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Some $162 billion.
This is how much it would cost to keep financially strapped Americans in their homes as the coronavirus pandemic continues to roil the nation’s economy, according to the Urban Institute’s Housing Finance Policy Center.
The amount reflects a worst-case scenario in which 40% of renters and 24% of homeowners would request rent or mortgage assistance for six months. If they seek forbearance for only three months, the cost drops in half, to $81 billion.
If the percentages of in-need homeowners and renters halve, then the expense would be $40.5 billion for three months and double that for six months.
“If forbearance for homeowners or rental assistance is freely available and not objectively tied to unemployment or hardship, the numbers are likely to be higher,” write HFPC co-director Laurie Goodman and senior research associate Karan Kaul.
Their calculations come in as the U.S. House approved today a record $2 trillion economic aid package, which the Senate unanimously passed on Tuesday evening.
The 880-page stimulus bill includes moratoriums on evictions and foreclosures as well as forbearance of mortgage payments for both single-family and apartment owners. As long as the latter seek loan relief, they may not evict their tenants due to rent nonpayment.
Reliant on the compliance of mortgage lenders, the new rules would apply to borrowers, whose home loans are federally backed, mainly by the Department of Housing and Urban Development and the government-sponsored enterprises Fannie Mae and Freddie Mac. According to the Urban Institute, 70% of mortgage holders – or about 33.4 million – have such loans. Nearly 14.6 million other homeowners, however, have fully private mortgages, not covered by the so called CARES Act.
“These measures are critical but won’t be enough to stabilize the entire housing market, which includes 44 million renter households—many of whom are not covered by these policies but who will also need help paying for housing,” Goodman and Kaul write.
On average, renters shell out as much as 30% of their income on housing. Those who pay more are considered house burdened. In comparison, the typical homeowner has monthly mortgage outlays that add up to 19% of their income.
Sources: Urban Institute calculations based on 2018 American Community Survey and 2017 American … [+]
Urban Institute
Importance of prices and unemployment
For their analysis, Goodman and Kaul used $912 as the median monthly rent, calculated by inflating the median amount for 2017 by 7.5%. The median monthly mortgage payment clocks in at $945 in the Institute’s estimates, or 5% more than the median amount in 2017.
The authors also utilized expected unemployment rates of 12 – 15% for the second quarter of 2020 in order to arrive at the base and worst-case scenarios of how many American homeowners and renters might apply for forbearance.
Earlier this week, the Department of Labor announced that jobless claims soared to a seasonally adjusted 3 million in the week of March 16. Meanwhile, the president of the Federal Reserve Bank of St. Louis President, James Bullard, said this week that unemployment in the second quarter of this year could skyrocket to 30% before offering an optimistic view that the economy would quickly recover after the initial shock.