Finding solutions for renters and landlords during a pandemic
A previous version of this newsletter included the incorrect number of homeowners in the US. Please refer to this version.
Imagine this: You have been living paycheck to paycheck for a while. And now, unexpectedly, your boss had to let you go amid the COVID-19 outbreak. You have no income and little savings, and your rent is due today. How do you look into your children’s questioning eyes?
Far too many of our country’s renters are experiencing this reality right now. Millions missed their rent payments in April, and, with job losses worsening, many more are expected not to pay in May. Plenty of homeowners missed their mortgage payments this month, too. Add the fear of losing housing to the many other anxieties facing working families across America this week.
Even before COVID-19 hit our shores, many of America’s 44 million renters were more vulnerable than the country’s 78 million homeowners and had smaller rainy-day funds. In 2018, for instance, almost half of all renters spent more than 30 percent of their income on housing costs, and a quarter paid more than half of their earnings on housing.
Make no mistake, the hardship facing renters will have lasting effects well past the arrival of sufficient testing and a vaccine. This moment will impact children growing up in unstable housing, and it will affect the pace of the economic recovery—especially in already struggling neighborhoods. If we learned one thing from the Great Recession, it is how central housing is to the whole nation’s well-being.
Many landlords are “mom and pop” operations without the sizable operating reserves needed to maintain properties (and provide the extra safety measures now required) when rental income falls. More than 50 percent of rental units are in buildings with 1 to 4 units, and 88 percent are owned by landlords with no more than 10 units (PDF).
Most landlords need rental income to make their monthly mortgage payment, although the Coronavirus Aid, Relief, and Economic Security (CARES) Act gave about a quarter of them—those with federally guaranteed loans—a brief reprieve. Most of the remaining landlords will need to work out forbearance from their lender or risk losing the property. And if lenders get skittish about the reliability of multifamily finance, the long-term consequences of this crisis could include further barriers in production of new rental housing and the loss of properties that are currently affordable. In short, the dearth of affordable rental housing we already face in many markets could get much worse.
Congress has helped bridge the gap temporarily with direct cash payments provided by the CARES Act and generously expanded unemployment insurance. These payments are coming slowly. Some folks are still left out, including undocumented workers. And the effects of job loss will linger far longer than these short-term income support programs are available. Housing experts fear property deterioration, unsafe conditions, evictions (when moratoria end), and increased homelessness, with sizeable impacts on not only state and local government budgets but also rental housing financing—and the broader financial system.
These challenges do not lend themselves to quick action, as the interactions are complicated, and they are made worse by uncertainty around the pandemic’s duration and its consequences for employment. Normally, it takes years to develop, vet, and build support for policy responses to issues this complex. But time is of the essence.
The Urban Institute is helping accelerate the pace at which solutions are analyzed and considered. Each week, a team of our senior experts (see below) is convening the Renters and Rental Market Crisis Working Group, where 80 invited affordable housing leaders sift through data and competing proposals for response to the emergency and its inevitable long-term effects. Ideas being discussed range from expansion of the US Department of Housing and Urban Development’s Emergency Solutions Grants Program and temporary tenant housing vouchers, to rent deferral and forgiveness programs delivered through grants to landlords or relief from their mortgage payments, with many ideas and combinations in between.
Of course, there are significant challenges for homeowners right now, too. So experts from Urban’s Housing Finance Policy Center are also managing the Mortgage Markets COVID-19 Collaborative, using analysis and convening to advance solutions to challenges for both homeowners and mortgage servicers.
At Urban, we are not advocates, and we are not trying to get perfect consensus among diverse players. Instead, by deploying our analytic power to provide better understanding and definition to the problems, and by unleashing our convening power to speed knowledge transmission and build shared understanding, we are trying to support policymaker decisionmaking and accelerate solutions.
For a collection of Urban’s work on the housing impact of COVID-19, check out the housing section of our COVID-19: Policies to Protect People and Communities page.
If you have ideas, questions, or comments, please write me or any of the leaders listed below.