Struggling Rental Market Could Usher in Next American Housing Crisis
Fallout from missed rent payments is threatening a swath of the U.S. population, as the expiration of eviction bans draws near. A large number of renters have been unable to pay some or even all of their rent since March, when the pandemic temporarily shut down most businesses. Many businesses remain closed or only partially open, pushing renters into unemployment and draining their savings.
Federal and local eviction moratoriums have protected many of them from losing their homes if they missed payments during the pandemic. But the national eviction ban and some state and city protections are set to expire by January or sooner. Renters then will be on the hook for months of missed payments, which even those who have jobs could struggle to pay.
Estimates of total outstanding rent debt vary widely. Yet by any measure, the effects of missed rent payments are bound to imperil millions of renters and wash over the broader economy. A study of unemployed workers released last week by the Federal Reserve Bank of Philadelphia calculated outstanding rent debt would reach $7.2 billion before the close of 2020. Moody’s Analytics estimates that it could reach nearly $70 billion by year-end if there is no additional stimulus spending. The economic-research firm calculated that 12.8 million Americans would then owe an average of $5,400 from missed payments.
Even the larger figure would be far less than what was lost when the $1.3 trillion subprime-mortgage bubble burst, leading to a national wave of defaults and foreclosures. But the tens of millions of people potentially caught in a web of home-rental debt and eviction would far exceed the 3.8 million homeowners who were foreclosed on in 2007-2010.
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But about a quarter of American renter households with children are now carrying debt from not paying rent, U.S. Census Bureau surveys show. Women and people of color are disproportionately more likely to owe rent, according to the census data. Black and Latino Californians were twice as likely as white Californians to face rent insecurity amid the pandemic, an analysis by the University of California, Los Angeles found. Mounting rental debt could also impede the path to a U.S. economic recovery, when 30 million to 40 million people from New York City to San Francisco face potential eviction once moratoriums expire, according to estimates cited by federal government officials.
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https://www.wsj.com/articles/struggling-rental-market-could-usher-in-next-american-housing-crisis-11603791000 (subscription)
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