Renter Households will Need Assistance Long After the Pandemic is Brought under Control

Published by H. Blair Kincer on Tuesday, July 28, 2020 - 12:00am

Positive rental survey findings may hide the true level of hardship being faced by renters as a result of the coronavirus pandemic. While surveys show renters have been able to make housing payments, the additional $600 in unemployment insurance payments provided by the CARES Act, money many have argued has made it possible for unemployed renters to make monthly rent payments, is set to expire July 31. The Senate COVID-19 package released July 27 proposes lowering the emergency unemployment payment to $200. In addition, the CARES Act moratorium on evictions expired June 24 as the Senate debated what to include in their draft of the next COVID-19 relief package; the newly released bill does not include eviction protections. Without the federal eviction protections and supplemental unemployment insurance payments provided thus far, evictions and homelessness could surge in the coming months.        

The U.S. was suffering from a severe affordable housing shortage long before the pandemic started – research shows there was a shortage of 7 million affordable rental homes, 25 percent of renter households are severely rent burdened and fewer than 25 percent of eligible households receive federal rental assistance. The economic fallout caused by business closures, record setting unemployment claims and future uncertainty has made the situation worse. As a result of COVID-19, the housing industry is watching the rate of rental payments closely for signs of just how distressed renters are.

Advocates who support affordable housing provisions are also watching these numbers as increased difficulty paying rent bolsters the case for the inclusion of more targeted affordable housing measures in future COVID-19 relief packages, in addition to expanding and extending soon-to-expire eviction moratoriums and mortgage forbearance currently in effect. Congress should consider short-term solutions like the $100 billion in emergency rental assistance included in the HEROES Act, as well as long-term provisions of the Moving Forward Act (H.R. 2) and the Emergency Affordable Housing Act that strengthen the low-income housing tax credit (LIHTC), such as implementing a 4 percent minimum floor, lowering the private activity bond financing percentage, increasing the 9 percent tax credit allocation, and various basis boost provisions to increase the supply of affordable rental homes.

What are We Seeing … and not Seeing?

When it became evident the country was going to be facing a prolonged downturn, housing market stakeholders – landlords, affordable housing advocates and their champions in Congress –turned their eyes toward renters for evidence of households being unable to pay the next month’s rent. So far, to the surprise of many, the numbers show that rent payments are being made. But at what cost?

National Multifamily Housing Council Survey 

The National Multifamily Housing Council’s (NMHC’s) Rent Payment Tracker is a survey of professionally managed apartment units across the country. As of July 20, NMHC reports that 91.3 percent of renters in the surveyed units had made a full or partial rent payment. This is small decrease from the previous month – 92.2 percent of renters made a payment as of June 20 – and a 2.1 percentage point decrease from the year before. In June the rate of payment increased throughout the month and by the end of that month 95.9 percent of renters covered by the survey had made a full or partial payment, up from 95.1 percent in May. Despite what may be considered encouraging news, NMHC is calling for the enactment of a direct renter assistance program because of the uncertainty still to come: Renters are likely to have cobbled together rent payments from a number of sources such as “federal relief funds, credit cards and alternative, flexible options provided by the industry’s owners and operators,” and, with record unemployment numbers, the number of households needing assistance is likely to rise as the economic downturn continues.  

It should be noted that the NMHC survey covers professionally managed market-rate properties; more than 11 million rental units are covered by the NMHC surveys. Missing from these figures are payments made, or not made, to smaller landlords or smaller landlords or for affordable and subsidized properties. It is in these properties where most low-income households are more likely to reside, and with no statistics on the rate of rental payments made in these properties, an important piece of the story is missing. It should also be noted that that the NMHC survey includes tenants making partial payments – while a partial payment is better than no payment at all, the whole story cannot be known without quantifying how many tenants are carrying over unpaid rent from month to month and how many landlords are having to make due with a portion of the money owed them.  In addition to needing to know how many tenants are making partial payments, it would be helpful to know the magnitude of partial rent payments to fully understand the impact to landlords.

The Richman Group Survey

To shed light on what is happening at affordable housing rental properties, The Richman Group surveyed data for approximately 15,000 affordable rental housing units across 110 properties. The Richman Group survey shows that by early April 86.2 percent of rents were paid. This was good news but one should consider that April rents were likely paid with March paychecks. An analysis of the cash reserves shows that the surveyed properties can likely sustain several months of reduced rent collections. If rental payments still cannot be made as fall approaches, these properties could be in financial trouble.

Apartment List Survey   

Another housing payment survey conducted by Apartment List shows that 32 percent of renters were not able to make a full payment as of June 1. (The Apartment List survey covers 4,000 respondents that are representative of the country’s demographics). A statement released by Congresswoman Maxine Waters, D-Calif., Chairwoman of the House Committee on Financial Services, and Congressman Denny Heck, D-Wash., pressing the Senate to take action on the HEROES Act, cites the Apartment List analysis as they call for more than $100 billion in emergency renter assistance. While the analysis does show that the percentage of renters who made no payment or a partial payment decreased from 30 percent in the  beginning of May to 11 percent at the end of the month, those who had trouble paying rent one month will likely have issues paying rent the following month.

Household Pulse Survey

Added to these surveys is the Census Bureau’s newly implemented Household Pulse Survey (HPS), a weekly survey sent by text and email that asks about participants’ ability to make housing payments during the pandemic, and their confidence in making future payments, among other questions on how they have been affected. Using survey data for May 14 to May 19, an Urban Institute article examines participants’ responses in regards to housing payments and confidence and highlights the disparity among renters by race/ethnicity and income. Black and Latinx renters as well as low-income renters were more likely to miss or defer a rent payment in May and these groups expressed less confidence in being able to pay rent in June.

Surveys can Mask the Actual Difficulty People are Having Paying Rent

Renters are making monthly payments, but at what cost? Are other bills going unpaid?  The Apartment List survey shows that lower-income households and those unable to work from home are having the most difficulty making monthly housing payments. The Joint Center for Housing Studies’ (JCHS’) initial interpretation of the Census’ HPS survey findings, which covers responses at the end of May, found that minority, low-income, lower-education and renter households were more likely to have lost income due to COVID-19.  It is likely that households are cobbling together funds from unstable sources that may not be available next month or foregoing other necessities as the  JCHS reported that not being able to pay housing costs also appeared to affect households’ ability to cover other costs. Households that were unable to pay their rent in the previous month were also more likely to suffer from food insufficiency – 42 percent of renters who were unable to pay their previous month’s rent also reported not having enough food in the past seven days (compared to 26 percent of homeowners who were unable to pay their mortgage in the previous month). The one-time stimulus payment of $1,200 provided under the CARES Act was no doubt helpful but rent and payments for other necessities come due each month. Those on unemployment will benefit from the supplemental increases provided as a part of COVID-19 relief, but these benefits are not permanent, and they are also not likely to be reaching those renter households most in need. Research shows that renter households that were the most cost-burdened prior to COVID-19 were less likely to have been participating in the job market and therefore are not befitting from the increased unemployment assistance provided by COVID-19 relief as much as higher-income households.     

Few households have sufficient savings to see them through one-time difficulties, much less prolonged joblessness and long-term hardship. The Joint Center for Housing Studies (JCHS) reports nearly half of renter households had less than $1,000 in cash savings in 2016; for homeowners this figure is over 15 percent. Considering the national median housing cost is $1,000 it’s clear that many households are not prepared for what is currently taking place.  Even those with savings could see those savings depleted when faced with long-term difficulties. The JCHS research highlights that those most likely to face difficulties are low-income renters, the very households that are “especially vulnerable to financial distress and housing insecurity during and after this pandemic.” To make ends meet some low-income households could be using credit cards, which has the potential to create its own set of issues if the bill cannot be paid in full when the monthly statement comes, leaving these households subject to high interest payments and unsustainable revolving debt. And still others may be tapping into retirement accounts – the CARES Act contains provisions that do not penalize people for accessing these funds under certain circumstances – but are they now sacrificing their future financial health to weather this current storm?

There is also a ripple effect to consider. Those making partial rent payments spoke of rent concessions and other payment plans worked out with landlords. These can be a short-term salve but landlords who accept partial/reduced rent payments could in turn have difficulty covering operating expenses. While pandemic relief bills included mortgage forbearance provisions, there are still payments for utilities and other services, especially those added as a result of COVID-19, like more extensive cleaning, that are necessary.  In considering rental assistance provisions, Congress must consider that it helps more than the renter. When households have the means to pay their rents, landlords and those employed in ancillary businesses that are employed by and support the rental market are also supported. This is especially true for small building owners, who rent to most low-income households and may have the hardest time tapping into aid that is currently available.

Both Short- and Long-term Solutions Should be Considered

One-time stimulus payments, renter protections such as eviction moratoriums, and increased unemployment benefits provide immediate assistance, but the rent and other bills are due every month. What happens when the eviction moratoriums are lifted and the assistance payments stop? The COVID-19 pandemic and the resulting economic downturn will have long-term repercussions and Congress will have to take a multipronged, long-term approach to ensuring lower income renter households can remain housed.

The House Committee on Financial Services convened a hearing titled The Rent Is Still Due: America's Renters, COVID-19 and an Unprecedented Eviction Crisis, during which is was noted that 17.6 million renter households could need assistance potentially totaling $96 billion. The Urban Institute published an article showing that assisting renters in need – those who were cost-burdened prior to COVID-19 and those who lost their job as a result of the pandemic – would total $16 billion per month in housing support. Worst case scenarios are that once renter protections expire, there will be wide scale evictions and in the direst situations we will see a rise in homelessness. The country already faces a homelessness crisis; add to that renters who were living paycheck-to-paycheck that no longer have a job and the ranks of homeless individuals can swell to unimagined numbers.  

In addition to federal aid, such as moratoriums on evictions and stimulus payments, immediate rental assistance has been provided by cities and states to struggling households. On July 20 the National Low Income Housing Coalition (NLIHC) released a research note detailing state and local rental assistance programs, finding more than 200 states and local jurisdictions have created programs to provide assistance during the coronavirus pandemic. The majority of these programs (82 percent) provide short-term relief up to three months, with the remainder providing up to six months of assistance; only three of these programs allow for the possibility of receiving assistance past six months.

Earlier in the pandemic an April CNN article highlighted efforts by states and cities to assist those residents who need assistance paying their rents. Washington, D.C.’s Department of Housing and Community Development will use $1.5 billion in federal HOME funds to provide rental assistance to low-income tenant households residing in properties facing significant financial impact as a result of COVID-19, with possibly more assistance down the line. Neighboring Montgomery County, M.D. announced the Renter Relief Act, enacted April 24, and the Emergency Assistance Relief Payment program, which provides assistance for food and essentials to families who were not eligible to receive funds directly from the federal or state COVID-19 aid. The Renter Relief Act prohibits landlords from increasing existing tenants’ rent by more than 2.6 percent after April 24 and during the COVID-19 catastrophic health emergency. This limitation on rent increases applies to all licensed residential rentals in Montgomery County, including rental units in multifamily buildings, houses, townhouses, individual condominium units, and accessory dwelling units. 

While it is necessary to act quickly to stabilize households, legislators must also lay the groundwork to address longstanding housing issues. To that end, housing advocates have been pushing for the inclusion of provisions of the Affordable Housing Credit Improvement Act (AHCIA) of 2019 in future COVID-19 relief packages. The LIHTC is responsible for the creation and preservation of more than 3 million affordable homes and strengthening this incentive could not only address the severe shortage of affordable rental housing but can also aid in economic recovery efforts. For instance, providing a 4 percent floor could finance nearly 126,000 additional rental homes, supporting both additional housing developments as well as supporting developments that may have stalled in the pipeline due to the current state of the economy. Other affordable housing provisions include, but are not limited to lowering the 50 percent test and increasing the allocations for the 9 percent tax credit. Looking beyond COVID-19, the importance of addressing the shortage of affordable housing is stressed in other areas – the recently unveiled $1.5 trillion dollar infrastructure plan, the Moving Forward Act, includes an investment of more than $100 billion in the nation’s affordable housing infrastructure to create or preserve 1.8 million affordable homes and increasing the federal investment in the LIHTC. Acting now to increase and preserve the supply of affordable housing will not only address immediate needs and aid in economic recovery but will also ensure that affordable rental housing will be available for the future.