Tenants at risk at end of COVID-19 safety net – YubaNet
The Consumer Financial Protection Bureau (CFPB) today released a report warning that millions of tenants and their families could suffer the previously averted economic damage from the COVID-19 pandemic when federal and state relief programs end. The report, “Financial conditions of tenants before and during the COVID-19 pandemic,” finds that some government relief efforts have likely helped to maintain the financial stability of tenants and their families, suggesting that many could be at risk in the future. as these programs expire. The report, which compared landlords and tenants, found that on average, the economic conditions of tenants were significantly more sensitive 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. The findings of today’s report will help inform CFPB’s continued work 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, ”said Dave Uejio, CFPB interim director. “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 must 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 Making Ends Meet survey and CFPB consumer credit data, CFPB researchers found that the financial conditions faced by tenants and landlords were divergent before the pandemic, with tenants typically knowing more financial vulnerability than owners. Tenants therefore had more to gain from certain pandemic relief efforts than landlords. They might also have more to lose from the end of the relief.
By comparing tenants and owners, the researchers found:
- Compared to homeowners, renters are more likely to be black or Hispanic, are 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 who said they did not pay any mortgages. Renters’ financial well-being scores were almost 8 points lower than those of homeowners with a mortgage and more than 13 points lower than those of homeowners who reported no mortgage payments.
- Tenants’ debts also differed significantly from landlords before the pandemic. 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 car loan.
- During the pandemic, despite poor labor market conditions, the financial conditions of tenants, on average, seemed to improve as much, if not more, than those of homeowners. Renters’ credit scores rose 16 points during the pandemic, compared to 10 points for mortgages and 7 points for other landlords, for example. However, renters’ credit scores, although improved, remained significantly lower than those of 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 delinquency, card use Homeowners’ credit card debt and credit scores remained relatively stable.
- Among tenants, some credit scores among groups that qualified for targeted pandemic relief appeared to be more sensitive 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. Additionally, delinquency rates among tenants with children have declined significantly 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 action in favor of a fair economic recovery, the CFPB has recalled credit bureaus and suppliers with 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 today’s report to point out how best to support a recovery that’s fair for tenants and all Americans.
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer credit markets operate by making rules more efficient, enforcing them consistently and fairly, and giving consumers better control over their behavior. economic life. For more information visit www.consumerfinance.gov.