The COVID-19 Pandemic is Adding Fuel to America’s Affordable Housing Fire

Finding safe, affordable housing has long been an issue for low- and moderate-income earners across the nation. While many people equate the affordable housing crisis with areas like Seattle or San Francisco, two cities that are known for staggeringly high rent prices, the reality is that affordable housing problems are not limited to in-demand metro areas.

Large cities, small towns and average-sized suburbs all deal with the same issues when it comes to affordable housing. Not a single state or major metropolitan area in the nation has an adequate supply of affordable and available housing for those renters with extremely low incomes, and a large portion of moderate-income Americans struggle to pay for housing costs, too.

America’s issues with affordable housing are only likely to compound with the additional economic stressors from the COVID-19 pandemic. Not only are wages stagnant and jobs scarce, but mass foreclosures and evictions are also looming. If that happens, it will add fuel to the affordable housing crisis — and displace millions of Americans from their homes.

America’s ongoing affordable housing issues

America’s renters were at high risk of succumbing to the affordable housing crisis well before the coronavirus arrived at the country’s doorstep. There was a shortage in 2019 of about 7 million affordable homes for households with extremely low incomes that are at or below the poverty guideline (or 30% of the area median income, whichever is higher), according to The National Low-Income Housing Coalition.

Renters who qualify as having extremely low income account for nearly 73% of all severely housing cost-burdened renters in the U.S. That housing shortage amounts to only 37 affordable and available homes for every 100 extremely low-income renter households.

And, contrary to popular belief, extremely low-income renters are not all chronically unemployed — about 39% are in the labor force, but their wages are too low to allow them to afford housing on what they take home from their jobs. Another 26% of extremely low-income renters are seniors and another 22% are people who have disabilities. Some extremely low-income renters are in school, while others are caregivers of a young child or a household member with a disability.

That’s just the extremely low-income households. Millions of renters at all income levels are affected by the high costs of renting and a national shortage of affordable units. A 2019 report from the U.S. Department of Housing and Urban Development found that a “lack of affordable rental housing options is a reality in high-cost metropolitan areas across the country.

Part of the issue is that changes in median household income have not kept up with rent increases in most high-cost metropolitan areas. The average metro area examined by HUD in the report experienced rent increases that were 67% greater than their income growth during the period from 2005 to 2016. Nonmetropolitan areas and lower-cost regions also experience similar substantial housing affordability problems, according to the report.

When rent increases outpace wages at that rate, it makes it hard for renters of any income level to keep up the pace.

Prior to the pandemic, about 20.8 million of America’s almost 43 million renters — who are spread out across the nation — were considered “cost-burdened,” which means that more than 30% of their income was going to pay for housing costs, according to the Joint Center for Housing Studies of Harvard University. That number includes a whopping 10.9 million renter households that were “severely burdened,” which means they were spending over 50% of their income on rent.

How coronavirus affects the affordable housing market

When COVID hit, the American economy sustained significant damage, and the pandemic is adding strain to America’s affordable housing supply via:

Widespread joblessness

A massive amount of jobs have been lost due to the pandemic and the public health restrictions put in place to keep Americans safe. About 30 million people had filed for unemployment as of July 24, and another 1.4 million Americans filed for first-time temporary unemployment benefits during the last week of July.

While unemployed Americans had been receiving an extra $600 a week as part of the CARES Acts, that financial boost ended in July. Less money for unemployment means less money for housing — and more chance of eviction or foreclosure. In areas with high rents or housing prices, or in areas with a severe lack of affordable housing, the loss of that federal unemployment funds could have dire consequences.

Increased wage gaps

A new Out of Reach report from the National Low Income Coalition shows that the persistent gap between renters’ incomes and the cost of housing is a prevailing issue, even in the midst of a worldwide health crisis — and the report points to essential worker wages as an example of the wage inequities in this country.

Many essential workers — grocery store employees, home health aides, custodians at hospitals — who have risked their lives to keep the country running during the pandemic, don’t get paid enough to afford housing in most areas.

A minimum-wage essential worker in central Florida — which is home to an ongoing affordable housing crisis — would need to work 89 hours a week — over twice the amount of hours to be considered full-time — just to afford a studio apartment, according to the report. A minimum-wage essential worker in the same area who is also head of single-parent household — and therefore needs a two-bedroom apartment — would need to work an estimated 112 hours per week to pay for housing and still have money left over to cover necessities, according to the report.

Add to that wage disparity the fact that millions of people are out of work and it becomes an even bigger issue. If people couldn’t afford rent prior to the pandemic, they certainly cannot afford rent in the midst of the pandemic, when both well-paying and low-wage jobs are hard to come by.

A looming eviction crisis

The moratoriums that were put in place in response to the economic damage from coronavirus have either expired or are set to in the near future, and it’s leaving renters who are behind on their rent payments with no place to go.

For example, the federal moratorium on evictions was put in place as part of the CARES Act — but those protections ended July 31, leaving the renters covered under the moratorium without any protection. Other eviction protections were put into place on a state level by 43 states and Washington, D.C., but more than half of the state moratoriums have already expired, and the majority of the remaining state moratoriums will expire by Oct. 31.

The loss of these state and federal protections will leave millions of Americans with the choice to either pony up the back rent they owe or lose their housing. Finding the money to pay the rent can be tough to do, though, without the extra $600 per week in federal unemployment funds that most unemployed Americans were receiving as part of the CARES Act.

Americans on unemployment are going to have to find a way to pay their rent on state benefits instead, but that can be a huge feat in itself. Most states offer paltry unemployment payments to residents, and while some states offer a livable maximum unemployment wage, most unemployed Americans don’t qualify for the maximum. The average person received $378 a week in unemployment benefits in 2019, according to U.S. Labor Department data — and some states, like Mississippi, offer a maximum benefit that’s well below the average.

Between the loss of eviction protections and the loss of federal unemployment benefits, experts are predicting that we’re on the verge of a looming eviction crisis. An estimated 19 to 23 million individuals are at high risk of being evicted from their homes by the end of September, with millions more to follow — unless something changes.

The threat of mass foreclosures

It’s not just millions of renters who are facing an affordable housing crisis if things continue on this trajectory. Millions of homeowners are also struggling to pay their mortgage notes right now, and while some mortgage forbearance protections were put into place for federally-backed mortgages, those protections also have a time limit.

Add that to the fact that the federal unemployment benefits have ended and we could have a serious issue on our hands. As of July 20, more than 3.9 million homeowners were in forbearance plans, according to the Mortgage Bankers Association’s (MBA) Forbearance and Call Volume Survey. If those homeowners aren’t able to afford their homes once the forbearance protections end — which is, again, highly unlikely given the loss of federal unemployment benefits — there will be a slew of foreclosures and short sales that follow.

This will, in turn, put millions of former homeowners in desperate need of affordable housing that likely isn’t available. The nation didn’t have enough affordable housing to accommodate those in need prior to the pandemic — and it certainly won’t have enough in the midst of it.

A shortage of affordable homes for sale

A nationwide shortage of housing inventory is also damaging the affordable housing market. Homeowners or buyers who are looking to purchase a home right now may have low interest rates to entice them, but a national shortage of housing inventory has driven up prices in many areas — and it’s causing bidding wars in some cities.

This has increased the average list and sales prices for the homes in many areas — and has also raised the barriers for entering the homeownership market.

For moderate-wage workers, the high price of homes and the competition over the inventory could make homeownership an unachievable goal. Add in the fact that lender belts have tightened in response to the economic turmoil caused by the pandemic and you have a recipe for a housing market that squeezes out the buyers looking for affordable housing options.

Low- and moderate-income buyers who are pushed out of the housing market by tight lending parameters and high housing prices will be left with one option: renting and increasing prices of rentals that come with it.

How a lack of affordable housing affects Americans

All of the issues above are compounding the ongoing issues America has had with affordable housing, creating a perfect storm that — if not tempered — will have dire effects on the country. In addition to mass homelessness, a lack of access to affordable housing can cause:

Higher risks of illness

If a mass eviction crisis occurs — with or without a foreclosure crisis — millions of Americans will be stuck looking for other housing they can afford. This means moving in with friends, family members or roommates, or finding cheap, poor-quality housing that’s in the price range they can swing.

But while these alternatives may get a roof over their heads, history has shown us that as more and more people shift to living in poor-quality, overcrowded, or unstable housing — or life without any home at all — it gets harder for them to follow public health directives that require them to safely “shelter in place.”

This puts them at far greater risk of contracting the COVID-19 virus as well as other chronic illnesses — and further complicates the nation’s push to stop the pandemic.

Stifled wages and GDP

Increasing access to affordable housing bolsters economic growth — it doesn’t stifle it. Research has shown that a shortage of affordable housing costs the American economy about $2 trillion a year in lower wages and productivity. If families don’t have access to affordable housing, the opportunities to increase earnings are stifled, which, in turn, causes a slow growth of gross domestic product (GDP), which is the overall indicator of a country’s wealth.

Researchers estimate that the growth in GDP in America between 1964 and 2009 would have been 13.5% higher if families had widespread access to affordable housing. This would have led to an income increase of $1.7 trillion — which amounts to an additional $8,775 in wages per worker.

Poor nutrition and medical care

Renters and homeowners who struggle to afford their housing payments tend to spend significantly less on food, health care, transportation and retirement savings when compared to other families in the same income bracket who have access to affordable housing. This can lead to poor nutrition, subpar medical care and other issues. Things are even worse for families who have extreme difficulties with housing costs. These families are forced to make serious, sometimes life-altering sacrifices.

Crushingly high rent burdens leave low-income families with little money for food, doctor’s visits or other necessities — and it’s common for families with extreme difficulties with housing costs to back on health care spending by nearly 70%. This makes households lacking affordable housing more vulnerable to diseases and illnesses associated with malnutrition and inadequate health care.

How to fix affordable housing in the U.S.

While we know the issue with affordable housing needs to be fixed, there is no clear answer on how to tackle the issue — especially right now. The best shot we have at providing Americans with affordable housing right now is to focus on the more immediate need for financial help to keep at-risk, out-of-work people in their homes.

Unfortunately, it’s not clear if or when that help will come. Federal lawmakers are still arguing over a new COVID relief package, and even if lawmakers manage to come to an agreement soon, we still have no idea what that new package would look like. What we do know is that there’s a very real chance that the federal unemployment payments will be lowered from $600 with any new package.

State and local governments could still step in for the time being to provide help to residents on a state level, but even if that does occur, that will happen on a state-by-state basis, leaving some Americans out to dry. Still, it’s our best shot until federal lawmakers pass a new relief package.

If state and local governments don’t step in, there will be a “tsunami of evictions and a spike in homelessness” nationwide, that will “devastate” not just individuals and their communities, but the economy broadly, Diane Yentel, president and CEO of the National Low Income Housing Coalition, told CNBC Make It recently

What to do if you need help with affordable housing

If you’re a renter concerned about losing your housing due to a loss of income, check into whether you qualify for eviction protections under a state program. Some states do still have protections in place for renters, so do what you need to do to take advantage of them.

If you’re a homeowner who can’t pay your mortgage but are able to apply for forbearance on your loan, apply for it. This will buy you some time on your payments will federal lawmakers figure out how they’re going to help people in crises from the pandemic.

If you don’t qualify for forbearance or state eviction protections, you may have to rely on state and local emergency relief programs to get you through until a coordinated federal response is in place. Start by checking the website of your state government or state courts to find out what’s available to you. You can also search through the National Low Income Housing Coalition’s database of state and local rental housing programs to find assistance that you qualify for.

You can also look into the HUD rental assistance programs that are available if you’re facing an immediate housing crisis. HUD can help with finding affordable rentals and special needs housing, public housing, subsidized private housing and even utility bills, but the waitlists for these programs can be long, so get in touch with your local office as soon as possible.

This is new territory for everyone — and the system isn’t perfect. Find help where you can, and once this is over, we can start tackling the ongoing issues with affordable housing so that things like this don’t happen again.

Angelica Leicht

Mortgage Researcher

Angelica Leicht is a writer and editor who specializes in everything mortgage-related for Interest.com. Her work has spanned topics that include lending product reviews, interest rate trends, racial biases in mortgage lending and the role of fintech in lending practices, and has appeared in publications such as Interest, The Simple Dollar, Bankrate, The Spruce, Houston Press and VeryWell, among others.