Average Rent Due to Pass $6K, Minorities Feel Most at Risk

The rent delinquent residents owe is increasing monthly, with Blacks and Hispanics marking themselves at most risk of eviction, according to a federal watchdog agency.

The Consumer Financial Protection Bureau estimates the number of residents behind on their rents will reach nearly 7 million by the end of June, up from 6 million currently. On average, the agency figures the amount owed landlords will reach more than $6,100.

The CFPB analysis is based on a Census Bureau survey in December that shows people of color are far more likely to believe they are facing eviction, sooner rather than later. Some 15.7 percent of the Black survey respondents and 11.3 percent of the Hispanics believe they are likely to be forced out. This compares to just 6.2 percent of whites and 4.2 percent of Asians.

“Since Black and Hispanic households are more than twice as likely to be renters than white households, an eviction crisis would fall hardest on communities of color,” the agency reports.

Income factors into the delinquency equation as well. The number of low-income renters in delinquency is higher than any other category, according to the CFPB, quoting December data from Moody’s Analytics. More than one in four renters—27.1 percent—with incomes below $25,000 are behind on their rent compared to 18.1 percent for all renters, 16.9 percent for renters earning between $25,000 and $75,000 and 8.9 percent for those making more than $75,000.

Some 8.8 million renters were behind as of December, according to the Bureau. Rental debt was $44.1 billion that month, CFBP estimated, rising to $52.6 billion in February. The total is projected to fall back to $41.2 billion by June.

But it is good to remember there are competing estimates on rental debt. In a recent blog The Urban Institute noted three different measures that differ widely, though it is somewhat a case of apples and oranges since the dates of the estimates differ, and none of them includes the effect of the first $25 billion of rent relief in the December 2020 stimulus package. Nor does it include the $25 billion in rent relief is in the American Recovery Plan.

On the low end, the Federal Reserve Bank of Philadelphia pegged the overdues in August at just $8.4 billion, or $6,000 per household for 1.4 million late renters.

The National Council of State Housing Agencies had the middle ground. It  estimated in December that the amount owed is somewhere between $13.2 billion to $24.4 billion in December, or about $1,740 for between 7 million to 14 million households.

At the other extreme, economists Mark Zandi and Jim Parrott more closely track the CFPB estimate. In January, they said back rents total $52.6 billion, affecting 9.4 million renters with an average of about $5,500 in debt.

Better Data Needed

Meanwhile, the Urban Institute says the industry needs better data. But “even without a perfect estimate of back rent owed,” UI said in a recent blog post, “it’s clear that $50 billion is the minimum needed to keep families stay stably housed now and over the next several months as the nation continues to respond to the pandemic.”

However, even that amount may not be enough, the bi-partisan think tank concedes, noting that many renters were in trouble even before the pandemic began. And the CFPB quotes consumer advocates as recommending “that policymakers dedicate $100 billion in order to cover the rental payments of cost-burdened low-income renters.”

Less than half of renters can look for help from their landlords, the CFPB report said. Just 40 percent of landlords have offered rent deferrals.

The federal watchdog also took a look at the situation of small landlords with 10 or fewer units and found they have been struggling as well.

“For this subset of landlords, many reported dipping into savings or using credit cards to make it through the pandemic,” it said, pointing out that small landlords own more than half of all rental units.

About 35 percent have taken money from savings or emergency funds as of August 2020, the agency found. Fourteen percent made use of credit cards. About 15 percent reported receiving some kind of government aid, and 10 percent found other jobs or other ways of making additional income.

The Mortgage Bankers Association has also weighed in on housing-related financial distress recently, looking at both renters and mortgagors.

More than 2 million renters believe they are at risk of eviction or foreclosure or would be forced to move in the next 30 days, according to fourth-quarter research released by MBA’s Research Institute for Housing America.

A Lot of Missed Payments

The report said the percentage of renters behind on their payments has actually decreased since the second quarter. Still, 7.9 percent of renters—2.6 million households—missed, delayed or made a reduced payment in December. That’s down from 8.4 percent as of the end of September.

Over the final three quarters of last year, 10.7 percent of renters missed one payment during the period, 4 percent missed two payments, 2.7 percent missed three payments and 5.4 percent missed four or more payments, the RIHA reported.

Some 2.3 million renters said felt at risk of eviction or being forced to move in the next 30 days. That’s between 6 percent to 8 percent of all renters. Surprisingly, as many as 5 percent of renters who have paid their rents over the last nine months still feel they are at risk.

Property owners have been giving considerable aid to renters, the report also found. But in aggregate, owners lost as much as $7.2 billion in fourth-quarter revenue from missed rent payments. That’s down from about $9.1 billion in the third quarter.

Edward Seiler, executive director of the Research Institute for Housing America and MBA associate vice president of housing economics, said until the vaccines slow the pandemic, providing targeted relief for those facing hardships until the “new normal” will be key to preventing wide-spread disruption in the multifamily sector.

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Associate writer Mark Fogarty contributed to this report.