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How the outbreak’s economic disruption is impacting renters

There are 44 million households that are renting in the U.S., but even before the massive economic disruption caused by the coronavirus pandemic many were already stretching their budgets to afford housing. But what will happen to them now? Hari Sreenivasan spoke with Jenny Schuetz, a housing economist at the Brookings Institution, to learn more.

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  • Hari Sreenivasan:

    This Wednesday is April 1st. That's the day the nation's 44 million households that rent typically have to pay their landlords. Even before the massive economic disruption caused by the coronavirus pandemic, many renters were already stretching their budgets to afford housing. So what will happen to them now? I spoke earlier with Jenny Schuetz, a housing economist at the Brookings Institution.

  • Hari Sreenivasan:

    There are lots of conversations about how to protect people from defaulting on their mortgages. What about renters?

  • Jenny Schuetz, Brookings Institution:

    Well, there is some attempts, mostly by local governments to try and protect people from being evicted. So local governments can pass a temporary moratorium or halt on evictions. That doesn't dismiss the rent altogether, it just pushes it down the line. So that can provide some temporary relief for renters come April 1st. This is something that's appealing to local governments because it doesn't directly cost them money and it sort of pushes off the problem for a little while but it's not a long term solution unless we really give households enough money that they are going to be able to catch up on their debts at some point.

  • Hari Sreenivasan:

    Do you think that the individual payments of possibly $1,200, or if you're married, $2,400, a one time payment will do the trick?

  • Jenny Schuetz:

    That depends a lot on where you live. So in a metro area like Dallas, $1200 a month is about the rent on a two bedroom apartment. So that will at least cover a decent chunk of your expenses for the month. But in a place like, say, San Jose, the median rent is double that and so there are a lot of people in expensive places for whom this is really not going to cover that much of their cost.

    What we know is that there are a lot of people who were in fact in unstable housing situations even before the current crisis hit. So about 20 percent of American households were already spending more than half of their monthly income on rent. That really doesn't leave a lot left over for other things and there's essentially no financial cushion. So these are households who in the best of circumstances were just barely covering their housing costs each month. Any kind of disruption to their income: losing their job, losing hours or a shift is going to mean that they can't pay all of their bills. So next week on April 1st there are simply a lot of people who are going to come up short.

  • Hari Sreenivasan:

    Lay out the kind of ripple effects of what happens when that check doesn't go through?

  • Jenny Schuetz:

    So the check that you write to the landlord goes to pay for a bunch of things that are kind of downstream from there. The first payment really has to go to the local government for property taxes. So that even takes priority over the mortgage for landlords. And this is a time when we know that local governments are on the frontlines providing a lot of direct services. Taking care of people with public health concerns, making sure that communities are still up and functioning. And local governments are seeing their revenues drop. So it would really be a shame if their property taxes got cut even further.

    After that there's the mortgage payment, and Congress is doing their best, and the federal agencies, to try and provide a little cushion on mortgages. Even beyond that, the rent check pays income, pays salaries for a lot of people who work in the real estate industry. So for instance, a large apartment building might have an onsite building super, have maintenance staff, housekeeping staff. It's really important that we keep buildings clean and sanitized and fix things when they break so that's still a clean place for people to be living. If rent checks stop then there are other people that are going to lose their income, and it just sort of cascades on down.

  • Hari Sreenivasan:

    This seems to be exposing, kind of an inherent inequity in how housing works in the United States…

  • Jenny Schuetz:

    Yes. We have had a system for a long time now that has a bunch of gaps and we are seeing what those look like now. So for those of us that study housing markets we've noticed that low income households have a very difficult time affording basic quality housing and there's really not very much direct federal assistance that goes to low income renters in particular. You know, we've seen also the number of homeless people has gone up over the last five years, it's impossible for them to shelter-in-place because they don't have a home. So we are starting to come to grips with the social cost for not providing decent quality affordable stable housing for everybody in society.

  • Hari Sreenivasan:

    Jenny Schuetz from Brookings. Thanks so much for joining us.

  • Jenny Schuetz:

    Thank you, Hari.

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