Millions of renters and homeowners could face evictions and foreclosure as many have trouble paying their bills in the recession. With temporary job losses turning permanent and the unemployment rate still at double digit rates, many families do not earn enough to make ends meet. They often rely on government assistance, but that government help in all forms – from added unemployment insurance checks to eviction and mortgage moratoriums — is starting to fade. Families could then quickly lose the roofs over their heads.
The recession brought massive job losses and record high unemployment with it. Families quickly fell behind in paying their bills, especially rents and mortgage payments, as they lost jobs and incomes. Rent and mortgage payments are among the largest and most consequential monthly payments for most families. If they fall further behind on those payments, they can lose their apartments or houses to evictions and foreclosures. Losing one’s home can further exacerbate other financial pressure, mainly because it becomes costlier to find a new place to live, and leave many families homeless or reliant on family and friends.
The federal government provided assistance to struggling families early on in the pandemic. These included moratoriums on rent and mortgage payments for federally backed properties as well as moratoriums on evictions and foreclosures. In addition, Congress passed the CARES Act that included stimulus payments, whereby adults could get up to $1,200 plus $500 for each child. The legislation added more financial support for struggling families after Congress increased the amount of unemployment insurance benefits for a larger number of people than would have otherwise received such benefits in March. Renter and homeowner protections coupled with added income support allowed a lot of people to stay in their homes that otherwise would have been out on the street.
Yet much of this government support is gradually disappearing. Federal protections for renters last through July, while mortgage forbearance protections expire in August. Added unemployment insurance checks will also come to an end before July runs out. The end to government assistance is coming at a time when the unemployment rate is still at double digits and some states are reimposing restrictions, forcing new waves of layoffs.
Many renters and homeowners with a mortgage already struggle, even in a world with government support. The Census reports that during the two weeks from June 11 to June 23, 18.2% of renters and 12.4% of homeowners with a mortgage didn’t pay their rent or mortgage or deferred those payments.
Many of those having trouble paying their rent or mortgage already lack regular income sources. For instance, only 50% of struggling mortgagees, who couldn’t pay their mortgage in mid-June, had some regular income, compared to 80.6% of mortgagees, who paid their mortgage. Among struggling renters, an even smaller share, 40%, had a regular income, compared to 65.6% of renters, who paid their rent. As permanent job losses and long-term unemployment quickly rise, many renters and homeowners will continue to struggle paying their bills.
Families having a hard time paying their rent or mortgage already often rely on government assistance. For example, 29.6% of renters, who did not pay their rent or deferred it in mid-June, used stimulus money to pay their bills and 20.2% relied on unemployment insurance benefits. Among struggling mortgagees, 31.7% used stimulus money and 19.0% had unemployment insurance benefits to pay their bills. As federal assistance disappears or shrinks, many renters and homeowners who deferred payments, for example, will not be able to make those payments after all.
Worse, many renters and homeowners who pay their bills rely on government support, too. Among renters current on their rent, 27.8% used stimulus checks and 17.6% unemployment insurance benefits. And among mortgagees, who were up on their mortgages, 21.1% used stimulus money and 11.0% used unemployment insurance checks to pay their bills. Without Congress extending more financial assistance to families, many renters and mortgagees, who currently still pay their bills, could quickly fall behind on their payments.
The necessity of added government help is also apparent from the fact that many renters and homeowners are already going deeper into debt and using up their savings. More than one-in-five renters – 23.2% to be exact —, who are paying their bills, went deeper into debt, for example, by using their credit cards, and 21.2% used savings. These shares were similar among struggling renters with 24.5% and 21.6%, respectively. Among mortgagees, who paid their mortgages, 24.5% went deeper into other debt and 23.3% used savings. More worrisome, more than one-third, 35.8%, of struggling mortgagees went deeper into debt and 31.5% dipped into their savings – and still could not afford their mortgage. A large share of struggling renters and homeowners are depleting their own resources, while they still cannot pay all of their bills. And many renters and homeowners, who are keeping up with their housing payments, have fewer and fewer reserves left if anything goes wrong.
The labor market will likely remain depressed for some time, especially as several states are now reimposing restrictions on businesses to get control on record virus cases. Temporary layoffs will increasingly turn into permanent ones. Families will find it harder and harder to pay their bills. Many have already dipped into their reserves, even with stimulus checks and added unemployment insurance benefits. All of this makes or a toxic combination that could result in massive evictions and foreclosures later this summer and going into the fall.
The federal government has the financial wherewithal to extend much needed financial assistance, while also protecting struggling renters and homeowners from losing their homes. Without this support, the country could quickly see a massive wave of evictions and foreclosures, destroying livelihoods and communities in its wake.
https://www.forbes.com/sites/christianweller/2020/07/10/the-coming-housing-crisis-is-already-here/Christian Weller, Senior ContributorForbes – Real Estate