The blog of the Urban Institute
April 23, 2020

Don’t Overlook the Importance of Unemployment Benefits for Renters

In just over a month, 22 million people have filed unemployment claims. In this short time, unemployment has skyrocketed, and renters are disproportionately affected.

Our analysis shows that renters, particularly low-income renters in the labor force, tend to be heavily concentrated in the five vulnerable industries where the layoffs were the largest: (1) accommodation and food service; (2) construction; (3) arts, entertainment, and recreation; (4) other services such as hairdressers, dry cleaners, and those that do repairs; and (5) retail trade.  

Chart: Low-Income Renters Are More Likely to Work in the Five Industries Most Vulnerable to COVID-19

There has been much debate about how renters will pay their rents and the need for rental assistance, specifically how much is needed and how it should be delivered.

Most delivery mechanisms have focused on existing programs within the US Department of Housing and Urban Development and US Department of the Treasury that provide direct rental assistance to tenants or assistance on the back end to landlords. The Coronavirus Aid, Relief, and Economic Security (CARES) Act and a patchwork of state and local rules provide eviction protection for renters, but they will still owe rent.

The CARES Act provided about $12 billion in funding for housing assistance and to meet the needs of people who are currently homeless, but it will not be enough. Another way to help renters is to provide income, and thus far, the major measures to help renters during this economic crisis have been through temporarily supplementing lost income.

How the CARES Act aims to mitigate the effects of income loss

The CARES Act contains provisions to help cushion families from the impacts of income loss. In addition to a onetime payment of $1,200 per adult with income under $75,000 (so, $2,400 for a childless couple making less than $150,000), the CARES Act provides a supplemental $600 per week in unemployment insurance (UI) on top of existing state benefits, a significant boost for most renters.

The CARES Act also extends coverage by 13 weeks for workers who have already exhausted unemployment benefits and includes eligibility for workers who were not previously covered by UI, including gig workers and people who are self-employed. Some workers who are laid off because their workplace closed, they are quarantined, or they are taking care of a sick family member may also be able to collect UI.

The CARES Act helped move the UI system, which has become less generous, to a more generous system that could help people pay their bills.

What does this mean for renters paying their landlords?

The table below shows median monthly income for renters in the 10 most-populous states. We then approximate unemployment benefits—one half of a median renter’s income, subject to the state cap. To this, we add supplemental unemployment benefits of $600 a week, or $2,598 a month.

For nearly every state we examined, the total benefit is at least as large as the median monthly household income. And the median renter has enough residual income after paying rent to meet other household expenses.

But the extra $600 a week in supplemental unemployment benefits lasts only until the end of July, and not even the most optimistic economic forecaster has the economy humming that quickly.

When supplemental benefits run out, renters will receive only base unemployment benefits. A look at these benefits relative to the median gross rent shows that renter households will suffer a large income drop from pre-COVID levels, leaving families unable to cover food, clothing, and other living expenses.

Table: the value of unemployment benefits to renters

Not everyone can access UI

Not all workers are eligible for or able to access unemployment benefits, including the estimated 10 to 12 million undocumented people living, contributing, paying taxes, and working in the US, and are likely renters and paying rent to landlords, who likely need to pay their mortgages. Some states and cities are using local and state dollars to cover the gaps for undocumented workers affected by COVID-19.  

Others not covered by UI include those who were not in the labor force or people who work in the informal economy, providing off-the-books services such as child care, catering, or cleaning services.

Those who are eligible can still face barriers. State unemployment offices are overwhelmed by applications, with some people filing hundreds of times—basically a new full-time job. Many states have not yet updated their systems to handle applications from newly covered gig workers and process the additional $600 benefit. And some states are just now ready to accept applications from people who are newly eligible for UI.

Rent is due soon

May 1 is right around the corner, and renters still need assistance, especially those struggling to access unemployment benefits. What can policymakers do to help?

  • Extend the weekly $600 unemployment boost beyond July. If this doesn’t happen, renters will fall off an income cliff in July, which is also when the federal moratorium on evictions ends for those living in federally financed units
  • Continue to expand access to unemployment benefits. Workers in the informal economy and those who are undocumented need assistance now and likely in the future if their employment continues to be affected.  
  • Consider funding rental assistance. Rental assistance offers a subsidy that can be calibrated based on housing market costs and income, so it’s a more precise instrument to offer assistance and can be timed based on need. It might cost less over time compared with offering a one-size-fits-all amount each week.

The rent is due soon. Now is the time for policymakers to consider renters’ immediate and long-term needs.  

J.J. Panzer, president of and broker with Real Management Company, stands in the doorway to the kitchen in a vacant unit in an apartment building managed by Real on Thursday, April 9, 2020 in San Francisco, CA. Many landlords are coming to the realization that many of their tenants will be unable to pay their rent after coronavirus-triggered layoffs and business closures left them without a source of income. (Lea Suzuki/The San Francisco Chronicle via Getty Images)

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