Renters are in serious trouble. By April 5, nearly a third of all tenants nationwide had not yet paid the month’s rent.
By April 15, 16% had paid at least some of their rent for the month, another survey reported.
By May 6, almost 20% of renters had not paid their landlords.
The numbers are all over the place, but they tell a consistent story. Within weeks of the coronavirus quarantines, households across the country struggled to keep their homes. Layoffs, budget cuts and pay reduction have not left any economic class alone. Doctors report having their hours and pay slashed as non-emergency procedures all but halt. Law firms conducted mass layoffs. (By one measure, law firms have laid off attorneys and staff at a rate “dozens of times larger” than businesses at large.)
Renters of all types have been particularly hard hit.
Why Renters Are in Trouble
As a category, renters are often in a more precarious position than homeowners nationwide. They tend to make significantly less money than homeowners, with half as many reporting incomes above $75,000 and twice as many reporting an income of $35,000 or less. Renters have a net worth roughly 1/45 of homeowners, tend to live in cities, where housing costs far more than it does in suburban and rural areas, and are more likely to hold the kind of jobs in food service and retail that have been wiped out during the coronavirus quarantines.
Even in the best of times, renters have less financial cushion than homeowners. When governments began shuttering businesses in mid-March they almost immediately ran into problems. Millions of people made their April and May payments late, with many missing their rent altogether. Landlords and housing experts expect this to continue, if not accelerate, heading into June.
Relief for Homeowners
Under the CARES Act, homeowners who struggle with coronavirus-related financial issues can enter what is known as “forbearance.” Under this program, a lender will suspend payments for up to one year. While the debt won’t go away, it will also not build up additional debt or generate unpaid bills. Payments resume as usual once the forbearance comes to an end, and the homeowners will have to pay the money back within a certain amount of time.
Relief for Renters
The CARES Act has suspended evictions from any rental properties bought with a federally-backed mortgage, about one in four apartments nationwide. (Unlike single-family homes, relatively few rental buildings are backed by the government.) Many states and cities have filled the gap with their own moratoriums, all of which largely say the same thing: Landlords cannot evict tenants for nonpayment of rent. Most of these jurisdictions have also banned landlords from charging late fees or reporting missed payments to a credit agency.
Paying the Back Rent
Once eviction moratoriums expire, typically in June or July of this year, landlords are free to present their tenants with a bill for all unpaid rent as well as the upcoming month’s costs, with some variation depending on which state you live in. In many states, anyone who can’t make that payment could face eviction. For renters who have already missed payments, this could mean finding several months’ worth of rent all at once. With anywhere between 20% and 40% of renters unable to pay even one month’s rent, and the economy still shedding millions of jobs per month, this will almost inevitably lead to mass evictions across the country.
What is currently an unemployment crisis may, and likely will, elevate into a crisis of homelessness. In fact, some landlords are defying the moratorium—in at least four states, they are already evicting tenants, ProPublica reported.
Will There Be More Relief for Renters?
In response to this situation, policymakers like Rep. Maxine Waters (D-Calif.) have begun pushing for a widespread renter relief program in Congress. Waters’ bill, co-sponsored by Rep. Denny Heck (D-Wash.) and Sen. Sherrod Brown (D-OH) would create a $100 billion fund to help renters who are struggling to make their monthly payments during the coronavirus crisis.
At time of writing this bill remained just that, a bill, and one with a very specific constituency. As written, the Emergency Rental Assistance bill would deliver almost all of its relief to low-income households. This would provide help to a population that sorely needs it, but would do little for laid-off and furloughed workers who used to have good jobs.
Waters’ bill would spend at least 70% of its money on households making less than half of an area’s median income. Yet the idea that a laid off middle-income worker could have three or four months’ worth of rent on hand simply misses the reality of life in cities where average rents are well over $2,000 and $3,000 a month. The truth is, especially in cities, Americans of all incomes face a crisis of homelessness in the coming months.
A proposed $3 trillion stimulus bill in the House, the HEROES Act, designates $100 billion in emergency assistance to protect renters and homeowners, but the bill is unlikely to be approved by Republicans in the Senate.
What Happens When the Moratorium Runs Out?
As explained by Rejane Frederick, Associate Director for the Poverty to Prosperity Program at the Center for American Progress, any rental relief program needs to begin by recognizing how financially vulnerable most renters tend to be.
“What do renters need?” Frederick said, while noting that she considered Waters' bill an excellent start. “It’s clear. They need a lot more money. They need a lot more assistance. They need a system that is much better designed to meet their needs, not just during a pandemic but the needs that existed well before Covid entered the scene.”
“I mean,” she continued, “we’re talking about a three-decade-old housing and homelessness crisis that existed before Covid hit.”
While financial experts recommend that renters pay no more than 30% of their income on rent, more than 11 million households spend at least 50% of their earnings on rent. Those proportions are considerably higher in cities, where costs of living have soared in recent decades. In that context, Frederick said, it’s important to understand that this is not a crisis that Congress can fix by hoping for the kindness of landlords. Households that dedicate more than half of their income to rent can’t survive on a portion of what they used to earn.
“You can’t force people to pay rent that they don’t have,” Frederick said. “Yet that’s exactly what we have done long before this crisis.”
Eviction moratoriums may have prevented a temporary homelessness crisis during the months of April and May, but they have all but guaranteed one over the summer as landlords demand their out-of-work tenants pay the back rent. To prevent this, renters will need relief. It will have to come in the form of direct grants that address the needs of all Americans, low- and middle-income alike. Just as important, Frederick said, renters will need forbearance built “one to one” like the program Congress created for the benefit of homeowners.
Perhaps the scope of this relief can finally drag another simple truth of 21st century finance into the light. It seems like the coronavirus created a housing crisis overnight, driving people out of their homes before the quarantines were even two weeks old.
But for millions of American renters, the money didn’t disappear. It was never there. More than anything else, the recession has simply exposed that.