Strains on Rental Market Spark Fears of New Housing Crisis
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Here's your money briefing for Wednesday, October 28th. I'm J.R. Whalen for The Wall Street Journal. Millions of Americans unable to pay their rent during the pandemic are protected by state and local eviction moratoriums. But those protections are due to expire in January, or in some cases sooner, and many fear that could trigger the country's next housing crisis.
That is a hit to low-income renters, but it is also a hit to the owners of the properties they live in who have mortgages and who may be in financial trouble soon as well.
That's Will Parker. He covers the housing market for The Wall Street Journal. Coming up, he'll give us an update on those eviction protections and what their expiration could mean for the rental market. That's after the break.
What eviction protections are currently keeping renters from being removed?
The Federal Reserve says that renters could be on the hook for more than $7 billion in overdue payments by the end of the year. Other estimates put the figure much higher. And when eviction protections expire, that could have a domino effect on the housing market. Our housing reporter, Will Parker, is here to explain. Will, thanks for being here.
Thanks for having me.
Now, the eviction protections are one thing, but are they actually making it any easier for renters to make monthly payments?
So you're seeing a large number of renters who are not able to make their payments. And although there is a eviction moratorium, that does nothing to absolve the debt that they are accruing through months of a mispayment. And what the concern really is that this debt is growing with every month that passes in the pandemic as unemployment remains high and as certain benefits such as expanded unemployment have expired. So that is a hit to low-income renters, but it is also a hit to the owners of the properties they live in who have mortgages and who may be in financial trouble soon as well.
But if unemployment remains high, a lot of these people may not be able to resume paying rent once the protections expire.
That's a huge concern because, you know, seven months into this pandemic, some people may find themselves in a position where they have work again, where they get access to income again, and they're making wages similar to what they were before, but they still might have several months of debt that they still have to pay. And their wages may not be enough to both cover their future rent payments and their expenses, as well as their rent debt from the months in which they were unemployed. so there is a huge concern that that some renters just simply will never be able to pay off what they owe how's the rental market faring during the pandemic as compared to other areas of the real estate market this pandemic is highlighting some of the key differences and advantages and setbacks between being a renter and being a homeowner so you know homeowners who are in trouble they they have certain financial options right they can take out an extra mortgage if they have to perhaps they can modify their current mortgage
There are forbearance programs for homeowners. But most renters do not have this ability to simply refinance what they are behind on. So the situation for renters right now, I think, is a much more difficult one.
Now, among renters, who's being hit the hardest by this problem?
So unemployment in this pandemic has affected lower income wage, hourly wage workers and service industry workers the most. And those are the same people who researchers believe account for the lion's share of the unpaid rent in the housing market right now. Also, census survey data indicates that non-white renters tend to be more likely to be behind on their rent payments right now.
Have higher income renters been insulated in any way from the economic hardship?
So some of the best data that we have on rent and rent payments come from about 11 million apartments that are so-called professionally managed apartment buildings. And these renters tend to be higher income and pay rents that are higher than the median. And even in those buildings, a recent analysis showed that missed rent payments are up 7% over last year.
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