Without stimulus, 12 million Americans will owe more than $5000 in missed rent by December: analysis

Rent debt could top $70 billion by the end of the year if Republicans keep blocking additional coronavirus relief

By Igor Derysh
October 31, 2020 2:00PM (UTC)
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Eviction Notice On Door (Getty Images)

Renters are expected to owe billions in missed payments by the end of the year without additional stimulus funding, according to two new analyses.

Senate Republicans have made clear they would oppose any large-scale stimulus deal reached between House Democrats and the Trump administration, at least ahead of the election, after balking at multiple Democrat-passed relief bills since May. But an analysis by the Federal Reserve Bank of Philadelphia found that another round of $1,200 stimulus payments and a clean extension of the $600-per-week federal unemployment boost that Republicans have long opposed could help millions of Americans stave off potential homelessness.

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While most renters are protected from eviction by a Centers for Disease Control and Prevention directive, which expires at the end of the year, missed payments have been piling up. The Philadelphia Fed estimates that the outstanding rent debt could reach $7.2 billion by the end of the year.

"Like the patchwork of state and local moratoriums preceding it, the temporary [federal eviction moratorium] has protected many renters from the threat of losing their homes in the middle of a pandemic. However, our analysis suggests that this stopgap measure has left millions of additional households, many owing thousands of dollars of back rent, at risk when the moratorium expires," the researchers wrote. "These households are primarily those with workers who lost jobs yet did not receive state or federal UI [unemployment insurance] (and other associated CARES Act provisions)."

That analysis likely does not show the full scope of rental debt. Another Philadelphia Fed analysis by the Consumer Finance Institute also found that credit card payments to businesses connected to rental real estate increased by more than 70% this spring and remained about 50% higher through the fall. That suggests many renters have cleared their rental debts only to rack up credit card debts with mounting interest rates to get by.

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"Even if now they are able to make their rent payment," Kate Bulger, a financial counselor at the counseling firm Money Management International, told The Wall Street Journal, "that huge inflation to their credit-card debt has become a new threat to their budget and their ability to cover all their expenses."

Estimates on the full toll of the mounting rental debt vary widely. Another analysis from the financial services giant Moody's projected that rental debt could reach $70 billion by the end of the year if there is no additional stimulus spending, according to the Journal. An estimated 12.8 million Americans would owe an average of $5,400 in missed rent, according to the analysis.

The Journal noted that Census Bureau data shows that about a quarter of renter households with children now have rent debt, with women and people of color disproportionately more likely to have missed payments. Another analysis from the University of California, Los Angeles found that Black and Latino renters in California are twice as likely to face rent insecurity as white residents.

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Some cities face a potential homelessness crisis when moratoriums ultimately expire. Previous estimates showed that tens of millions of Americans face potential eviction, which could leave families without shelter or force them to move into other households, increasing the risk of coronavirus spread.

"These households will have to make some pretty massive financial choices and pull back on other spending to pay their rent," Mark Zandi, the chief economist at Moody's, told the Journal. "That's a hit to the economy."

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The consequences of unpaid rent could impact families for years.

"If you don't pay it back that can escalate to things like judgments, potential garnishments against your wages," Bulger told the outlet.

Isis Bouzy, a Florida mother and hairstylist whose hours were cut amid the pandemic, said she faces eviction after racking up more than $2,100 in rent debt.

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"I'm not sure where this will leave me," she told the Journal. "I want to be a homeowner one day, and an eviction won't look good."

Both analyses made clear that it would take additional government aid to help millions stave off a housing crisis.

"Policies designed to replace lost income for unemployed workers…have been very effective at preventing rental debt for those households that receive them," the Philadelphia Fed analysis said, adding that another round of stimulus payments and a $600-per-week unemployment boost would reduce the number of renters with rent debt tenfold.

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While the White House and Democrats both largely support another round of stimulus payments, Senate Republicans omitted the payments when they forced a vote on a slimmed-down package priced at less than 25% of the Democrats' $2.2 trillion compromise offer.

Federal Reserve Chairman Jerome Powell, who was appointed by President Donald Trump, warned Congress earlier this month that "too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses" and increase bankruptcies, harm productivity, and shrink wage growth.

"By contrast, the risks of overdoing it seemed, for now, to be smaller," he added. "Even if policy actions ultimately prove to be greater than needed, they will not go to waste. The recovery will be stronger and move faster if monetary policy and fiscal policy continue to work side-by-side to provide support to the economy until it is clearly out of the woods."

Republicans have also adamantly opposed extending the $600-per-week enhanced unemployment benefits, pushing instead to cut it by half even though studies have found the generous benefits have helped prop up the economy and a drastic cut would shrink economic growth and cost millions of jobs.

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Senate Republicans and the White House have baselessly argued that the generous benefit serves as a "disincentive" to workers to return to their jobs but studies by university and Federal Reserve researchers have repeatedly shown that is just not true.

One study by economists at the Chicago Federal Reserve found that laid-off workers receiving the unemployment boost "search more than twice as intensely as those who have exhausted their benefits." Another study by researchers at the New York Federal Reserve and the University of Pennsylvania found that "employers did not experience greater difficulty finding applicants for their vacancies after the CARES Act, despite the large increase in unemployment benefits."

Another analysis published by the National Bureau of Economic Research found that "states with more generous unemployment insurance benefits had milder declines and faster recoveries" but found "no evidence" that generous unemployment benefits "drove job losses or slowed rehiring."

Negotiations between Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi, D-Calif., are still ongoing despite opposition from Senate Republicans but have repeatedly stalled.

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Pelosi on Thursday accused Mnuchin and the Trump administration in a letter of failing to resolve key differences, according to Politico, prompting Mnuchin to allege the speaker's letter was a "political stunt."

"Her ALL OR NONE approach is hurting hard-working Americans who need help NOW!" Mnuchin tweeted.

Pelosi said during a press conference later in the day that Democrats would not accept a bill that underfunds unemployment benefits or relief for cash-strapped state and local governments.

"We're not talking size, we're talking quality. We're not going to take a small bill," she said. "I want a bill for two reasons. First and foremost the American people need help. They need real help. And second of all, we have plenty of work to do in a Joe Biden administration ... So we want to have as clean a slate as possible going into January."


Igor Derysh

Igor Derysh is a staff writer at Salon. His work has also appeared in the Los Angeles Times, Chicago Tribune, Boston Herald and Baltimore Sun.

Tips/Email: iderysh@salon.com Twitter: @IgorDerysh

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Aggregate Coronavirus Donald Trump Mitch Mcconnell Nancy Pelosi Rent Debt Steven Mnuchin