By Philip Garboden
Last week, the Eviction Lab released a scorecard for COVID-19 Housing Policy. Hawaii scored fairly well comparatively: 15th out of the 50 states. Unfortunately, this only put us near the top of a fairly rotten pile. With the exception of two or three states, the vast majority of the country currently has little or no plan for addressing the fallout from the COVID-19 crisis for renters.
Let’s start with the good news. Since the beginning of the crisis, Hawaii has largely suspended evictions, a policy reinforced by a recent order from Governor Ige. The State acted quickly in this regard to reduce the number of forced moves during a shelter-in-place order – a moral and epidemiological necessity.
Now the bad news. Over the last six weeks, over a third of working individuals have lost their jobs. Tomorrow, rent will be due for the second time since the shutdown began. Many families will be unable to pay. Some may fall two months behind, meaning they may already be in a hole they won’t be able to get out of.
Saving is hard for most of us. It’s particularly hard for those near the bottom of the income spectrum in a place like Hawaii. A recent statewide focus on ALICE families (Asset Limited, Income Constrained, Employed) has highlighted just how hard it is for many households to save any money, not to mention invest for retirement or build wealth.
Even under normal circumstances, thousands of families are late with their rent each month. Most of those families eventually come up with the money and landlords usually accept it. Empathy aside, landlords are incentivized to avoid eviction for the simple reason that it’s more expensive to put someone out than to accept a late payment.
Low-wage labor is inconsistent and undependable. One month you might work 60 hours at your two jobs, another you’ll get just 20. After expenditures, a renter household might not have enough on the first of the month, but they may have it a week later (plus whatever they owe in late fees). If that doesn’t work, you may have family to fall back on: an auntie or uncle, a boyfriend, a sister, someone with a dependable full-time job. If things are really bad, there may be someone to ask for help.
The COVID-19 crisis undermines both these options. Not only are ALICE families the most likely to have lost their jobs during the shutdown, but so have members of their social networks. Even relatives a bit higher on the income scale – teachers, firemen, and civil servants – are now preparing for an uncertain future.
This means that any family that has been unable to pay rent in April or May may struggle mightily to catch up on their own, particularly if their landlord demands all the back rent at the moment the moratorium is lifted. For those who are eligible, a retroactive payment of the augmented unemployment insurance will be an enormous help. But if the Federal Pandemic Unemployment Compensation (FPUC) is not extended, even more families will find themselves in trouble in the fall. Short or medium-term, the rent will be due and many families won’t have the ability to pay it.
So what can be done?
We need to consider two scenarios. The first involves the possibility of no extra money – no new Federal funds for housing above what has already been allocated. The second assumes we do find some resources to handle this crisis.
If we don’t get more money, it’s going to hurt, but at least the pain can be spread around a bit. Altruism aside, most landlords understand that a mass eviction in June or July is not good business, particularly in a housing market as bleak as the rest of 2020 looks to be. It wouldn’t surprise me at all if many landlords were already working out a way to keep their delinquent tenants housed post-crisis. Organizations like the Mediation Center of the Pacific have started offering their services to help landlords and tenants negotiate sustainable lease agreements.
But the State should not be timid about requiring such adjustments for those who do not see the writing on the wall. Most of Hawaii is going through a time of profound sacrifice. To save the lives of our loved ones, the Governor has asked restaurants to close and hotels to sit empty. By the same logic, it is entirely appropriate for rental property owners to be asked to make financial sacrifices as part of our collective exercise in harm reduction, accepting a bad outcome to avoid a worse one.
But this can only be a temporary solution. Going without a portion of their revenue for three or more months will have profound economic consequences for landlords, jeopardizing the existence of the housing they provide. This is particularly true for the small “mom and pop” landlords who dominate our rental market. While some may be protected from foreclose by Federal mandate, the coverage is extremely patchy. Some may lose their properties or decide that landlording simply isn’t worth it, placing their properties up for sale. The last thing our islands need is less rental housing.
This is why additional resources are so desperately needed. There are many ways that housing-stability resources could be allocated. Groups like Hawaii Community Lending are already experimenting with innovative low- or no-interest loans to cover rent arrears, collateralized by tenants’ security deposits and paid back gradually over time.
The core issue, if more money does come, is quickly getting it into the hands of tenants, and subsequently their landlords. The easiest way, of course, is to give eligible tenants unrestricted cash transfers, similar to the $1,200 checks and the temporary FPUC UI expansion. My sense of the national political environment is that such an intervention is unlikely as a sustained solution. More likely, perhaps, is that funds will be allocated to states explicitly for housing, similar to the Hardest Hit Fund during the Great Recession. That program, while well intentioned, was much too slow to get money into the hands of those who needed it most. Time is even more of the essence for renters, who can lose their housing much more rapidly than underwater homeowners. The newly unemployed are already navigating the nation’s patchy social safety net, trying to cobble together Unemployment, Food Stamps, Medicaid, and cash assistance to construct something that will sustain them through the crisis. Housing cannot be the piece that lags behind.
Why would we expect delays? The simple answer is that it can be complicated to ensure that we’re using the money effectively – helping support the renters who need it most and avoiding fraudulent activity such as inflating rents towards the maximum subsidy.
There are a number of policy proposals out there about how to do this, but they can be roughly divided into two broad categories. The first is to put the onus on the landlords to apply for funding to cover rent arrears. The second is to temporarily expand the Housing Choice Voucher (HCV aka Section 8) program to provide vouchers to families affected by the crisis. Both have merits, but an expansion of the HCV program is a better choice.
First, the HCV program has an existing administrative structure, namely the Hawaii Public Housing Authority and the four County housing offices. These agencies will certainly need financial support to expand their capacity, but they already have the tools in place to assure the money is allocated effectively and fairly.
It is likely that a carefully-crafted program expansion could expedite renter assistance even beyond what these agencies are currently capable of. A fundamental challenge with vouchers (in Hawaii and across the country) is finding landlords who are willing to accept them. The vast majority of the recently unemployed would not be looking to move and would, presumably, have already met their landlord’s screening criteria as a tenant. Because the rents would already have been negotiated with the tenant before the subsidy, we can be confident that the moral hazard concerns related to price inflation would be less of an issue, at least in the near term.
Given appropriate permissions from HUD (some of which have already been granted), the local Housing Authorities could skip the initial inspection and rent-reasonableness determinations for those looking to lease in place. To receive back rent, a landlord could be required to renew the tenant’s lease for a year (or however long the temporary funding is available), a risk reduction strategy that many landlords would happily embrace. And because the amount paid by a tenant in the HCV program is contingent on their monthly income, families who found jobs post shutdown would quickly graduate out of the program, meaning their funding would be available to other families in need.
There are, of course, infinite wrinkles to be worked out, not the least of which is how to expand the administrative capacity of these agencies in a hurry (something the State has struggled with for other departments). But it is important for the housing field to learn a lesson from the last crisis: money doesn’t matter if you lack the tools to get it to those who need it. Considering how to build on what we have, rather than reinvent the wheel, seems the most attractive option.
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Photo by Philip Garboden