As if renting wasn't expensive enough, the pandemic made life even harder.
For years now, there has been a growing reliance on more rental housing as affordable housing shrinks. Please don’t confuse the term affordable housing with low-income housing because people’s ability to find a place to live they can afford is getting harder.
The underlying problem that impacts more than one out of every three households is the cost of having a place to live takes up more than 30 percent of income each month. And one in six households is paying more than half of their income to put a roof over their heads.
Much of the impact of expensive housing is felt by people that earn less than $75,000 a year. But that group also includes firefighters, law enforcement, teachers, and other public service workers.
Along comes a virus
The coronavirus pandemic has changed so many lives of those that have not succumbed to it. Substantial job loss was experienced at the sharp end of this crisis, but nearly 20 million people are still looking for jobs and unemployed or underemployed.
And COVID-19 struck when 47.5 percent of all renter households were already overburdened with high rental costs.
Additional unemployment benefits were available at the start of this crisis, but it seems the current government support for those out of work is shrinking. Also vanishing are the protections from eviction that initially kept tenants in their rental homes and apartments. But those protections are ending.
One crisis at a time
While growing unaffordable housing for more people is an issue that needs to be addressed, it is not the immediate crisis at hand. We can deal later with the decreasing number of starter homes people can afford to buy.
The immediate disaster is the coming giant wave cresting of evictions.
An estimated 30-40 million people are now at risk of being evicted from their housing and booted to the street as incomes shrink or vanish.
It is unfair to label landlords as greedy or cruel by evicting tenants who can’t afford to make the rent payment.
The National Low Income Housing Coalition (NLIHC) says it best when they observed, “Many property owners, who lack the credit or financial ability to cover rental payment arrears, will struggle to pay their mortgages and property taxes, and maintain properties. The COVID-19 housing crisis has sharply increased the risk of foreclosure and bankruptcy, especially among small property owners.”
Grant Sabatier from the site Millenial Money hopes landlords will make adjustments to avoid evicting tenants. Sabatier said, “Rent demand in many cities is also low, so landlords are going to be less likely to evict because they could have a harder time finding new tenants.”
Sabatier is also hopeful eviction prevention laws or programs stay in place. He said, “I’m hopeful local and state governments will extend eviction moratoriums through at least the end of the year, if not through June of 2021. The reality is many Americans still can’t pay their rent, so if they aren’t extended, it will be a disaster.”
The eviction wave issue is a tragedy on both sides. Both tenants and landlords are at risk of losing. Landlords are at risk of losing their property and credit, while tenants are at risk of being put on the street in a matter of days after missing a rent payment.
Michael Bovee of Consumer Recovery Network, “Not having the stability of a roof over your head can make it even tougher to find work. Having an eviction, or missed rent payments on your credit reports makes it that much tougher to get approved for a new rental, even when employment returns.”
And of course, Bovee is right. The historical ways of finding a new place to rent after a credit mishap are less applicable when you are homeless or recently evicted with low or no income. It is tough to put down an additional security deposit to persuade a private landlord to rent to you when you can’t even cover the necessary expenses.
It might be that a future government agency might develop a program for renters to help guarantee payment to get them back into housing. Still, right now, even low-income housing authorities are rushing to evict families.
Landlords are also preparing for eviction protection programs to end.
What you can do if you are evicted and unemployed
Winter is approaching; unemployment is slow to rebound, the coronavirus is still a plague without a cure, and people are losing healthcare coverage.
A safety net to help catch evicted people and families is the role of government. But local and state governments have bursting budgets, so any hope to provide relief for the 30-40 million evicted tenants is a job for the federal government. But will they step in like they bailed out banks?
The disaster is apparent to the financial experts I talked with, and they had varying words of advice.
Bovee offered, “Stay connected to opportunities in your community.
Network with friends, family, former coworkers, faith-based organizations, and tenant rights organizations in your area.
Develop a plan that dedicates your resources to maintain your health and well-being.”
Sabatier said, “Use this as an opportunity to find a cheaper place and/or live with friends or family if you can. Reduce your expenses and increase your emergency fund.”
The reality is there is no good solution for 30 to 40 million people facing eviction. The safety net of homeless shelters, food banks, and low-cost daycare to help parents work again is limited.
I’m not worried at all about the debt caused by being evicted. That’s easy to eliminate once income is in reach again. A Chapter 7 bankruptcy will eliminate the problem debt for the majority of affected families and individuals. In about 90-120 days all the past debt, judgments, and eviction obligations can be legally eliminated to get a fresh start. Bankruptcy also can be a solution for landlords to reorganize their debts as well.
Damon Day, a debt coach, said he is spending more time helping people prepare for a potential financial crisis due to possible eviction. Day said, “An eviction on the horizon feels scary, but I’m spending a lot of time right now helping people come up with a personalized plan of action on how to best tackle their crisis today so they can do better financially tomorrow.
That gives people a plan and comfort.” He added, it is understandable that people are liquidating assets like retirement funds. He said, “Still, too often, I see people doing that out of fear, rather than having a plan of how it is going to make things better.”
The hidden cost of this crisis should also not be ignored, a significant number of people will suffer from a mental health crisis as a result. And guess what else is in short supply, mental health care.
Recent Government Eviction Prevention Efforts Just Kick the Problem Down the Road
The Centers for Disease Control and Prevention (CDC) just issued an order. Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19.
The government action would prevent evictions through December 31, 2020. If you are a renter that seems like a good thing, but is it?
With the elimination of enhanced unemployment benefits to help people afford things like rent, landlords are going to be left shouldering the burden for people that can’t now evict. When it comes time to kick people out, they will be on a hair trigger and excited to do just that.
While the order prevents landlords from evicting people it does not stop people for owing the rent due. The order specifically says, “Nothing in this Order precludes the charging or collecting of fees, penalties, or interest as a result of the failure to pay rent or other housing payment on a timely basis, under the terms of any applicable contract.”
But this eviction prevention measure is not universal and comes with rules and hoops tenants will have to jump through. I predict many will be unaware of these and will wind up getting evicted anyway when they fail to file the proper paperwork, or the landlord “loses” it.
Under the order a tenant must complete an executed declaration that says the tenant has used best efforts to obtain all available government assistance for rent or housing, makes less than $99,000 in annual individual income or $198,000 in household income, and they are unable to pay the full rent payment.
The need for this order is stated as an effort to avoid a significant increase in homeless shelter occupancy as evicted people struggle to find a place to live. The CDC says that would cause the pandemic to spread. The order also says, “The risk of COVID-19 spread associated with unsheltered homelessness (those who are sleeping outside or in places not meant for human habitation) is of great concern to CDC. Over 35% of homeless persons are typically unsheltered. The unsheltered homeless are at higher risk for infection when there is community spread of COVID-19.”
The CDC order goes on to say, “Additionally, research suggests that the population of persons who would be evicted and become homeless would include many who are predisposed to developing severe disease from COVID-19.”
So, it appears to me that the CDC recognizes the serious consequences of homelessness, but the eviction protection order just sets people up for being massively evicted beginning on January 1, 2021 when the full amount of back rent will be due.
Until then, landlords and rental complexes will financially suffer.
Published by Debt.com, LLC