If the public bails out landlords when times are bad, why should landlords be entitled to unrestricted profits when times are good?

Coronavirus pandemic calls into question the very basis of our for-profit housing system

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During the pandemic, this once-per-month newsletter may be split into two issues: one monitoring developments related to the COVID-19 pandemic, and one for other news on housing justice.

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The Trump and Biden administrations have both passed laws providing cash assistance for those behind on rent or utilities. Under the Trump Administration, the CARES Act (passed in March 2020) provided $12.4 billion and the December stimulus package provided $25 billion. Now, Biden’s American Rescue Plan provides an additional $22.4 billion. That’s a total of $59.8 billion — a massive amount of money that is helpful to tenants in the immediate term, but will ultimately end up in their landlords’ pockets. To put it in perspective, Bernie Sanders estimated $70 billion was needed to fully modernize every single public housing unit in the entire United States — catch up on half a century of deferred maintenance, equip all buildings with high-speed internet access, make all buildings disability accessible, etc.

Tens of billions of dollars in aid flowing to landlords calls into question the very basis of our for-profit rental housing system. First, housing is a basic human need, so a system that can’t provide housing in a crisis is not a housing system we should rely on.

But operating a for-profit business is not a basic human need. Many people believe that every person should have a right to housing, but nobody believes that every person should have the right to run a for-profit business.

The moral basis of capitalism is that people who own for-profit businesses deserve profits because of the risk they take: they might lose everything. Owning a business is risky, or so the story goes. If the economy enters a downturn, its owner might lose everything through no fault of her own; because of this risk, the owner is entitled to every penny of profits when the economy is strong and the business is profitable. By contrast, an employee might lose her job if the company goes bankrupt, but that’s it; an employee won’t take any further financial loss, but the owner will. As such, an employee doesn’t have any claim to profits when times are good. That’s the moral basis of capitalism: the owner of the company deserves to keep every penny of profits when times are good because she may lose everything when times are bad.

And yet rental assistance amounts to tens of billions of dollars bailing out landlords’ for-profit businesses. Without the bailout, many landlords would stand to lose everything.

Perhaps we’re in such a dire situation that there is truly no alternative than to bail out landlords. But if we bail out for-profit landlords when times are bad, why do they deserve all the profits when times are good?

Rent controls, length of tenure regulations, and other tenant protections are the right thing to do. But there is no longer any argument against them. If the public is going to bail out landlords when times are bad, then landlords need to give back to the public when times are good. Unrestrained profits in rental housing must be a thing of the past.

Housing Provisions in the American Rescue Plan

The big story is the passage of the $1.9 trillion American Rescue Plan, signed into law by President Biden after not a single Republican voted for it. Here are the housing provisions in the plan:

  • $27.4 billion for rental assistance

    • Of this, $5 billion is reserved specifically for emergency housing vouchers (for people about to become homeless), leaving $22.4 billion to help renters catch up on unpaid rent

  • $5 billion for homelessness programs, either to fund emergency shelter programs or to fund more permanent options

  • $10 billion in assistance to homeowners behind on their mortgage

  • $5 billion in assistance for people behind on utilities

Census data remain grim

The latest Census Bureau data (covering February 17 to March 1) reveal incredible suffering:

  • 46% of people reported a loss of employment of themselves or a household member since the start of the pandemic

    • 20% of respondents reported expecting themselves or a household member to experience a loss of employment in the next 4 weeks

  • 32% reported not having enough to eat in the past 7 days (9%) or cutting back and eating foods they did not like in order to save money

    • For households with children, 38% reported not having enough to eat in the past 7 days (12%) or cutting back and eating foods they do not like in order to save money

  • 10% of homeowners with a mortgage reported being behind on mortgage payments

  • Only 69% of homeowners with a mortgage reported “high confidence” they could make their next mortgage payment

  • 19% of people paying rent for their housing reported being behind on rent

  • Just 47% of people paying rent for their housing reported “high confidence” they could make their next rent payment

  • Only 41% reported it was “not at all difficult” to pay for usual household expenses in the past 7 days

Apartment List had been doing a monthly survey in 2020 on rental debt but reduced the frequency. Their latest survey from January found that “in total, our survey finds that 28 percent of renters carry rent debt, and of those, 42 percent owe over $1,000 to their landlords.” (emphasis added) The misery is unsurprisingly concentrated among Black and Hispanic renters:

Federal eviction moratorium extended; assistance is still inadequate

When the American Rescue Plan was passed earlier in March, it did not extend the federal eviction moratorium, which was still set to expire at the end of that month. Readers may recall our anger at President Trump for waiting until 4 days before the eviction moratorium ended to extend it. We wrote of Trump’s extension, which occurred on December 27:

“If you’re not one of them, try to imagine the terror tens of millions of Americans who can’t afford rent must have felt not knowing if they would have a place to live until 4 days prior to doomsday.”

Biden cut it even closer, waiting until just two days prior to its expiration. He ultimately extended it through the end of June.

In theory, the $22.4 billion allocated to rental assistance should render eviction moratoria unnecessary; if people have cash assistance to help them catch up on rent, then there is no need for a moratorium against evictions. There are several problems with this, however:

  • This is the third round of rental assistance and there have been serious problems actually getting cash assistance to renters who need it. It was simply unrealistic to expect this money to be distributed by the end of March.

    • As of early March, multiple jurisdictions have been unable to allocate a single penny of rental assistance funds they received back in January.

    • Tens of millions of dollars supposed to be for renters in Pennsylvania actually wound up funding the Pennsylvania Department of Corrections.

    • Many in need have no idea that rental assistance programs even exist. If you don’t apply, you can’t receive assistance.

  • $22.4 billion is not enough. As we reported last issue, as of December Americans were likely behind on rent and utilities by $52.6 billion. Since those estimates came out, renters now owe rent for January, February, and March; in other words, that number has certainly grown. Since December, the Biden and Trump Administrations have (respectively) passed $22.4 + $25 = $47.4 billion, which is clearly not enough.

  • As the Census Bureau data make clear, many people are still experiencing lost income due to job loss from the pandemic. As reported above, 46% of Americans have experienced a loss of income since the start of the pandemic and 20% expect a loss of income in the next 4 weeks. Perhaps Jane is lucky and gets enough assistance to cover her back rent from, say, June 2020 to March 2021. But if Jane is still unemployed, she’s going to get evicted a week later for not paying her April 2021 rent.

The federal eviction moratorium was meant to expire at the end of March; given all of these problems, the Biden Administration’s CDC decided to extend it to June. In the best-case scenario, all $47.4 billion in aid quickly makes its way to renters who need it. Given all the problems distributing aid, a best-case scenario is vanishingly unlikely. But even a best-case scenario is simply inadequate for the scale of the problem: renters are behind on rent by far more than $47.4 billion and millions remain jobless. A one-time cash benefit to pay rent might make you current on the rent you owe, but if you are still jobless, you will simply fall behind again.

Eviction Lab continues to track state-level tenant protections during the pandemic.

Foreclosure protections extended

The Biden administration extended the two programs protecting homeowners experiencing financial hardship due to the pandemic: the federal foreclosure moratorium and the forbearance program. Nonetheless, the situation remains dire. Overall, there are still 2.7 million households in forbearance plans. Only 54% of those who entered COVID-related forbearance have been able to successfully resume payments and leave the program. If nothing fundamentally changes, there will be a catastrophic wave of foreclosures at the end of September.

Overall, the pandemic remains a catastrophe of historic proportions

The CDC eviction moratorium is still not working very well, an issue we covered at length last issue.

In the December issue of this newsletter, we discussed at length how the American housing system was totally broken prior to the pandemic. It’s worth keeping this in mind, so we’ll review some updated data in this issue.

We thought we had covered everything last month, but landlords simply pretending they never received the CDC declaration form is a new eviction moratorium loophole.

Researchers found that homeless individuals have a 30% higher case fatality rate from COVID-19. Surprisingly, the risk is highest for young adults and lowest for those 65 and older.

The Federal Reserve Bank of Philadelphia estimates that American renters are only behind on rent by $8.4 billion. But their estimate isn’t reliable; their analysis excludes tens of millions of people with lost income.

The Biden Administration’s $22.4 billion for emergency rental assistance is more or less in line with the actions of the Trump Administration ($12.4 in the March CARES Act and $25 billion in the December stimulus). This side-by-side comparison argues that Biden’s approach to poverty during the pandemic is basically in line with Trump’s.

Allocating emergency rental and foreclosure assistance is going very badly

Because rental assistance is allocated at the local level, it is impossible to make a general statement about how well these funds are being distributed. But you don’t have to look hard for fiascos. For example, as of March 2, St. Louis has not been able to distribute a single penny of the $9 million it received for rental assistance in January. As of March 5, neither had Madison County, the third most populous county in Alabama. And as of March 6, Broward County, the second most populous county in Florida, also had not been able to distribute a single penny of the $59 million it was allocated in January. The City of Atlanta was only able to disburse about half of the $22 million it was allocated by the CARES Act in March 2020.

The money for emergency rental assistance is actually given to the Treasury Department; the money thus filters down from the federal level to be disbursed by local agencies. In some places, local rental assistance programs already existed, and the Treasury money is simply beefing up the budgets of those programs. But in many places, there are no rental assistance programs; in other words, jurisdictions with zero ability to run an emergency rental assistance program suddenly have to disburse millions of dollars in emergency rental assistance.

In addition to problems at the local level, some states are having difficulty assigning funds to local governments. Pennsylvania was allotted $150 million for rental assistance from the CARES Act; an appalling $96 million never made it to tenants and was mostly spent on Department of Corrections payroll. (Some of the $25 million Pennsylvania was allocated by the CARES Act to help people catch up on the mortgage payments also didn’t reach those who need it.) These issues reached new heights of barbarism in Idaho and Michigan as Republicans in those state legislatures are attempting to prevent their state’s share of emergency rental assistance from being used at all.

Overall, this system of money filtering down through multiple levels of government (from the federal Treasury Department to state governments to local governments) is not working very well.

But there are other problems as well. Last issue, we linked to stories of landlords simply refusing to accept cash from rental assistance programs, opting instead to throw their tenants out on the street. According to research by the Federal Reserve Bank of Philadelphia, the vast majority of renters in need of emergency rental assistance either have no idea that such programs exist or could not figure out how or where to apply (see the below graphic from the National Low Income Housing Coalition). Note that these data do not indicate if those who applied actually received assistance; given all the problems disbursing aid, many of those who did apply probably received nothing:

Foreclosure moratorium and mortgage forbearance extended, but the situation remains dire

Black Knight’s most recent data (covering January 2021) reveal an extremely dire situation among homeowners. As we discussed in previous issues, anyone with a mortgage owned or guaranteed by the federal government (through Fannie Mae, Freddie Mac, Ginnie Mae, the Federal Housing Administration) is entitled to 360 days of forbearance. If you cannot afford your mortgage payments, you do not have to make any payments for 180 days and can renew once for another 180 days (making for 360 days of total possible forbearance). 

Since the program was started in late March 2020, there had been a wave of people who applied early-on whose forbearance was therefore approaching that 360-day limit. Facing this impending armageddon of foreclosures, the Biden Administration extended forbearance; after 360 days are up, homeowners can renew their forbearance for a three-month period, twice. In other words, homeowners can put their mortgages in forbearance for a total of about 18 months. This postpones the foreclosure armageddon until September.

The fundamental problem is that a large portion of people in forbearance plans remain unable to right themselves financially. Black Knight points out that the forbearance rate — that’s the percentage of homeowners with a mortgage in forbearance — has not improved since October. Since the program’s inception in March 2020 through October 2020, the forbearance rate steadily ticked downward. But since October, there has been essentially no change in the forbearance rate. In other words, between March and October 2020, a large number of program participants have been able to recover their financial footing and — no longer in need of forbearance — leave the program. But since October, there has not been a reduction in the number of people who need the program.

If people were exiting forbearance at a steady rate, delaying the termination of the program would solve the problem: the Biden Administration could simply extend forbearance for several months, until nobody needed it any longer. But people aren’t able to leave the program; unless something fundamental changes, extending the program will only delay — and not prevent — a foreclosure catastrophe.

Overall, there are still 2.7 million households in forbearance plans. Only 54% of those who entered COVID-related forbearance have been able to successfully resume payments and leave the program. For some perspective, the number of homeowners 90 or more days behind on mortgage payments (including those in forbearance plans) is a whopping five times higher than pre-pandemic levels.

Finally, the foreclosure moratorium is still active; in mid-February, the Biden administration extended it to June 30. While most mortgages are eligible for forbearance, a large minority are not; the foreclosure moratorium thus offers some protection for homeowners without federally-backed loans.

It’s worth pointing out that the Biden Administration extended forbearance and the foreclosure moratorium in mid-February — a month and a half before catastrophe — whereas the eviction moratorium was only extended two days before its expiration.

Reminder: Our housing system was totally broken prior to the pandemic

According to data from the National Multifamily Housing Council, the pandemic has had almost no effect on tenants’ ability to pay rent. This graph shows the percentage of renters able to pay their rent in full by the 6th of the month; a shocking 15-21% were unable to do so in the six months prior to the pandemic. Astonishingly, in the October prior to the pandemic, only 79.4% of renters paid rent in full by the 6th; in the October during the pandemic, only 79.4% of renters had paid rent in full by the 6th. In other words, tenants were already buckling under the cost of rent and the pandemic made a terrible situation even worse:

NMHC’s dataset is not representative, so this cannot be extrapolated to all renters. However, this dataset includes a quarter of all renters; because it is so large, conclusions from this dataset cannot be dismissed. In other words, we know this is a massive problem, but we don’t know how massive it is. Unfortunately, I am not aware of other datasets that would provide an apples-to-apples comparison of renters’ ability to pay rent before and during the pandemic.

Eviction moratorium not working very well

We spilled a lot of ink last issue on the many, many problems with the federal eviction moratorium. One problem was that many renters do not know about the moratorium or how to benefit from it. This is a massive problem: Douglas County, Nebraska (Nebraska’s most populous county) has started hearing eviction cases again, and the number of cases being heard is nearly at pre-pandemic levels, apparently because people do not know how to complete the paperwork to benefit from the CDC eviction moratorium. In other words, the moratorium is having almost no effect in preventing evictions in Douglas County.

A separate, but related problem (which we discussed in the December issue) is that courts are continuing to accept eviction filings, even if the eviction cases cannot actually proceed due to a federal, state, or local eviction moratorium. In other words, even though courts cannot process cases to throw people out of their homes, they are nonetheless accepting filings in order to throw people out of their homes as quickly and efficiently as possible the moment the moratoria are lifted. This remains a problem; for example, Tampa, Florida, is (as of March) back at pre-pandemic levels of eviction filings. Indeed, Eviction Lab finds that between September 4, 2020 and February 27, 2021, eviction filings only fell by 10% from pre-pandemic levels in Tampa and Jacksonville, Florida.

By just how much are renters behind on rent?

This explainer from the Urban Institute examines three different estimates on how much renters are behind on rent. At the low end, the Federal Reserve Bank of Philadelphia estimates that renters are behind on rent by a total of $8.4 billion while the Urban Institute puts that number at $52.6 billion.

This is buried at the end of the newsletter because the Fed’s estimates are clearly wrong. The Fed’s analysis only includes people who have lost a job — astonishingly, their analysis excludes people who lost income after their hours at work were reduced. By contrast, Urban estimated the number of renters behind on rent based on the Census Bureau’s weekly surveys, which are nationally representative and directly ask people if they are behind on rent. 

As we discussed last issue, Urban estimates that a typical renter is behind by more than $5,500. The Fed estimates that a typical renter behind on rent owes over $6,000, which is in close agreement with Urban’s figure; overall, this lends credence to Urban’s claim that a typical renter is behind by several thousand dollars.

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