As coronavirus lockdowns are extended, countless unemployed and underemployed renters could face homelessness, despite federal efforts to provide emergency financial aid.
Renter households make up about 36 percent of U.S. homes. Of nearly 50 million such homes, some 20 million renters (PDF) spend a third or more of their pre-tax income on rent, according to Pew Research Center. And according to the National Low-Income Housing Coalition, there are 867,765 extremely low-income households in Texas, 192,744 of which are in Dallas. Dallas ranks fifth nationally among America's big cities with 697,154 renters, or 54 percent of the population.
The Coronavirus Aid, Relief and Economic Security (CARES) Act provides direct cash assistance and expanded unemployment benefits, but this aid will not reach millions of low-income or otherwise economically vulnerable households, households that are disproportionately renters. This group includes immigrant workers who do not use a Social Security number to pay taxes.
The CARES Act has provided some housing assistance for renters, including a 120-day moratorium on evictions, but only for the 28 percent of renters whose landlords have mortgages backed by the federal government. While helpful, little of this aid benefits at-risk renters who do not receive federal assistance. State and local policies, including stopping evictions for a period of time, halting rent increases and late fees for nonpayment, and various repayment schemes when emergency rulings end, are useful short-term measures for renters. However, without additional intervention, distressed tenants are likely responsible for all arrears in the longer term, an untenable situation for many.
Designing aid programs for renters is much more difficult than aiding homeowners with mortgages. Mortgage debt in the United States is held by a remarkably small number of financial institutions, making policy implementation relatively easy. Additionally, longer-term strategies are available to mortgagers, such as folding missed payments into the principal on a home loan, thus spreading any short-term financial burden over many years. Such mitigation options are unavailable to renters, who are typically under one-year rental contracts.
Policy interventions targeting landlords may be more effective in providing assistance to renters.Share on Twitter
Policy interventions targeting landlords may be more effective in providing assistance to renters. Data from the 2015 Rental Housing Finance Survey show that 50 million rental properties in the United States have around 23 million landlords, approximately half the size of the population of renters. Seventeen million of these landlords are individual investors with an average of one to two rental properties. Three million LLCs and limited partnerships own on average about five rental properties each, and around 300,000 real estate investment trusts and real estate corporations own an average of seven to eight rental properties each. Even policies aimed at securing the cooperation of the smaller number of corporate landlords could assist tens of millions of renters.
Substantial differences in the interests and capabilities of these landlord groups might make formulating policy more difficult, but doing so may still be more feasible than alternatives. Many rental properties have active mortgages, so these landlords are in a market where policy could be more strategically deployed. Many individual landlords may respond to programs that, for example, allow them to roll missed rental income into mortgage premiums, and issue transferable federal tax credits reflecting rent reductions and agreed forgiveness. This could offset their additional debt burden. Large-scale investors might also respond to such tax credits. Given the costs of evictions and the prospect of prolonged vacancies, landlords should have an implicit incentive to participate in solutions targeting them directly.
Housing security is vital to individual and collective well-being, and is a key component in the nation's economic performance.Share on Twitter
The overlapping mix of state and local claims on property taxes could complicate matters, but there is a precedent for this type of program in the more than 30-year-old federal Low-Income Housing Tax Credit program, through which state agencies distribute federal tax credits. Communication and monitoring could be critical to ensure renters' awareness of these benefits, but even a partially successful effort along these lines is likely to be an improvement on the current paucity of programs. A landlord-focused policy approach is likely more feasible than the alternatives that would require far greater coordination and monitoring. These include ideas such as synchronized top-to-bottom freezes on rent, mortgage, and utility payments, or sustained cash assistance to renters reflecting variations in rental costs across geography.
Housing security is vital to individual and collective well-being, and is a key component in the nation's economic performance. The looming coronavirus eviction crisis suggests the need to address the systemic problem of housing affordability and security now. A strategic approach could improve responses to future challenges, whether nationally or locally. Strategic policies are likely to be less expensive, easier to implement, and more beneficial to renters than hasty, ad-hoc crisis-related reactions to evictions and homelessness.
Alina Palimaru is an associate policy researcher and leader of the Housing and Homelessness Strategy Group at the RAND Corporation. Jason Ward is an associate economist at RAND. Amy Shearer is an associate behavioral scientist and leader of the Housing and Homelessness Strategy Group at RAND. Marcus Dillistone is a member of the Royal Society of Medicine (UK).
This commentary originally appeared on Dallas Morning News on April 30, 2020. Commentary gives RAND researchers a platform to convey insights based on their professional expertise and often on their peer-reviewed research and analysis.