What Happens When You Give Renters Money? They Spend It on Housing
In the early days of the Covid-19 pandemic, one of the feared fallouts from job and income losses was renters not making their housing payments. A wave of missed payments, it was predicted, would not only put millions of renters at risk of eviction and homelessness but could potentially destabilize the housing sector if landlords were in turn unable to pay for their mortgages, property taxes, and maintenance needs. Temporary eviction moratoria, meanwhile, cover only some renters and provide at most a respite rather than a solution, as back rent is still due when these bans end.
Surprisingly to some, however, this phenomenon has not (yet) materialized, as renters have generally stayed current on their rents. Data collected by the National Multifamily Housing Council has shown that the share of renters in large professionally managed apartment properties making at least partial rent payments has been consistent over the last three months with the same time frame a year ago.
This outcome is even more surprising given the higher shares of renters experiencing job and income losses due to the pandemic. Moreover, renters are less likely to have sufficient cash savings to cover unexpected drops in income, often have lower incomes, and have higher rates of cost burden than homeowners. How were so many therefore able to cover their housing costs?
Federal Support Key to Keeping Renters Current on Housing Payments
Actions taken by the federal government have provided unprecedented relief to households impacted by the pandemic. As part of the CARES Act, the U.S. Treasury sent stimulus payments of $1200 per adult and $500 per child in households earning under $75,000 (and under $150,000 in households with two adults) to offset lost income and boost consumer spending. The CARES Act also provided a $600 per week federal supplement to state unemployment insurance (UI) payments. While not all workers have been able to fully access this benefit, those that receive these funds have been able to recover much more of their lost earnings than state unemployment benefits – which generally replace only up to a half of weekly wages – would otherwise provide. Indeed, the Urban Institute projects these policies alone prevented over 10 million U.S. households from falling below the poverty line.
These two sources of income support are also largely what has allowed renters to so far continue making their housing payments. Data from the U.S. Census Bureau’s Pulse Survey backs up this claim; from June 11-30, over 81 percent of renters who used stimulus funds on spending (instead of paying down debt or applying toward savings) reported putting some of that money toward rent payments. Indeed, housing was second only to food (83 percent) among uses of stimulus funds. Utility payments (67 percent), meanwhile, were the third most common expense – further evidence that federal support has been vital for renters to meet their housing-related needs.
Notably, spending of stimulus funds on rent does not vary much among subsets of renting adults. Those reporting recent job losses are only slightly more likely (86 percent) to have used their stimulus on rent as compared to still-employed renters (74 percent). Nor is there much difference by income, with 83 percent of renters earning under $50,000 applying some of the funds on rent, versus 80 percent among those earning $50,000-$100,000.
Giving Renters Money Is Good Housing Policy…
The finding that renters, including those out of work and with low-incomes, have largely used federal support to stay current on their rent, may not actually be that surprising. These results are consistent with prior small-scale programs to provide income support or rent supplement payments to low-income households. Indeed, a meta-analysis of different types of interventions found income assistance to consistently reduce incidences of homelessness and housing instability. The recent allocation of federal stimulus and enhanced unemployment insurance to supplement income, while motivated by the unique circumstances of the Covid-19 pandemic, is similar to these prior demonstrations of income support.
These actions by the federal government also show how, even at a large scale and without the same oversight as smaller trial programs, low-income households can generally be trusted to use publicly provided resources to meet their most pressing needs, especially housing. As noted above, this not only ensures households are able to keep a roof over their head and avoid the trauma and long-term consequences of evictions and homelessness, but also ensures the rest of the housing ecosystem continues to function.
… But Only Works So Long as Renters Can Access It When Needed
The short-term nature of the federal response to the economic impacts of the pandemic, however, is also likely to bring only temporary relief to millions of renters who remain unemployed or with reduced income. Most Americans have by now received and spent their one-time stimulus payment, and the expanded UI benefits are due to expire at the end of this month. Yet with unemployment rates among renters projected to remain elevated, and a new round of business closures recently implemented in areas with surging virus rates likely to only add to the number of out-of-work Americans, the need for continued public supports remains crucial.
If the federal government does not extend the enhanced UI benefits or provide other support for renters, then its earlier efforts to supplement incomes and housing costs will have been for naught. Indeed, signs are already emerging that current month rental receipts are lagging historical rates, even as eviction moratoria are ending and putting millions more households at risk of homelessness in the middle of an ongoing public health crisis whose solution relies heavily on stable housing.
The need for continuing assistance for impacted renters is dire. Recent evidence shows that renters, when given the opportunity to do so, will use available funds to remain stably housed. Maintaining income supplements like expanded unemployment insurance and stimulus payments that allow people to stay current on their rent and/or meet other household needs is responsible policy. The cost of letting this support expire, meanwhile, is likely to be much higher.
Check out Enterprise’s Resilient Futures resource page for more information on housing and policy responses to the pandemic, and subscribe to our daily and bi-weekly policy newsletters for more information on Enterprise’s federal, state, and local policy work.