- Without more federal aid for jobless workers, experts expecting largest disruption to housing market since Depression
- Unlike US economy, rental housing troubled prior to COVID outbreak
- During “good times” pre-COVID, some 200,000 people slept in cars, on streets or under bridges
The visuals for the Great Recession were empty subdivisions and foreclosed homeowners. The visuals for the COVID recession could be jobless tenants, disproportionately hourly workers, struggling to pay their rent for overcrowded apartments.
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Emily A. Benfer, a professor with the Wake Forest University School of Law, said, “The United States is on the brink of an eviction crisis of unprecedented magnitude…” assuming that the federal government does not extend now expired unemployment protections.
Most renters who did not receive unemployment benefits were covered by various eviction moratoriums despite not having money to pay their non-housing debts. Passed initially as part of the CARES Act in March, the federal evictions moratorium all by itself gave approximately 28.1 – 45.6% tenants who lived in properties that have federally backed mortgages a rent payment reprieve until July 25, according to the Federal Reserve Bank of Atlanta.
Federal and individual states/cities’ evictions moratoriums were supposed to be temporary support measures for tenants until COVID subsided and the economy returned to “normal.”
Guess what? COVID is still here to the tune of +5M cases and +165,000 deaths in the US and the economy continues to see more than 1M laid-off workers file for unemployment benefits and temporary layoffs are becoming permanent job losses.
Landlords are not agreeing with experts’ extreme predictions for evictions. Some property owners are working out rent cuts and extended payment plans while they experience increasing vacancies and falling rent prices. Other property owners suggest that most tenants have stayed current on their rent payments.
Still, regardless of expert prognostications and landlord narratives, renters were not in great shape prior to the COVID pandemic (nearly 48% were paying +30% of their income towards housing) and renters are in worse shape now as they’ve been harder hit by the virus and suffered greater job losses. Even after the economy recovers, the rental market is likely to remain challenging.
Two words to the wise for tenants wanting to renegotiate or renew their leases. If a tenant already has a contract in place, the landlord is in the driver’s seat and will likely not renegotiate. If the tenant wants to renew the lease, it’s currently a renter’s market due to those increasing vacancies and concessions. Give it a try.
Thanks to the Federal Reserve Bank of Atlanta, Curbed and The New York Times.