Many People are Behind on Rent. How Much Do They Owe?
Congress is currently debating President Biden’s $1.9 trillion proposal for additional coronavirus relief funds. The president’s proposal and subsequent proposals from the House Financial Services Committee include $25 billion in rental assistance funding to cover back rent and provide additional help to renters during 2021. This is in addition to the $25 billion passed in the December 27 coronavirus relief bill. Although $50 billion in emergency rental assistance funding may seem like a large amount, it is likely not enough to improve the financial situation for renters, many of whom were struggling before the pandemic.
There is no comprehensive way to track rental payments, and it is difficult to know how much back rent is owed because high-quality data are unavailable. Unlike mortgage payment data, for which multiple data providers aggregate and offer almost real-time payment status for most homeowners, rental payment information can be obtained only through surveys with relatively small samples or indirectly estimated using non-housing-related datasets that show unemployment claims and job losses. Thus, estimates of back rent owed by early 2021 range from $8.4 billion to $52.6 billion. A range this large can be confusing and lead to a lack of action. We analyzed the three most-quoted estimates of back rent to understand the assumptions underlying each.
How the three measures of back rent differ
We assessed estimates by the Federal Reserve Bank of Philadelphia, Stout, and Parrott and Zandi, which differ in (1) whether they cover only renters with COVID-19-related job losses or all renters in financial distress, and (2) how much back rent delinquent renters owe. There are also differences in the timing of the data used for the estimates: the Federal Reserve Bank of Philadelphia used data through August 2020, Stout estimates use November 2020 data, and Parrott and Zandi used data available through mid-January 2021. None of the estimates include the effect of the initial $25 billion in rental assistance passed in late December.
Who is covered?
The Federal Reserve Bank of Philadelphia considers only renter households that have had a COVID-19-related job loss. Of those 7.5 million renter households, the researchers estimated in October 2020 that 1.4 million would owe back rent by January 2021. In contrast, the Stout and Parrott and Zandi analyses consider all renters who have stated they were behind in their rent payments, including households who experienced partial income declines and those who faced financial challenges before the pandemic.
Parrott and Zandi estimate that 9.4 million of these households owed back rent in January 2021. Stout, using November data, estimated 7 to 14.2 million households would owe back rent by January. Both Parrott and Zandi and Stout rely on Census Pulse Survey data. This survey asks whether respondents missed the previous month’s payment (which is the basis for the Parrott and Zandi results) and how confident they are in paying the next month's rent (which is used to determine the Stout range). Parrott and Zandi’s estimate of affected renters is close to the middle of the Stout range. The share of renters who answer that they are behind on their rental payments in the Census Pulse data is significantly higher than in other data sources, including the National Multifamily Housing Council, Avail, and the Understanding America Study, suggesting both Parrott and Zandi’s and Stout’s numbers may be overestimates.
How much do delinquent renters owe?
Though they use different methodologies, the Philadelphia Fed and Parrott and Zandi’s analyses come to similar conclusions, finding the average renter owes $5,600 to $6,000 in back rent. Parrott and Zandi’s average monthly rental cost (approximately $1,400) comes from the Bureau of Labor Statistics’ Consumer Expenditure Survey. They estimate that the average renter will be almost four months behind on their rent based on the payment behavior of other debts in the credit bureau data. To simulate how much rent the household will be unable to pay, the Philadelphia Fed calculates household income after a job loss and then makes assumptions about living expenses, savings, and the likelihood of receiving unemployment benefits.
In contrast, Stout employs yet another methodology and finds a much lower number of back rent due ($1,740 on average). Using Census Pulse data, Stout makes assumptions about the likelihood tenants will be delinquent in a given month if they were delinquent the prior month. The methodology assumes renters would miss only 50 percent of their rent, and those with the highest rent burden would be the first to miss this rent payment. Those renters are more likely to be low-income households, who pay a lower rent than the US average.
We need better data to more accurately estimate back rent
Some of these differences should be easy to navigate. For instance, policymakers should consider assisting all renters in distress, not only renters who are behind on their rent because they have experienced a job loss during the pandemic. But this still leaves a range between $13.2 and $52.6 billion in back rent owed.
Other differences are more difficult to navigate because the lack of reliable data means economists must rely on a range of assumptions, leading to a range of predictions. This crisis has revealed the need for better data for tracking rental payments, and until new surveys or data are available, policymakers won’t have the accuracy they truly need.
What we do know is that renters were financially vulnerable even before the pandemic hit, with a quarter of renters paying more than half their income on rent (PDF). The crisis has only increased financial pressure on many renter households. Even without a perfect estimate of back rent owed, it’s clear that $50 billion is the minimum needed to keep families stay stably housed now and over the next several months as the nation continues to respond to the pandemic.
(Timothy Malone / EyeEm / Getty Images)