The blog of the Urban Institute
July 31, 2020

Moving to a 70 Percent Income Replacement for Unemployment Insurance Benefits Will Disproportionately Hurt Low-Income Renters

July 31, 2020

Policymakers are debating how and what should replace the additional $600 per week in supplemental unemployment insurance that has prevented evictions and kept households afloat amid uncertain economic conditions. This additional money has been critical for renters, as they tend to have lower incomes, fewer emergency funds, and higher unemployment rates than homeowners.

Although most homeowners can defer their mortgage payments through the Coronavirus Aid, Relief, and Economic Security (CARES) Act forbearance plan, only one in four renters lives in properties with federal mortgages protected under the CARES Act eviction moratorium, which has yet to be extended on a national scale past July.

But despite high unemployment rates, many renters have continued to pay their rent because of the weekly $600 federal unemployment supplement.

Last week, Republicans proposed to extend federal unemployment insurance but lower the weekly amount from $600 to $200 until states can implement a system where state unemployment insurance and a federal supplement would replace no more than 70 percent of lost income. The 70 percent replacement would potentially go into effect in October. The federal component would be capped, so the maximum a person could receive is their state unemployment benefit plus $500 a week.

Moving to $200 a week would make it harder for renters with low incomes to pay their bills, but moving to a 70 percent income replacement would cause even more damage to vulnerable renters.

In the aggregate, under a 70 percent income replacement, we estimate that renters will receive roughly $10.4 billion in state and federal unemployment benefits per month, higher than the $8.3 billion they would receive under the $200-per-week proposal. But households with higher incomes would see a big increase in monthly benefits, while households with lower incomes would see a sharp decline.

Average monthly unemployment assistance for renters with job loss

The average renter earning up to 30 percent of the area median income (AMI) before job loss would receive only $536 in monthly unemployment insurance, down from $835 under a $200-per-week supplement. Under the $600-per-week supplement, these households were receiving over $3,000 a month.

The highest-income renters—those making at least 150 percent of AMI before the crisis—would see an increase to $2,545 per month, up from $1,707 on average under a $200-per-week supplement.

The switch from $200 per week to a 70 percent replacement would push an estimated 140,000 additional low-income renter households to the brink of eviction, as their remaining income combined with unemployment insurance will no longer cover their rent. This is particularly harmful, as only 16 percent of renters making less than $25,000 a year had any emergency funds going into the pandemic.

By evaluating this proposed legislation on how it will affect renters most vulnerable to eviction, we can see that moving the income-based threshold for supplemental unemployment will harm low-income renters, especially as the future of a federal eviction moratorium remains unclear. Instead, policymakers can consider extending the $600-per-week supplemental unemployment benefits (PDF) and enact rental assistance policies.

A woman holds a sign up as demonstrators march in the street during the Cancel Rent and Mortgages rally on June 30, 2020, in Minneapolis, Minnesota. The rally was organized to demand the temporary cancellation of rents and mortgages as COVID-19 continues to adversely affect the economy. (Photo by Brandon Bell/Getty Images)

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