Measuring The Need For Housing Affordability
Mike is the Co-Founder and CEO of Jetty, a new financial services company on a mission to make renting more affordable and effortless.
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As renters across the country struggle to pay rent, many states and municipalities continue to extend eviction moratoriums. And while these measures will keep many in their homes during the Covid-19 pandemic, they’re not enough to address the underlying issue of the country’s affordability crisis.
That’s because housing affordability was a serious issue even before renters across the U.S. lost their incomes during a global pandemic. Even more, it’s not a question that will be solved if and when the virus becomes more manageable.
Even Before The Pandemic, Housing Costs Were Concerning
Months before the pandemic, in 2019, about half of all renters were either “moderately or severely cost-burdened,” meaning at least 30%-50% of their income went to housing costs. Around the same time, a report from the Federal Reserve revealed that 40% of Americans didn’t have $400 in the bank or in credit for emergency expenses.
And as of January 2020, one report from the American Payroll Association showed 74% of American employees were living paycheck to paycheck. So while Covid-19 caused – and continues to cause – widespread job loss, it certainly didn’t create the current conditions.
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The Economic Fallout Hits One Group Of Renters Hard
The economic fallout in the past year has impacted Americans of all income levels, but has hit low-income renters harder than any other demographic.
In a recent Pew Research Center survey, 43% of U.S. adults say that they or someone in their household has lost a job or taken a pay cut due to the outbreak. Among lower-income adults, that number jumps to a staggering 52%.
This has led to findings showing 1 in 4 adults are struggling to pay bills since the outbreak started, while a third have dipped into savings or retirement to meet their commitments. An additional 1 in 6 have relied on borrowed money or accepted food from local charities.
It should come as no surprise, then, that many of these households are struggling to pay rent. Among lower-income adults surveyed by Pew, 46% say they’ve had trouble paying their bills since the pandemic started, and roughly one-third (32%) say it’s been difficult to make rent or mortgage payments.
We Need Permanent Solutions
Right now, eviction moratoriums are the only thing keeping many renters in their homes. But many of these moratoriums are set to expire in the coming months, leaving millions of people at risk of eviction.
Moving forward, we need better solutions that help both residents and property owners.
The Mortgage Bankers Association reports $9 billion in rent that went uncollected in the third quarter of 2020 alone. Without this rent, many landlords struggle to meet obligations for property taxes, insurance and maintenance.
These challenges on both sides of the equation point to a larger need for policy change. That’s why groups like the Bipartisan Policy Center are advocating for sweeping legislation that would extend emergency unemployment benefits, provide $15 billion in emergency rental assistance, and extend forgivable loans or tax credits to property owners facing lost rental income.
Meanwhile, other legislators have focused on bills that make securing housing more affordable, including Cincinnati’s Renter’s Choice law that went into effect in April of 2020, Atlanta’s similar bill that was approved in October 2020 and Columbus’ legislation that was also introduced last year.
On a smaller, more immediate scale, some properties are taking the lead to offer residents more flexibility. Many have chosen to work out agreements to collect at least a portion of residents’ rent each month or create payment plans that allow renters to pay less while finances are tight and then pay back the difference down the road. At my own company, many of our real estate partners are looking at allowing residents to put security deposits toward rent, or even use them for other expenses.
At Jetty, we’ve seen more of our real estate partners express interest in letting residents put their security deposits toward rent, or to use those funds for other expenses. That’s why we launched Unlock Deposit this past fall.
Moving forward, property owners and managers will continue to find new ways to improve affordability – with or without legislation. It’s in alignment with many of the industry players’ missions – including my own company’s – and will be an important part of recovery not just from the pandemic, but from future events that impact rental payments.
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