Democrats Want To Give Renters $100 Billion To Cope With the Coronavirus
Giving renters direct assistance is a better idea than rent cancelation, but that's not saying much.
The rental housing market is holding up better than many expected during the COVID-19 pandemic, with the number of people paying at least part of their rent only a little lower than it was this time last year. Yet both tenant advocates and landlords fear that a prolonged economic slowdown and a tapering off of government aid could soon result in an explosion in non-payments and evictions.
To prevent this, Democrats in Congress have introduced the Emergency Rental Assistance and Rental Market Stabilization Act, which will provide renters with an additional $100 billion in assistance over the next three years.
"We must take immediate action to prevent the COVID-19 crisis from turning into a national eviction crisis. It is absolutely essential for the next COVID-19 relief package to include this bill," said Rep. Maxine Waters (D–Calif.), one of the sponsors of the House version of the legislation, in a Friday press release.
The bill, says Waters, will "help struggling renters across the nation as well as mom and pop landlords relying on rental payments for their retirement." Sen. Sherrod Brown (D–Ohio) has introduced companion legislation in the Senate.
The $2.3 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act included $12 billion in additional funding for programs administered by the U.S. Department of Housing and Urban Development (HUD), as well as moratoriums on evictions and foreclosures at properties with federal-backed mortgages.
The National Low-Income Housing Coalition (NLIHC), an advocacy group, has been pushing Congress to go much further. Its research estimates that expanding rental assistance to low-income renters who've lost jobs and income because of coronavirus would cost $116 billion over the next year.
Democrats' rental assistance bill would boost funding for HUD's Emergency Solutions Grants program by $100 billion over three years. The program received $238 million in fiscal year 2019. The agency awards that money to states and local governments in the form of grants to spend on homelessness programs.
Democrats' bill would expand that program to offer rental assistance to anyone making as much as 80 percent of median income. The HUD Secretary has the authority to approve assistance to those making up to 120 percent of an area's median income, which in some high-wage cities is above $100,000 a year.
Grantees would have to spend at least 40 percent of the money they receive providing assistance to folks earning no more than 30 percent of area median income, and at least 70 percent on assistance for those making no more than half an area's median income.
Per-household rental assistance would be capped at 120 percent of a metro area's fair market rent, as determined by HUD. But the bill would also allow the department to approve higher levels of individual assistance if they deem it necessary.
The NLIHC has endorsed the bill, as have over 100 advocacy and community groups. The idea of increased funding for rental assistance is popular with landlord groups, including the National Multifamily Housing Council.
More radical housing advocacy groups have urged policymakers to go further and actually cancel rents and mortgage for the duration of the pandemic. Rep. Ilhan Omar (D–Minn.) introduced a bill in April that would do just that.
Doing so would "have huge ripple effects throughout the institutions that own property or banks," says Emily Hamilton, a researcher at George Mason University's Mercatus Center. Providing cash assistance directly to renters is a more straightforward, much less risky policy, she says.
"It makes sense to try to make it so that people can continue paying their rent from both a public health perspective, we don't want people becoming homeless or moving into crowded living arrangements," Hamilton says.
The version of rental assistance put forward by Waters and Brown, however, suffers from similar flaws as other forms of existing federal housing assistance, says Hamilton, arguing it spends too much on middle-income people who don't necessarily need government support.
The bill also doesn't slowly taper off benefits as recipients' incomes rise, which can incentivize people to avoid earning higher wages or working more hours on the margins for fear of losing a larger dollar amount of government benefits.
Making the legislation less-targeted still is that its measure of income would count only what people are earning when they apply for assistance, and not any recently terminated income. That would mean a lot of potentially well-off, but recently laid-off renters could end up getting government support.
Hamilton argues that rental assistance should be focused on those making 30 percent of median income and that this assistance should be slowly tapered off as recipients' incomes rise, to avoid huge income cliffs.
Michael Tanner, a scholar at the Cato Institute, says it would be better still to just provide people with cash, which they can spend on rent, food, or whatever other bills they might have. Democrats' proposal runs the risk of becoming a permanent program that ends up primarily being welfare for landlords.
"What you don't want to do is set up a program that goes on forever. We should be talking about three months, not three years," Tanner tells Reason. "We want to be careful this doesn't become a boondoggle for landlords too. We don't landlords to jack up their rent just to get more subsidies from the government."
Indeed, one of the reported reasons that the percentage of people still paying at least some of their rent hasn't changed much since this time last year is that tenants and landlords have been able to work out private arrangements for rent forbearance, rent reductions, or even rent forgiveness in a few cases.
"Residents and owners are working together with payment plans, allowing credit card payments and other flexible options," Doug Bibby, president of the National Multifamily Housing Council, told CityLab.
Throwing a bunch of money at the problem would help some tenants, but it would also reduce landlords' incentives to cut deals.
House Democrats are currently working on a $1.2 trillion coronavirus response bill, according to an Axios report from Sunday. It's possible that rental assistance could be folded into this fifth economic relief package. It wouldn't be the worst housing policy proposal to pass. But given what's on the table, that's not saying much.