Millions of renters have lost their job or lost hours at work because of coronavirus-related business shutdowns—and for many, it isn’t clear how they’re going to pay rent on April 1. In some cities, eviction moratoriums mean that renters have temporary protection, though they’ll still be on the hook for paying back rent in the future, which will be difficult given their continued lack of income. In response to this obvious economic tension, some governments are facing the fact that rents are going to need stronger protections than simply owing three months of rent after three months of no income.
The City of New York is considering allowing tenants to pay April rent using their security deposits, an idea championed by Ankur Jain, the founder of Kairos, a startup that helps tenants reduce the cost of security deposits. “April 1 is going to be the first major economic test of how people are going to fare in this new coronavirus world,” he says. “Unfortunately, the stimulus bill and everything else that they’re talking about, at best, will hit people’s bank accounts in 30 days. So we have this crisis where if renters can’t pay their rent on April 1, even if their state has an eviction [moratorium], they’re going to go into default with their landlord. It’s going to hit their credit score. Their landlord will default with their mortgage bank. The domino effect is massive.”
Jain argues that using security deposits can help fill the gap. “We were looking at this trying to figure out how in the world do you solve this in a quick enough way to address the upcoming month’s rent payment, to buy us 30 days to figure out how to stabilize the economy further,” he says. “There’s $45 billion sitting in the United States in security deposits right now. What better opportunity to put that money to work and actually help cover next month’s rent? Landlords generate their cash flow, renters get relief immediately, and don’t accrue any debt or liabilities over the next month.” Officials in New York City, including the mayor, have expressed support for the idea, which may quickly take effect. Jain is also in talks with other cities and states about doing the same thing.
At the state level in New York, lawmakers are also considering a 90-day rent freeze, which would go further than the existing moratoriums on rent and mortgages in the state, allowing tenants to stop paying rent while providing relief for landlords. “Tenants who don’t have income are obviously not going to be paying rent,” state senator Michael Gianaris, who introduced the bill, told New York Magazine. “Whether we put some kind of regulatory structure around it or not, we have to recognize the reality on the ground.” Gianaris is working to try to pass the bill immediately, though it’s not clear how quickly it can happen.
In Los Angeles, where around 60% of the population are renters, the city has a moratorium on evictions—as in other cities with similar moratoriums, this means that tenants should notify their landlords about why they can’t pay and provide documentation about their loss of income because of COVID-19. But the city also extended the period that renters have to pay back old rent; they’ll now have as long as 12 months. Landlords of rent-controlled apartments also won’t be able to raise rents, temporarily. The city is also discussing providing financial help to tenants to pay rent. Some advocacy groups, including Strategic Actions for a Just Economy, are pushing for stronger protections, including a temporary freeze on rent payments, rent forgiveness, and a suspension of mortgage payments.
An organization of families called ParentsTogether Action is calling for a nationwide moratorium on evictions and foreclosures, along with a suspension of rent, mortgage, and utility payments. In a survey of its members, the group found that only 38% said that they would be able to pay April rent in full without cutting back on food and other necessities. Less than a third of the families surveyed said that they were confident that they would be able to pay for housing in May.
A national solution is necessary, Diane Yentel, president and CEO of the National Low Income Housing Coalition, says over email. “The piecemeal approach that federal, state, and local governments have taken to prevent evictions and foreclosures leaves millions of low-income people confused about whether moratoriums apply to them and at risk of falling between the policy cracks,” she says. “We need a uniform national policy that assures each of us we won’t lose our homes in the midst of a global pandemic. Housing is healthcare. In this public health emergency, when our collective health depends on our ability to stay home, we must house people who are currently homeless and prevent any additional people from becoming so. Quick action to prevent increased homelessness is needed: This is not just a moral imperative, but also an urgent public health necessity.”