An estimated 11 million American households are significantly overdue on their regular housing payments and at heightened risk of losing their homes over the coming months, according to a worrying new report. The more encouraging news is that President Biden’s American Rescue Plan (opens in new tab) sets aside billions of dollars for rental relief which should ensure the threat of becoming homeless is allayed for the time being.
The potential scale of the problem has been highlighted by the Consumer Financial Protection Bureau which found that some 8.8 million renters and 2.1 million homeowners were “significantly” behind on their mortgage (opens in new tab) payments. Black and Hispanic households were more than twice as likely to report being behind on their payments than white households, as were households with incomes below $75,000 compared with those whose income was greater.
“Some of these households were already behind on their payments before the pandemic began, but many households experienced income shocks such as a job loss, reduced hours, or the death of a family member,” noted the report (opens in new tab).
Renters struggling the most
With 6% of mortgages delinquent as of December 2020, up from 3% in March last year, the number of struggling mortgage borrowers has doubled since the beginning of the pandemic. In a sign of the severe financial stress being felt, most of the delinquent loans were more than three months behind on payment.
However, through sheer weight of numbers - and particularly given renters only account for just over a third (opens in new tab) of US households overall - the report suggests that the challenges faced by renters are far greater than homeowners. Perhaps unsurprisingly, low income renters were more likely to report that they were behind, with more than one in four with incomes under $25,000 owing rent.
How the new relief package will help
The report notes that the coronavirus relief afforded by the Government, including stimulus checks, enhanced unemployment benefits, forbearance measures (opens in new tab), and moratoriums on evictions, have been instrumental in ensuring millions of Americans have not lost their homes during the health crisis.
However, with the ban on evictions expiring at the end of March, and additional support measures for the unemployed ending mid-March, attention inevitably turns to the latest rescue plan which has been passed by the House, but still needs Senate approval. A further $26 billion has been earmarked to help renters, and another $10 billion for mortgage assistance, along with an extension of the enhanced benefits for those out of work and the promise of a third stimulus check (opens in new tab).
What about the eviction ban?
What is notable by its absence is an extension of the nationwide eviction moratorium announced by the Centers for Disease Control and Prevention (CDC) in September last year. Despite calls from President Biden to keep the ban through September 2021, the budget reconciliation path that the American Rescue Plan legislation is taking through the Senate means the eviction extension can’t be included in the bill. The hope now is that the President will move to extend the safeguard through an executive order to avoid the flood of evictions that would inevitably follow if it were to lapse and the wider implications it could have on health and debt (opens in new tab).
“The Biden administration must vigorously defend the CDC order in the courts, and must strengthen, enforce and further extend the eviction moratorium for the duration of the pandemic and until all emergency rental assistance has been disbursed,” said (opens in new tab) Diane Yentel, President and CEO, National Low Income Housing Coalition. “Evictions risk lives, drive families deeper into poverty, and strain overstretched public health systems. When our collective health depends on an ability to stay in our home, we all have a stake in ensuring that tens of millions of renters don’t lose theirs.”
Qualifying for rental assistance
In terms of the relief for renters that is included in the bill, emergency rental assistance is available if at least one person within a household:
- has qualified for unemployment benefits or seen a reduction in household income, incurred significant costs, or experienced other financial hardship during the pandemic;
- can demonstrate a risk of experiencing homelessness or housing instability;
- has a household income below 80% of the area median income (AMI).
The funds must be used to cover back and forward rent and utility payments, and other housing expenses, but if you’re struggling with your rent, there are other steps that you may be able to take (opens in new tab) too.
For homeowners behind on mortgage payments, talking to your lender about your situation is the first thing you should do, while also exploring the other options (opens in new tab) that may be available to you. Making contact with lenders is good advice if wider debt is taking its toll too, including on credit cards and personal loans (opens in new tab).