A Match Made in Misery: Housing Insecurity Meets a Pandemic-made Recession

We’re careening toward an eviction cliff thanks to the pandemic. But things were bad before the virus hit.

As with everything else, the pandemic and recession (“pan-cession?” Or “rec-demic?”) has and will continue to exacerbate the fragility of housing in the U.S. Not to be outdone by other parts of housing history, the circumstances have prompted countless pieces predicting a record number of evictions across the country. We can call it an “avalanche” or a “tsunami” or a “cliff.” Regardless, there’s a disaster-level period on the horizon.

Today, we’ll take a look at the state of housing before the virus struck and why things look bleak as we move forward. Some of this might not be news to many of you, as polling showed an overwhelming majority thought housing affordability should be a top priority last year. Even so, there is a lot of info to unpack regarding housing’s precarious state. Let’s get to it.

Trends in homeownership

Housing at large has seen disproportionate progress over the last decade and change. For example, the Pew Social Research Center in 2016 took a look at the market’s recovery from the Great Recession. They found home ownership to be declining across the board, more sharply among Black and low-income households than white and medium- to high-income ones.

One of the biggest reasons (there are many) for this development involves discriminatory lending practices by banks throughout the U.S. In Chicago, banks were reportedly less likely to approve mortgage lending to majority-Black and LatinX neighborhoods than they were to predominantly white ones. Lending amounts were also much smaller in Black and LatinX communities than their white neighbors. The same can be said of other cities, where fewer lending opportunities effectively lock Black and LatinX individuals and families out of homeownership.

Without support from banks, other options are slim when factoring in the growing costs of homes. Home prices have grown significantly over the last decade, outpacing growth in median income and causing a growing gap between supply and demand for affordable houses. There’s a glaring exception though: the cost of housing has actually decreased for those with higher incomes.

More people are renting and rental costs are soaring

With fewer people having access to owning a house and memories of the foreclosure crisis still fresh, more Americans are now renting. Overall, the rental population is the highest it’s ever been, topping 108 million people in 2018. Rental households are younger than owner-occupied ones and tend to have lower incomes. That’s not to say there aren’t affluent renters, as growth in high-income renters dwarfed that of homeowners over the past decade.

Like home prices, rental costs have also increased significantly over the past several years. The National Low Income Housing Coalition’s annual report Out of Reach includes data on the national housing wage, or what you’d need to make per hour in order to afford a modest rental home. In 2020, the wage for a two-bedroom home was $23.96 and $19.56 for a one-bedroom home.

Holy cow. Remember that the federal minimum wage is still $7.25 an hour.

Obviously, these calculated wages (and rental costs in general) vary by state and city. But some of states with the largest metropolitan areas and largest, most diverse populations, like California, New York, and Texas, have housing wages that are even higher. And when connecting housing costs to specific jobs, several common occupations pay way below these wages.

Much like home prices, rent costs have outpaced the media household income, leading to larger shares of the population to be “rent-burdened,” or having to pay over 30% of their income on rent. This is especially prevalent among low-income renter households; the NLIHC found 75% were considered rent-burdened in 2017, up from 65% in 2001.

The severity of rental costs only increases when you focus on those with lower incomes. A 2017 report from the Federal Reserve’s Board of Governors found that a “median renter in the lowest income quintile [those in the bottom 20% of income earned in the U.S.] pays 56 percent of monthly income on rent,” whereas the top quintile spends less than half of that proportion.

Let’s bring this all home with an example. In Chicago and the surrounding county of Cook, about 63.5% of renters in 2017 made less than 80% of the region’s median income. That’s almost 535,000 households out of 843,000, according to the Census Bureau’s American Community Survey. Additionally, about half of renters in Cook County that year were considered rent-burdened. (Data found and calculated here, in the Institute for Housing Studies report’s appendix and text, respectively.)

The pandemic and recession have made things worse

Obviously, housing is strongly tied to income. It’s expected that an economic downturn will affect housing, which is why the lackluster performance by the U.S. and states regarding housing assistance elicited dozens of pieces on the growing housing crisis.

Thanks to the CARES Act passed in March, we do have an eviction moratorium in place for those living in federally-subsidized housing. Unemployment benefits received a huge bump in possible payments; individuals also received a check for as much as $1,200. States and cities have enacted their own moratoria in addition to rent freezes.

Even with these measures in place, we’re treading water. According to the Census Bureau’s Household Pulse Survey, about half of the country experienced some form of loss in employment income as of mid-July; about 35% expect to lose income in the near future due to the pandemic.

The survey also found about a quarter of Americans are experiencing housing insecurity right now, and it’s easy to expect this to increase when you consider the cocktail of underlying conditions. Some renters have already reached that conclusion: Confidence in paying next month’s rent is also exceptionally high for Black and LatinX renters, according to the NLIHC. After all, the federal eviction moratoria and boost to unemployment benefits are set to expire later this month.

Although the stimulus checks could be used for any expense, almost 40% of renters said they intended to use theirs for housing. The need is clearly high, especially for low-income renters as they’re more likely to be employed in sectors most vulnerable to this pandemic. And yet, the federal stimulus checks were a one-time disbursement.

States and cities are trying to brace for these services’ expiration, many rolling out their own direct assistance programs for rent and mortgage payments over the past few months. However, rollout for some programs has been pretty jumbled. Some also don’t seem up to task, like Virginia’s. The commonwealth’s program will spend $50 million in rent relief, but NLIHC projects Virginia needs to spend about $1.6 billion to cover the pandemic’s effects. If that sounds ridiculous to you, just wait till you see it graphed:

Anyway, enough with picking on Virginia, which like other states cannot devote much money to rent relief when there are dozens of other expenses to cover right now. In truth, they should not have to produce these programs in the first place—that’s on Congress.

There are plenty of ideas out there to address the upcoming eviction cliff, like renewing the boost to unemployment benefits. Many require more action from the federal government. In the meantime, the notion of an eviction tsunami is not so much “the sky is falling.” This is very real, right now as homeless shelters in New York City and California have reported a spike in need for their services.

Before the pandemic, many households in the U.S. experienced housing insecurity. Large portions of our communities are locked out of homeownership, but renting isn’t an escape from the high cost of housing. Under the current circumstances, things look dire as government support has stalled and looks to evaporate in the near future.

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