Wednesday, April 22, 2020

Renters and Rental Market Crisis

Working Group

2

The COVID crisis has a waterfall of effects . . .

W a t e r f a l l

Capital Markets tighten credit and lenders can't or won't lend

Property Owners/Landlords can't cover operating costs & pay lenders, city services and taxes

Tenants lose income & can't pay rent

3

The solution begins with . . .

Stabilizing renters, which will . . .

Stabilize and preserve properties and

landlords, which will . . .

Enable lenders to finance rental housing

and prevent larger capital market failures

W a t e r f a l l

4

COVID-19 creates problems for the rental market across three time horizons

Immediate

• April -September 2020

Intermediate

• September 2020 -September 2021

Long-Term

• After September 2021

5

Even before COVID-19, low-income households faced immense rent burdens

Source: ACS 2018 Note: Rent Burden - Gross Rent/Income is between 30% and 50%,

Severely Rent Burden – Gross Rent/Income is 50% or above

1,312,246

3,046,709

3,733,538

1,025,114694,751

123,821

6,124,663

2,585,362

827,344100,633 47,830 781

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

AMI<30% AMI: 30-50% AMI: 50-80% AMI: 80-100% AMI: 100-150% AMI≥150%

NUMBER OF RENT BURDENED HOUSEHOLDS

Rent Burden Severely Rent Burden

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5 million already cost-burdened households under 80% AMI work in the 5 most vulnerable industries to COVID-19

Note: Five industries include (1) Food & Accommodation, (2)

Construction, (3) Retail, (4) Entertainment and (5) Other Services.

237,500

955,854

1,149,062

297,822

171,612

25,220

1,649,891

792,609

235,876

22,083 8,699100

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

AMI<30% AMI: 30-50% AMI: 50-80% AMI: 80-100% AMI: 100-150% AMI≥150%

Rent Burdened Severely Rent Burdened

Source: ACS 2018

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These same 5 industries have already shed an estimated 4.1 million low-income jobs

Note: Five industries include (1) Food &

Accommodation, (2) Construction, (3) Retail, (4)

Entertainment and (5) Other Services.

Source: Where Low-Income Jobs Are

Being Lost to COVID-19, Urban Institute

Renters: Individuals who were previously housing insecure and for whom

CARES Act UI payments don’t replace income that could be used for rent

are at risk.

Owner/Landlords: Owners for whom mortgage forbearance does not apply,

face potential financial insolvency as tenants are unable to make full or

partial rent payments.

8

Over the next several months the immediate challenges are . . .

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These problems will likely persist into 2021

• Renters: Notwithstanding federal stimulus income supports, low and

moderate income renters that have lost income and face unsustainable

financial burdens, may become housing instable in the intermediate term.

• Owner/landlords: Owners that can draw on operating reserves and qualify

under forbearance policies could face financial insolvency.

• Capital markets: Multifamily servicers will continue to need assistance to

meet financial obligations.

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Depending on the longevity of the crisis, this could create long-term problems in the rental market

Renters: Without appropriate policy interventions, long-term

unemployment coupled with reductions in the affordable housing stock

could lead to increases in homelessness and housing instability.

Owner/landlords: With the loss of mom and pop owners, larger

commercial companies may buy smaller rental properties. Commercial

owners may not keep rents affordable.

Capital markets: If capital markets take a hit, and lending standards

tighten, funding for the development and rehabilitation of rental housing

declines, leading to an even tighter housing market and more long-term

housing instable families (could be even worse with losses of existing

affordable housing).

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A portfolio approach is needed

• There may be relief that is not possible to provide directly to

tenants and for which an intervention through owners is

needed to supplement

• Each delivery mechanism has limitations; several

mechanisms will cover more renters in need

• In addition to allocating resources, tenant protections are also

needed

• Problems in the rental market will shift over time and new

policy interventions may be needed at different points

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Today we will discuss policy proposals to address the immediate challenges . . .

Will Fischer, Center on Budget and Policy Priorities

Tom Bledsoe, Housing Partnership Network

Shekar Narasimhan, Beekman Advisors

Ben Metcalf and David Garcia, Terner Center at UC

Berkeley

A g e n d a

Discussion

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Discussion questions

Which tenants affected by the COVID crisis do these proposed solutions

serve?

Which tenants are not covered by these solutions?

What data analysis is needed to:

Estimate the size of the challenge

Assess how well proposals address the challenge

Size the proposals

Help to target resources to those most affected by the COVID crisis

I m m e d i a t e C h a l l e n g e

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Future working group meetings will cover . . .

Intermediate challenges

Long-term challenges

Federal role for tenant protections

A g e n d a