For more on this topic, please join NPQ and Shelterforce (register here) on Tuesday, September 1st at 3:00 p.m. Eastern for a free one-hour webinar featuring the voices of two tenant organizers.
Today, nearly six months after COVID-19 prompted a nationwide economic shutdown, millions of Americans can’t pay their rent. It may be that they lost their job and haven’t been able to find a new one. Maybe they were furloughed and rehired, but still can’t catch up on the backlog of bills. On top of that, tens of millions have seen their $600 weekly federal unemployment supplement vanish since the CARES Act provision expired at the end of July, making the household income squeeze infinitely worse.
Whatever the cause of income shortfall, the bottom line is that as many as 40 million people are at risk of losing their homes in the coming weeks and months, with a ripple effect that will go far beyond their individual households. To understand the scale, that number represents more than double the combined populations of New York, Los Angeles, Chicago, and Houston, or 70 percent of all rural residents throughout the country.
Based on any measure, it is a social and economic catastrophe in the making.
On August 8th, the administration issued an executive order that pledged “to minimize, to the greatest extent possible, residential evictions and foreclosures during the ongoing COVID-19 national emergency.” However, the order does not reinstate the moratorium on evictions that expired in July and, in fact, contains no direct commitment to curtail evictions. It simply calls on agency heads to examine what might be done with existing programs and resources.
So how do we avert the pending eviction wave and ensure vulnerable populations have access to safe, decent, and affordable housing? For some families, it may already be too late. Depending on the locality, once the wheels of eviction are in motion, they can be very difficult to stop. But there is better news, too. For the overwhelming majority of those at risk, bold Congressional action, even now, that includes significant rent subsidies, mortgage assistance, and foreclosure protection could keep millions in their homes.
Think of it this way: just as the Paycheck Protection Program (PPP) helped small businesses and nonprofits to preserve jobs in the first few months of the crisis, we need a similarly scaled relief program for housing that will keep families in their homes, protect owners and operators of affordable housing from default, and preserve the infrastructure of our communities.
This is especially important given the state of the housing market before the pandemic. For years, the country has been grappling with an affordability crisis, and not just in hot markets like New York or San Francisco. Study after study indicates that no county in the country—whether it is urban, rural, or suburban—has enough affordable housing to meet the needs of their residents.
In addition, many communities never fully recovered from the Great Recession, leaving residents vulnerable to new housing shocks. For instance, a Federal Reserve analysis found that while national homeownership rates rebounded in the years following the last downturn, Black homeownership levels remained below pre-crisis levels. In fact, the gap between Black and White homeownership rates is greater now than in 1968 when housing discrimination was still legal. At one point in 2019 Black homeownership rates fell as low as 40.6 percent, compared to 73.1 percent for Whites. Households of color, in short, never regained their economic footing, and now they are among those most dramatically affected by COVID-19.
Pile on stagnating wages and a shrinking middle class and, simply put, tens of millions of Americans have been struggling to find decent housing within their means for years. When the pandemic hit, too many were already standing on quicksand.
Direct financial assistance
Given the depth of our national housing challenges, direct financial assistance to at-risk renters and homeowners is vital and should extend well into 2021. The HEROES Act, passed by the US House of Representatives in May, includes vital provisions related to housing, including $100 billion in emergency rental assistance for people facing eviction and $75 billion for distressed homeowners.
Lawmakers must reconvene quickly and enact this aid. The people hit hardest by the economic impact of the virus are those who typically have little financial cushion. As Federal Reserve Chairman Jerome Powell has pointed out, low-wage workers, women, and people of color have borne the brunt of the job and income loss. In April 2020, the Fed estimated that 40 percent of those earning less than $40,000 were out of jobs—and they also happen to be the same people who need affordable housing.
For struggling renters and homeowners, simple forbearance—in which housing payments are pushed off for a few months in the hopes that circumstances will improve—does not solve the problem. These families would end up deeply in debt, with no ability to repay the balloon sums eventually due. They would be more likely to slide into poverty and could still end up facing eviction a few months down the road.
For property owners—both homeowners and landlords—one alternative would be to restructure their loans and add an extra year to their duration, adding missed mortgage payments to the back end of the loan. It could be particularly helpful in encouraging small landlords to accept reduced rent payments from hard-hit tenants, if they could restructure their debt and relieve their own financial strain by doing so. In addition to avoiding the accumulation of unpaid debt right now, when conditions are so difficult, this has the added benefit of protecting community lenders, credit unions, and other small institutions from significant near-term losses.
But renters themselves, by definition, lack a real property asset to restructure. National estimates already point to a $25 billion backlog in rent payments, and that’s despite relief that was included in the federal relief package known as the CARES Act, passed back in March. For three months running, at least 30 percent of renters did not make their full on-time rent payment, if any at all. Imagine what those numbers will look like in the weeks to come, now that measures like supplemental federal unemployment insurance have expired.
The other advantage of financial assistance is that it helps avoid a dangerous downward spiral of loss throughout communities. Renters would be able to pay their landlords, who can then sustain their operations, pay their own mortgages and taxes, and pay their staff and outside vendors. It ensures neighborhood businesses still have a solvent customer base. It prevents displacement of children at a time when they should be getting ready for school—especially given the shift toward digital learning. And it supports community safety, by avoiding boarded up homes and deteriorating apartment properties.
My organization, the Local Initiatives Support Corporation (LISC), works in thousands of urban and rural communities, and has seen first-hand how these many aspects of “community” reinforce each other. We know that there is an urgent need not only to protect renters and homeowners at risk of eviction, but also to ensure the supply of affordable housing is available to meet the needs of countless more families that will endure economic losses in the coming months and possibly years.
In addition to direct financial assistance for renters and homeowners, there are a number of other measures Congress should take up when members return to work. They should include:
- A national moratorium on evictions for nonpayment of rent. This is an imperative. It keeps people in their homes and helps protect the economic infrastructure of communities. It must be coupled with emergency rental assistance to compensate owners and ensure renters don’t accrue back rent they can’t pay back at a later date.
- At least $14 billion in additional funding for the HOME Investment Partnership. HOME typically is used to support long-term affordable housing. But right now, additional HOME funds could be employed in innovative ways that meet immediate needs, such as providing funds for affordable housing landlords to defray significant increases in operating costs related to health and safety—from cleaning supplies, to protective equipment for staff, to expanded services for residents, like food for home-bound seniors or broadband for kids to learn from home.
- Funding that specifically addresses homelessness. This is both a housing issue and a matter of public health. The CARES Act included $4 billion in emergency grants to help rapidly house people without homes. That should be increased to $11.5 billion in the next round of relief so that work can continue. It offers the chance to not only limit the transmission of coronavirus, but also to expand the nation’s stock of permanent supportive housing that can help end homelessness.
- At least $1 billion in resources for community development financial institutions (CDFIs), which include more than 1,100 mission-driven lenders offering affordable capital in low-wealth communities. CDFIs have been leaders in responding to the pandemic, although have not received additional resources to support their work to date.
The above are four key emergency measures that are required to stop an eviction tsunami from pushing families out from their homes across the nation.
Rebuilding a society in which all Americans can afford their housing will require more than emergency measures, however. Earlier this year, before the pandemic shutdown of the US economy, LISC chief operating officer Annie Donovan in NPQ cited the need for strong policy supports, including increasing community ownership of property, such as through community land trusts; building partnerships with faith-based organizations like churches; and giving nonprofit housing organizations first option to purchase multifamily properties at fair market value, as San Francisco did last year.
Federal policies that boost housing could also pay big dividends. For instance, nonprofit affordable housing developers need additional capacity-building funds. For complicated reasons concerning how PPP treated real estate, most of these mission-driven developers were left out in the cold. And, yet, these nonprofits are central to a strong recovery, as well as to our ability to house families in the future. Another key measure, federal support for the Low-Income Housing Tax Credit program—long the nation’s largest program supporting affordable housing—could and should be expanded to support more development opportunities that respond to local needs.
In addition to federal efforts, state and local governments have also been taking action to protect their residents, working with private and nonprofit capital providers to address housing and economic challenges. The New York Forward Loan Fund—which, I should acknowledge, LISC administers—includes small landlords among the business-owners and nonprofits that are eligible for relief and recovery loans. It means those owners can pay their bills, even if their residents can’t pay the rent right now, which will help avoid mass evictions. And a wide range of state and local jurisdictions have also restricted evictions during the pandemic as part of their response programs.
We know these efforts are valuable. Indeed, given the current pause in federal support, it is fair to say that these actions are helping hold back the eviction wave right now. But as valuable as these efforts may be, none on their own can achieve the scale of relief needed, nor can they lay the groundwork for national recovery.
Federal resources are needed. A combination of rent and mortgage relief can keep families in their homes and preserve our communities. It is especially important now, in the midst of a pandemic that has claimed an estimated 180,000 American lives so far. Keeping people safe in their homes is a matter of utmost public health concern.
In short, although it is election season, Congress cannot put off housing until after November. To ensure that Congress does act, nonprofits of all stripes must step up their advocacy now. The alternative is too horrible to contemplate.
Denise Scott is executive vice president of the Local Initiatives Support Corporation, overseeing community investment programs in thousands of urban and rural communities throughout the country.