The Consumer Financial Protection Bureau (CFPB) recently released a report warning that millions of tenants and their families could be at economic risk with the end of federal and state COVID-19 relief programs.
The report, “Financial conditions of tenants before and during the COVID-19 pandemic,” claims that some government relief efforts have likely helped maintain the financial stability of tenants and their families, now putting them at risk as these programs expire. The report compared landlords and tenants, finding that, on average, the economic health of tenants has improved thanks to relief measures such as stimulus payments and changes in unemployment benefits. When these programs end, tenants and their families may be at increased risk.
According to the CFPB, the report will help inform the work underway to support tenants and their families.
“Today’s report confirms that renters, compared to owners, are more likely to be black or Hispanic, more likely to have lower incomes, and more likely to be female. They are also at particular risk of falling further behind as the country recovers from the economic impacts of COVID, ”CFPB Acting Director Dave Uejio said in a statement. “Past recessions and depressions have seen communities of color and low-income communities of all races and ethnicities left behind as the economy as a whole recovers. We cannot repeat this story. The CFPB is committed to helping tenants and their families prosper. We need to amplify and protect the modest gains tenants have made during the pandemic to ensure this country’s full and fair recovery from COVID-19. “
Using the CFPB’s Join the Ends survey and consumer credit data, CFPB researchers found that tenants were generally more financially vulnerable than landlords. Therefore, they had more to gain from some pandemic relief efforts than the owners. They might also have more to lose at the end of this relief.
By comparing tenants and owners, the researchers found:
– Renters are more likely to be black or Hispanic, younger and have lower incomes. Before the pandemic, the average credit scores of renters were 86 points lower than those of homeowners with a mortgage and 106 points lower than those of homeowners without a mortgage. Renters’ financial well-being scores were almost eight points lower than those of homeowners with a mortgage and more than 13 points lower than those of homeowners who did not pay a mortgage.
– In June 2019, renters were more likely than homeowners to have student loan debt and to have used some form of alternative financial service, such as a payday loan, pawnshop, or auto title loan.
– During the pandemic, despite the poor labor market conditions, the financial conditions of tenants, on average, seemed to improve as much or more than those of landlords. Renters’ credit scores rose 16 points during the pandemic, compared to 10 points for mortgages and seven points for other landlords, for example. However, renters’ credit scores have remained lower than landlords, which explains even the modest improvements in tenant credit scores.
– The financial conditions of tenants throughout the pandemic have been more sensitive to changes in government financial assistance than those of landlords. Delinquency, credit card use and credit card debt among renters have increased and decreased in conjunction with stimulus payments and changes in federal unemployment benefits, while homeowner delinquency, use credit cards and credit card debt have remained relatively stable.
– Among tenants, some credit scores among groups eligible for targeted pandemic relief appeared to be more responsive to policy changes than those among other groups. For example, the credit scores of indebted tenants jumped 40 points in the first months of the pandemic. In addition, delinquency rates among tenants with children saw a dramatic drop as a result of stimulus payments during the pandemic (dropping from 42.1% to 34.4%), perhaps reflecting that stimulus payments could be more important depending on the presence of children in the family.
As government financial support for a pandemic ends, tenants risk falling even further behind the broader national recovery. Renters make up over 30% of U.S. households, and their well-being is essential to the well-being of the economy as a whole and the communities in which we live.
As part of its work to support a fair economic recovery, CFPB has reminded credit bureaus and suppliers of their obligations to accurately report rent payments and evictions. Accurate reporting is now even more essential with the new mortgage underwriting process announced by Fannie Mae last week, which will add rent payments to the appraisal process for mortgage qualification and approval. The CFPB will use this report to indicate how best to support a fair recovery for tenants and all Americans.
Read the full CFPB report, “Financial Conditions for Tenants Before and During the COVID-19 Pandemic”.
Source: CFPB
