Opinion | A rental crisis is coming. Here is how to avoid it.



These disruptions appear to be working, at least for now: we haven’t seen as severe an increase in rent default as might be expected, and the early rent payment figures for May seem a little more encouraging than the April figures. .

But these remedies focus on the short term. Due to the magnitude of this recession, many, if not most, unemployed tenants will not have new jobs by the end of July. The federal government needs a long-term plan to prevent millions of unemployed tenants from losing their homes when eviction moratoriums and unemployment sweeteners are over.

More stops are coming

In fact, public health experts predict that the Covid-19 crisis will last well beyond the summer, and some government officials are preparing for waves of closings that could continue for 12 to 18 months. The United States is also likely to be hit by another wave of virus, perhaps more deadly, next winter. When the economy reopens, you’ll find yourself in the midst of a deep recession during which millions of middle-income tenants are likely to be unemployed and require housing assistance for the first time. Without smart and proactive policies to help millions of unemployed tenants, we will face billions of dollars in rent debt, eviction court chaos, and overcrowded shelters prepared for another outbreak.

Tenants were fighting before the Covid-19 outbreak amid a well-documented affordable housing crisis. Nearly forty percent of tenant homes are rented, which means they spend more than a third of their wages on rent, and two-thirds of tenant homes cannot afford an unexpected expense of $ 400.

On top of that, tenants have few of the legal and financial protections offered to landlords. Many states prohibit tenants from withholding rent, even if their unit is in poor condition, most tenants are not entitled to legal advice during eviction proceedings, and once eviction sentences are passed, tenants can be evicted in a matter of days. And, in part as a result of the subprime mortgage crisis of 2008, federal housing policy largely favors homeowners over renters. Congress spends approximately three times as much on mortgage interest reduction than on rental housing bonds each year. While mortgage holders are protected by the provisions of the Dodd-Frank Act, especially through the creation of the Office of Consumer Financial Protection, there is no analogue for tenants.

At the moment, these tenants are kept afloat through a combination of short-term emergency cash, unemployment benefits, and eviction bans. But it won’t last beyond the summer. In addition to the $ 1,200 one-time stimulus check, the additional $ 600 per week added to unemployment insurance checks expires in July. Unemployment does not cover everyone, especially our 10 to 12 million undocumented immigrants who pay taxes, many of whom are tenants, and those working in the informal economy who provide childcare, cleaning and other services. An additional 8 to 12 million unemployed Americans have not even bothered to apply, due to a well-documented backlog of claims and the difficult application process.

It is unclear what the appetite is in Congress to extend current stimulus measures in the short term. Lawmakers may choose to extend the $ 600 a week unemployment sweetener last July. An extra $ 2,400 a month is more than enough to cover the rent for most Americans, and once unemployment offices are stripped of the initial claims crisis, providing this assistance would be an efficient and direct way to maintain to more people in their homes. However, Republicans are concerned that these expanded benefits are discouraging people from returning to work, and any such proposal would have to survive tough negotiations.

Meanwhile, the $ 300 billion recently provided in the latest stimulus package to keep small business workers on the payroll is probably gone. Temporary rental assistance remains unfunded for tens of billions of dollars, and the need only increases as layoffs continue.

Family Owners

While landlords should be encouraged to reduce payments or implement payment plans, canceling rent is not a viable option for many of them. The prototypical rental unit may be inside a high-rise apartment building owned by a real estate giant, but in fact, the vast majority of rental properties in this country are single-unit homes owned by family owners. These owners depend on the rent to pay their own mortgages, finance repairs and maintenance of rental properties, and pay property taxes.

Therefore, protecting tens of millions of tenants in the midst of a deep recession will not be easy. But Congress needs to recognize the importance of keeping rent checks flowing. Past due rents could easily be converted into foreclosed units and a consolidation of rents stocks similar to Wall Street purchases after the Great Recession. That means an increase in substandard housing, worse property management, and more marginalized Americans. In addition, evictions cost American cities hundreds of millions of dollars per year. That money should be helping to shore up a struggling economy.

But while it is difficult, it is not impossible to avoid a rental housing crisis. Congress needs to expand direct rental assistance. That means cash for rent, sent directly to landlords or tenants.

The National Low Income Housing Coalition estimates that $ 100 billion in rental assistance would support 15.5 million low-income households over the next year. The Urban Institute estimate is approximately double and represents tenants of all incomes. That line of demand is a drop in the segment compared to the full stimulus funding that Congress anticipates driving this year, and will stabilize the largest household spending of millions of Americans.

Various mechanisms

There are several mechanisms that Congress could choose for this. Cash could be provided directly for rent through HUD’s existing network of Emergency Solutions Grants, where local service providers manage funds for people at risk of homelessness, or through the temporary expansion of the program. the Department’s Housing Choice Vouchers, through which local housing agencies pay a portion to low-income tenant rental owners. While some housing agencies may face a wave of new applications, most zero-income unemployed American tenant households would easily qualify.

Alternatively, Congress could try to channel money more directly to homeowners. The benefit of this approach is that there are fewer landlords than tenants, and they are easier to locate. The downside is that this approach would involve creating a completely new program. If Congress takes this route, it could model a program in the Treasury Department’s Affordable Housing Modification (HAMP) program, focused on non-homeowner-occupied housing, or expand the Main Street Loan program in the Federal Reserve to allow loans to the rental industry.

The bottom line is that Congress needs to find a way to inject funds into the rental ecosystem, be it through unemployment insurance, rental assistance, or direct payment to landlords. Protecting our tenants will not be cheap, and it will not be easy. But ignoring the looming crisis will cost billions more in the future in the form of rent debts and home foreclosures, and could prevent millions of Americans from taking refuge safely instead. That is something we really cannot afford.