Homeowners and small landlords are under mounting pressure, as lost income related to COVID-19 leaves them with month after month of unpaid debt and limited ability to catch up. The loss of wealth could impact the next generation and beyond, especially in communities of color, warns LISC’s Denise Scott. “Just as COVID-19 is having a disproportionate impact on the health of Black and Brown families, so too is it exacerbating our racial wealth gap, which already saps so much from our national potential.”
When the story is finally written about 2020, and we look back at heart-breaking loss of life, businesses, jobs, and family experiences of these recent months, our national failure to enact clear housing solutions in the face of COVID-19 will seem inexplicable.
It is clear, from both data and experience, what needs to be done.
Seven months into the pandemic, there are more than 1 million households that are past-due on their mortgage payments and not protected by a forbearance program. They are at near-term risk of foreclosure. Another 4 million households are in forbearance on their loans, so able to forestall their payments and avoid immediate loss. But they will be facing a significant financial burden to begin catching up in January and may ultimately find themselves unable to pay.
This is all in addition to the risk to millions of renters that are protected from immediate eviction by moratoriums but not from the long-term risk of housing loss that will come when back-payments are due.
Economists, state and local officials, housing experts and nonprofit organizations have all raised red flags about this in recent months. The reality is that even before COVID-19, 59 percent of American families were living paycheck to paycheck. Many of those families will now be facing significant unpaid mortgage debt, even if they have found new jobs or are called back to old ones.
The loss of wealth to these households—especially in communities of color, where many homeowners never fully recovered from the last economic downturn—could impact generations to come. Just as COVID-19 is having a disproportionate impact on the health of Black and Brown families, so too it is exacerbating our racial wealth gap, which already saps so much from our national potential.
The only way to meet this challenge is with significant federal resources. We have been saying it since May, when the House passed the HEROES Act with $100 billion in emergency rental assistance and $75 billion in mortgage relief, but which is still languishing. Emergency protections without a broader plan of assistance will only push the hard policy decisions down the road—and do significant damage to families and communities in the process.
This is as true for landlords as it is for homeowners. We are particularly concerned about those owning small multi-family buildings that offer affordable rents to families and seniors.
Recent data indicates that just 37 percent of tenants living in affordable, unsubsidized rental properties were able to pay rent in July. That will make it difficult for their landlords to pay their mortgages and other bills related to the upkeep of their properties, and it puts their tenants at risk.
The shortfall in income is likely to result in deferred maintenance, which could affect the safety of residents, and should a landlord end up in foreclosure, all tenants could be end up facing eviction, whether they are current on their rent or not, as lenders take over the property.
And, about those mortgagors: the same ripple effect also extends to community lenders, often the primary source of financing in underserved communities, as their borrowers are unable to make loan payments. They will struggle to provide ongoing financing for businesses, real estate development and home purchases, all of which will be critical to the economic recovery of the communities they serve.
In so many ways, it is eerily familiar.
The last recession was fueled, in part, by a similar daisy chain of loss, even though the underlying economic conditions were completely different. In our case today, a health crisis created a business crisis, and then a job crisis, and now a housing crisis. These challenges will not be quickly or easily overcome, especially if allowed to worsen.
We know many federal officials recognize this pressing need. The LISC policy team, like other housing organizations, has been working directly with lawmakers to urge immediate, significant relief to protect renters, homeowners, landlords and housing organizations that provide so many vital services in our communities. Most notably that includes emergency rental assistance, financial assistance for distressed homeowners, and resources to ensure that affordable housing providers can weather the crisis.
And we aren’t alone. “We urge our leaders to take strong bipartisan action and not fiddle around the margins or kick the problems down the road, which would only exacerbate the risks to the economy, to tens of millions of families and to struggling businesses,” said LISC Chairman and former Treasury Secretary Robert Rubin in a joint op-ed with former Treasury Secretary Jacob Lew, in the Washington Post this month.
We couldn’t agree more. American families and communities need action now.
Denise Scott, President
With more than three decades of experience in community development, Denise leads LISC’s investment in 38 local offices in cities and rural communities across 49 states with a firm commitment to ensuring local leaders have the platform and capacity to drive strategies for equitable community change. She is responsible for providing vision and setting the strategic direction for local offices and national programs and leading implementation of enterprise priorities like Project 10X. Denise previously served as LISC’s Executive Vice President for seven years. In this role, she elevated the field agenda and refined a service delivery system for national resources, investments and technical assistance to maximize LISC’s impact.
@LISCDeniseScott