Study: COVID is Hurting Renters More Than Homeowners. Here’s How To Avoid Eviction

Possibly hurt further by the coronavirus pandemic,  Black American renters could be among minorities in jeopardy of losing their households.

With some 50 million people renting and many perhaps incurring job or income misfortune because of the crisis, renters in 11 American states and Puerto Rico are among those at the greatest risk of enduring housing instability,  according to a new analysis by The Ascent.

Simultaneously,  bans on evictions have been imposed or are expected to be lifted soon in several states, something else that could leave renters without housing.  A Motley Fool firm, The Ascent reviews financial products including credit cards, savings accounts, mortgages, and other items to help people make informed decisions on money matters.

And unfortunately, renters that could trounce the hardest are more likely to be people of color. Though Latinx and Black residents account for 18% and 12% of the U.S. population, they tally for 28% and 18% of the affected renter population, respectively.

The Ascent used government data to determine the areas with high jobless rates and where renters shell out a big percentage of their income. The report presents many reasons why such circumstances are more bleak picture for renters than homeowners. Among them:

  • Renters could potentially be priced out by landlords who opt to raise rent. In contrast, homeowners with fixed-rate mortgages won’t see their monthly payments rise.  And homeowners who have fully purchased houses can live there as long as they pay the taxes.
  • Renters can’t take advantage of seeking home-equity loans or using cash equity from refinancing to help make ends meet through a job loss. Those are options for homeowners.
  • People renting typically make less money than homeowners.

The report also examined reasons why renters are more defenseless to the pandemic economy. They’ve already spent at least 30% of their incomes on housing, consisting of some 47% of renters. They now earn less than 30% of their area’s median income than before the pandemic. The Ascent says that number at last count was 11 million. Another pitfall: many renters live in states with high unemployment rates or low unemployment benefits. They also work in industries suffering from great job losses stemming from the pandemic such as tourism and hospitality.

To conclude which areas renters are most affected by the current pandemic economy, The Ascent based its research on two crucial factors: rent affordability and unemployment. It then determined areas where renters are at most risk for housing unpredictability. Here are the areas ranked:

1. Puerto Rico

3. New York (tie)

3. Connecticut (tie)

5. Rhode Island (tie)

5. Mississippi (tie)

6. Louisiana

7. California

8. Nevada

9. Hawaii

10. Michigan

12. New Jersey (tie)

12. Massachusetts (tie)

Tips For Renters

But renters may do well to consider taking actions to help keep their households.  Matt Frankel, a certified financial planner at The Ascent, offered tips to Black Enterprise for renters potentially facing displacement.

What are steps renters can take to avoid the prospect of being evicted?

The best move you can make if you’re struggling is talking to your landlord. As a rental property owner myself, I can tell you firsthand that most are quite sympathetic to tenants who have had their incomes disrupted. Maybe you can offer to get caught up over time or make some other arrangement. If you’ve been an otherwise great tenant, it isn’t uncommon for a landlord to allow you to apply your security deposit to your rent to help you stay current. But the key is starting the conversation.”

Why should renters take these steps now? What are the main downsides if they don’t?

If you’re falling behind on rent, the worst thing you can do is ignore the problem — even if you live in a state that has put a hold on evictions. That rent will come due eventually. Some people believe that a moratorium on evictions is the same thing as a temporary break from rent, but this is simply not the case.

For the 11 states and Puerto Rico cited in The Ascent’s study, which ones pose current or upcoming threats to renters with rent moratoriums expiring?

Some of the economically hardest-hit states have pretty strong protections in place for renters. For example, California put a hold on evictions for 90 days after its state of emergency ends (which is still in place), and New York has shut down evictions until August 20. On the other hand, eviction moratoriums have already expired in Mississippi and Rhode Island, and are days away from being lifted in several other hard-hit states. If you live in one of these states, it’s extremely important to get in touch with your landlord and try to work out an amicable solution.

Are there other options tenants facing financial hardship can take that you’d like to discuss? Would it make sense to open up a credit card or personal loan to pay rent?

If you have strong credit, a personal loan can be a useful tool for giving yourself financial flexibility during tough times, assuming you can afford the monthly payments. Some of the best personal lenders will make loans for as little as $2,000, so you don’t necessarily need to borrow a large amount of money to pursue this option. On the other hand, I generally discourage using credit cards to pay rent — not only do many landlords not take them, but interest rates tend to be far higher than with personal loans.