Coronavirus: Why the ‘Cancel the Rent’ push is a terrible idea

Democrat Ilhan Omar has introduced legislation that would cancel rent and mortgage payments for the duration of the COVID-19 crisis.

There is a movement in the US to cancel rent. It’s probably going to come here, but should be resisted, because it’s a terrible idea.

“Cancel the Rent” is a bit different from a rent strike, since it’s driven by politicians, not the people.

It’s being pushed in the US by progressives, among them Ilhan Omar, who has introduced legislation that would cancel rent and mortgage payments for the duration of the COVID-19 crisis, whilst establishing a fund for repaying landlords and lenders.

It’s also the topic of a long essay in this week’s New Yorker. The piece, by Princeton University assistant professor Keeanga-Yamahtta Taylor, couches the argument as one that would assist the poor.

In reality, it would assist the rich, but that’s not the only problem with it.

"As a society, we must ask whether the failure to pay rent or a missed mortgage payment should be punished with a death sentence." @KeeangaYamahtta on the cost of turning land, concrete, and steel into money, while we turn people out into the streets.https://t.co/rQTJYAmzwk

— The New Yorker (@NewYorker) May 12, 2020

Taylor says 20 per cent of tenants in the US have not paid this month’s rent. And of course we know why: 33 million people in the US have filed for unemployment since the pandemic began, and since housing is usually the greatest of all household expenses, cancelling rent seems like a fair solution, to avoid evictions, and also foreclosures, as investors also go under (most use rent to pay the mortgage.)

So, why not do it?

Here’s a better question: how? Because where would you start?

How does anyone decide how much rent to cancel? All of it, for everyone? Regardless of your balance sheet? Regardless of the landlord’s? Whether it’s your biggest expense or your smallest? Whether you have nowhere else to go, or not?

The problem with cancelling rent is that it’s too prescriptive.

It doesn’t take into account the individual circumstances of renters and landlords.

Which is not to say that governments shouldn’t continue to bailout individuals, instead of banks, and airlines.

Of course they should.

The Morrison government is doing this, by doubling JobSeeker, and introducing JobKeeper, and making child care free, and so on.

But honestly, the best way to assist Australians during this pandemic would simply have been to adopt the Rudd model.

Rudd’s program — go hard, go early, go households — provided urgent assistance to individuals, to spend as they saw fit.

Maybe some of them paid the rent.

But if it not, they had the right to spend the money elsewhere, even on flat-screen TVs.

It’s more democratic than covering only the rent, because everyone up to a certain income level gets it.

It’s also the only stimulus that has been shown to work in a fast-moving crisis.

The government’s response to COVID-19 has been far messier: stimulus here, and stimulus there, and not everyone gets it, and there’s so much paperwork, which in turn led to those very long lines outside Centrelink, which were depressing for everyone.

A person files an application for unemployment benefits, in Arlington, Virginia.

Why didn’t they just send out the cheques?

Well, let’s just say the problem wasn’t financial. It was ideological.

The Morrison government has had no problem committing stimulus that adds up to around $7600 per person, or $18 billion, compared to about $10 billion spent by Rudd.

But the Coalition lashed Labor for sending cheques to dead people, remember? They were fierce critics of the Rudd plan.

But so what? Dead people don’t cash cheques. And the waste and corruption in the Rudd program was small beer, compared to what might have happened, had the nation plunged into recession.

Handing out cash for people to spend as they please is always the best response. And handing it to the lowest earners — renters — is also more effective than handing it to higher earners, who own not only their own, but other people’s homes.