Looming Rental Evictions in U.S. Could Deepen Economic Fallout From Coronavirus Pandemic
In the United States, roughly 110 million Americans live in 43 million rental units, or more than a third of all households. In a typical year, approximately two million renters are at risk of eviction.
But 2020 isn’t a typical year. Far from it.
Due to the COVID-19 crisis, an unprecedented number of Americans have seen drastic cuts to their income. It’s no surprise that the most common cause of eviction is loss of income. The coronavirus pandemic has led to staggering job losses in the first half of the year, and the economy is treading water in a major recession that could take months or even years to recover from. In just under five months, more than 54 million workers have filed for unemployment benefits which, until now, have been supplemented by a $600 weekly benefit from the federal government.
The relief payments were part of emergency government measures to support the economy. However, the measures were meant to be temporary until COVID-19 cases were under control and the economy started recovering. Neither has happened.
With unemployment benefits and eviction moratoriums expiring, a significant number of renters — as many as 23 million, according to The Aspen Institute — could face eviction proceedings.
Renters are poised to shoulder brunt of economic crisis
Renters have been more likely to lose their jobs during the coronavirus crisis. Even in the best economic environment, the unemployment rate for renters is consistently above that of homeowners. Renters have lower median incomes than the national average median income — $40,500 compared with $63,179 in 2018, according to the U.S. Census Bureau.
As a result, many renters don’t have enough cash reserves to weather a job loss. The supplemental unemployment funds have been helping millions of Americans afford their rent payments. In 2018, the median monthly rent in the U.S. was $1,058, according to Census figures. So the $2,400 monthly emergency benefit may have covered that and provided some cash for other living expenses.
Right now, Congress is locked in heated debates about what an extension of these unemployment benefits might look like, and there is a strong possibility the payments will be reduced. Any payments less than $250 per week from the government wouldn’t cover most Americans’ rent payments, and state payouts vary significantly.
The end of the federal supplemental unemployment benefits coincides with the end of eviction moratoriums for properties with federally backed mortgages, including loans owned by Fannie Mae and Freddie Mac and mortgages backed by the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA) and the U.S. Department of Agriculture (USDA). A patchwork of local eviction moratoriums are close to ending in many cities and states, too, and some have already expired. In addition to people losing their homes, evictions may accelerate new COVID-19 infections, because housing is a public health measure.
An eviction crisis of this magnitude may lead to a financial crisis. Landlords use tenant rent payments to cover their mortgages and operating expenses.
If there’s an increase in landlords defaulting on their mortgages, rental property values would plummet. This would extend to owner-occupied housing. Why? These housing markets have become increasingly intertwined since the financial crisis of 2007-08, with an increase in single-family rental properties. In short, protecting renters protects the whole economy.
Tips for renters struggling to make their payments
The federal eviction moratorium under the CARES Act expired as of July 25, and tenants owe the amount of the rent payments missed.
What can tenants do to protect themselves if they are facing difficulties meeting their rent payments? Shabana Baksh, associate real estate attorney of the New York City law firm K&L Gates, shared the following tips with LendingTree:
- Although the federal eviction moratorium has expired, state and local eviction moratoriums may remain in effect to protect residential tenants. Tenants can learn about current state and local policies here: K&L Gates 50-State Guide to COVID-19 Property Policies and Regulations and Princeton University Eviction Lab COVID-19 Housing Policy Scorecard.
- Under the CARES Act, federal law requires landlords to provide tenants with 30 days’ notice to leave the property before the landlord may file an eviction complaint in court for nonpayment of rent.
- If a tenant receives an eviction notice, they are required to follow the local process for eviction proceedings and show up to eviction court hearings. Tenants should check state and local court rules as some courts are permitting virtual phone or video proceedings rather than in-person court appearances.
- Tenants should alert the landlord of their inability to pay rent. Landlords may be willing to negotiate during this time in order to keep a tenant who can pay less instead of trying to secure a new tenant. The tenant should be honest about their situation, explain the impact by a loss of housing, ask about a payment arrangement and keep copies of any documents of said negotiations with the landlord.
- Tenants may seek financial assistance from emergency rental relief programs. State and local rental assistance programs were established to help tenants cover their missed payments (e.g. Vermont, City of Austin, Texas etc.). The National Low Income Housing Coalition is tracking a 50-state list of emergency rental assistance programs (See also: The Department of Housing and Urban Development and the Consumer Financial Protection Bureau). Additionally, there are a number of local and national organizations seeking to preserve affordable housing and prevent evictions for residential tenants (e.g. Justshelter.org).
- Tenants who may not be familiar with their rights have the right to seek legal help and hire an attorney. LawHelp.org provides a list of available pro bono legal aid attorneys to assist with landlord-tenant matters (e.g. to help determine whether a landlord was in violation of the CARES Act).