Despite the continuing COVID-19 pandemic and the sharp rise in inflation, many renters have weathered the economic crisis better than expected. The job market’s fast recovery and timely government benefits such as unemployment insurance and emergency rental assistance have allowed renters in properties owned by mom-and-pop landlords to largely continue making on-time payments during the past three years.
But those trends haven’t held for all renters. For tenants in the bottom 20 percent of the rent price distribution, the lowest-income renters, we have observed greater volatility in on-time rent payments and a decrease in the share of on-time payments since May 2021, reflecting the financial struggles these renters are facing.
Despite wage gains overall, many less affluent renters are struggling more now than they were either before the pandemic or earlier in the pandemic. With the eviction moratorium lifted and federal rental assistance winding down, these renters are becoming more financially vulnerable as rents have become increasingly unaffordable. Building more affordable rental housing using low-income housing tax credits (LITHC) and expanding housing choice vouchers can help renters with low incomes have stable housing and avoid eviction.
Renters with low incomes are struggling to pay rent
Avail, by Realtor.com, is an online platform that helps mom-and-pop landlords manage their rental properties, including collecting rent. Every month, Avail provides the Urban Institute monthly data on on-time rental payments, which we have made publicly available on our website.
Using these data, we compared the rental payment of all Avail tenants in the bottom 20th percentile of the monthly rent distribution. Before the pandemic, 87.3 percent of renters made on-time payments, a share that has stayed largely stable over the pandemic (the share was 86.9 percent in November 2022). In contrast, the share of on-time payments for the 20 percent of renters paying the lowest rent dropped from 84.5 percent in January 2020 to 82.3 percent in November 2022. This group also saw a greater fluctuation in on-time rental payments. The difference in the on-time payments between all renters and renters in the bottom 20 percent of the rent price distribution has increased from 2.8 percentage points in January 2020 to 4.6 percentage points in November 2022.
In November 2022, for the five metropolitan statistical areas where Avail collects rent payment data for more than 1,200 renters, we find that renters in the bottom 20 percent of the market’s rent price are less likely to pay rent on time. The difference between the share of on-time payments between all renters and renters with low incomes is particularly high in New York and Chicago, ranging from 7 to 8 percentage points.
Savings have declined more for renters with low incomes
In November 2022, more than 60 percent of renters said they were saving less than $250 a month. With inflation rising, 74 percent said they are saving less than they were a year ago, 14 percent are saving about the same, and 12 percent are saving more. For those who earn less than $50,000 a year, 78 percent were saving less than they were 12 months ago versus 68 percent for those who earn more than $75,000.
Renters with low incomes have few options to lower their rent
Although renters, in general, seldom successfully negotiate their rents with their landlords, the Avail survey found that the success rate for renters with low incomes was worse than for other renters. Of those who experienced a recent rent increase, 35 percent said they attempted to negotiate for a smaller increase, but only 17 percent succeeded. About 34 percent of renters earning less than $50,000 attempted to negotiate, around the same rate as all renters. But only 13 percent of renters with low incomes succeeded, meaning only 4.5 percent were able to lower their rents through negotiation, suggesting that negotiation is not a viable avenue for expense control.
Additionally, the survey found that renters with low incomes are less able to work remotely, making it more difficult for them to move to a more affordable area. Among employed renters earning less than $50,000, only 9.3 percent were able to work entirely remotely compared with 20.3 percent of those earning between $50,000 and $99,999 and 27.5 percent of those earning at least $100,000.
How policymakers can provide stable and affordable housing to renters with low incomes
Despite tenants’ resilience to continue making their rent payments, the data show some concerning trends, especially for those with low incomes. The Biden-Harris administration has presented some avenues to increase affordable housing in the market, including reforming the income guidelines and delaying deadlines for LIHTC, the main source of affordable rental housing. Along with supply-side solutions, expanding housing choice vouchers and streamlining the process to get a unit approved for the voucher program could help many struggling tenants achieve stable housing.
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The Urban Institute podcast, Evidence in Action, inspires changemakers to lead with evidence and act with equity. Co-hosted by Urban President Sarah Rosen Wartell and Executive Vice President Kimberlyn Leary, every episode features in-depth discussions with experts and leaders on topics ranging from how to advance equity, to designing innovative solutions that achieve community impact, to what it means to practice evidence-based leadership.