Understanding the Potential Magnitude of Rent Shortfalls in New York Due to COVID
We would like to help cities or counties with populations under 500,000 replicate this analysis. If you work in or for a city or county that does not have the resources to duplicate this analysis, but are interested in seeing how your community is similarly affected, please reach out to our Executive Director [email protected] to discuss how we can help.
All code and data for our analysis of rental assistance need are available on GitHub.
Understanding the Potential Magnitude of Rent Shortfalls in New York State and New York City Due to COVID-19
Job losses from the economic fallout of the COVID-19 pandemic are unprecedented, and unemployment filings have reached historic levels. In a previous analysis, we showed that job losses were likely to impact Black and Hispanic* households disproportionately, noting they were over-represented among households earning income from occupations highly vulnerable to pandemic-related income loss. Policymakers, advocates, and property owners have grown increasingly concerned that mounting job losses are affecting the ability of households to pay their rent. In response, many have put forth proposals for providing short-term rental assistance during the COVID-19 crisis, but the magnitude of the rental shortfall remains unclear.
In this post we estimate the likely magnitude of need for rental assistance in New York State and New York City. First, we examine the temporary CARES Act benefits made available to New York State residents and show the variation in the degree to which they are helping different types of renter households. Next, we use New York State Unemployment Insurance Assistance (UI) claims data to learn which industries have actually suffered the most job losses. With this information, we narrow in on the magnitude of rental assistance needed after taking into account CARES Act benefits. More importantly, we project need in August, the period when the most beneficial CARES Act provision for UI claiming households wears off, assuming little or no job recovery.
Consistent with the CARES Act’s goal of covering lost income for workers affected by COVID-19, we find that rent burdens will remain manageable for renters who experienced job loss through the end of July and who are eligible for benefits. These benefits are vital for this period of time, and may explain, in part, why rent collection has not dropped as dramatically as many expected when the pandemic started. That said, the CARES Act assistance is not reaching all workers that experience job loss. A portion of households are not eligible for UI, and other workers are seeing hours cut without necessarily losing their jobs. Further, assuming unemployment continues at its current high rate going into August, renter households will face significant shortfalls without further government support.
Background and Examples of Renter Households that Use the Program
In response to the COVID-19 pandemic and the unprecedented job losses it has created, the federal CARES Act dramatically expanded the UI system. First, the CARES Act expanded eligibility for UI. Households that ordinarily would not have been eligible, such as gig workers and freelancers, or those unable to travel to their workplaces for public health reasons, were granted access to UI benefits. The CARES Act also extended the length of time that base UI benefits are available by an additional 13 weeks (in New York, from 26 to 39 weeks). At the same time, the CARES Act temporarily made UI benefits substantially more generous by adding a flat weekly supplement of $600 (Enhanced Benefits) to base UI benefits. Enhanced Benefits are set to expire on July 31, 2020.
However, there are gaps in the UI system. Some households are not receiving UI because they are ineligible, while others are not receiving it (or face lengthy delays in accessing their benefits) due to administrative hurdles. Still others continue to face economic hardship even after receiving UI benefits. There is also variation across states in the generosity of overall weekly benefits (the maximum weekly benefit ranges from a low of $235 in Mississippi to $1,192 in Massachusetts), the length of time a person can receive benefits, and the ease of accessing benefits. As a result, many households continue to face significant financial challenges, and in particular, difficulty paying their rents.
To illustrate the importance of UI benefits towards mitigating rent burden, as well as the range of ways UI benefits assist different types of households, this section estimates the post-COVID rent burdens of six prototypical New York households who were paying 35 percent of their (pre-COVID) income in rent, and were therefore moderately rent-burdened. In general, we find that rent burden would jump for a number of households that do not recover their wages by the time Enhanced Benefits wear off.
In calculating weekly UI benefit rates, we assume that each household’s gross income is earned evenly across quarters. Each household in the first four scenarios has a total income of $40,000; the last two scenarios depict households earning $60,000. In each case, we assume that the UI claimants will remain unemployed into August. In this section, we do not account for one-time stimulus assistance the CARES Act provided income eligible households in April/May.
Household One: Single Earner, Formerly Earning $40K, Full UI Benefits
Rent Burden (percentage of income towards rent) through July: 28%
Rent Burden from August onward: 71%
To simply illustrate a household receiving full unemployment benefits, we consider a household earning $40,000 a year, with a single earner who was laid off due to COVID-19. That household was previously moderately rent burdened, paying a monthly rent of 35 percent of its income, or $1,167 per month.
If the recent earner in that household is eligible for unemployment benefits, she is receiving a weekly benefit of $984 through July 31: $384 in base UI benefits, plus the $600 supplemental payment. Thereafter, she will receive the weekly $384 benefit, for a total of 39 weeks.
Because of the CARES Act’s supplemental UI payment, this household will not be rent burdened through July. Assuming 4.3 weekly payments per month, the single earner will have a monthly income of $4,231 through July, making the household’s rent 27.5 percent of their income.
After July, however, this household will lose the supplemental UI payment and revert to the base UI rate. The household’s monthly income will drop to $1,651, and they will become severely rent burdened, paying 71 percent of their income towards rent.
Household Two: Single Earner, Formerly Earning $40K, Lost 60% of Hours, Receiving Partial Unemployment
Rent burden through July: 25%
Rent burden from August onward: 54%
In New York, unemployment insurance is also available to some workers who have lost hours but remain employed part-time. In this scenario, we look at a household identical to that in Scenario One (a single-earner household, earning $40,000, and paying 35 percent of its income toward rent). Here, however, we assume that the working member’s employment was cut from five days a week to two, while earning the same hourly wage. In other words, the household’s weekly income was cut from $769 to $308.
Based on New York State’s formula for partial unemployment benefits, this worker will receive $192 each week in UI (half as much as the worker in scenario #1). She will also receive the $600 supplement through July, for a total weekly household income of $1,100.
Through July, this household will not be rent burdened. The household will have a monthly income of $4,730, meaning that they will pay 25 percent of their monthly income towards rent. After July, however, this household’s income will drop to $2,150. The household will be paying 54 percent of its monthly income to rent, making the household severely rent burdened.
Household Three: Single Earner, Formerly Earning $40K, Lost 20% of Hours, Receiving No Benefits
Rent burden through July: 44%
Rent burden from August onward: 44%
Not all workers who lose their jobs will be able to access UI benefits. Some will be deterred by any number of administrative obstacles. Others, including immigrants working without legal authorization, will not be eligible. Some job losses, including those where “essential workers” fear returning to their workplace, may not trigger UI eligibility.
Even a relatively small reduction in income can greatly exacerbate a household’s rent burden. Consider if the same household supported by a single worker earning $40,000 saw the worker’s hours cut by 20 percent, from five days to four days per week. This is not an amount sufficient to trigger any partial UI payment in New York. That earner’s wages would fall to $615 per week, or $2,667 per month. The household would then be paying 44 percent of their income in rent, compared with 35 percent before the reduction in hours.
Workers facing income losses greater than 20 percent who cannot access UI—because of immigration status, employment history, or difficulties applying—would of course face larger rent burdens.
Household Four: Two Earners, Formerly Earning $20K Each, One Eligible for UI
Rent burden through July: 34%
Rent burden from August onward: > 100%
This scenario imagines a household with the same rent and the same total income, but split among two working members. We assume both earners have lost their jobs and previously earned $20,000 each, and that only one is eligible for UI.
The worker who was eligible for UI would receive a base UI benefit of $192 per week, along with the $600 supplemental payment through July. The other member of the household would not receive any UI compensation. Through July, this household’s income would be $3,406, and it would be paying 34 percent of its income towards rent—leaving it at roughly the same level of rent burden as before. After July, the household’s monthly income would drop to $826. Their monthly rent would be greater than their income.
By comparison with Household One, this household is far more reliant on the $600 supplemental payment, which as a flat rate, is larger relative to their former wages and base UI benefits. Once it expires (and assuming no new income), this household will not be able to pay their rent.
Household Five: Single Earner, Formerly Earning $60,000, Full UI Benefits
Rent burden through July: 37%
Rent burden from August onward: 80%
While the scenarios above all examined households earning $40,000, the interplay between UI and rental assistance is somewhat different at higher incomes. (The same is true at lower incomes, but at lower incomes, additional government benefits may be available). This scenario looks at a household that, prior to its single earner being laid off, had earnings of $60,000 per year—around the median income for New York City households. Like the households above, they were paying 35 percent of their income to rent, for a monthly rent of $1,750.
Relative to workers earning $20,000 or $40,000, this worker will receive a lower percentage of her former earnings: with full UI benefits, she will receive $504 per week, (the maximum base UI allowed in New York State). She will also receive the $600 supplemental payment through July.
This will give her a monthly income of $4,747 through July. During this time, she will pay roughly 37 percent of her income to rent, a slight increase in rent burden from before she was laid off. After July, her monthly income will fall to $2,167. She will be paying 80 percent of her income to rent.
As compared with a lower-wage worker, this household receives proportionally smaller (though larger in absolute terms) benefits from the UI system. Both while receiving the federally-supplemented UI benefit and while receiving the state baseline, this household will be more rent burdened than the household earning $40,000.
Household Six: Two Earners, Each Formerly Earning $30,000, Full UI Benefits
Rent burden through July: 23%
Rent burden from August onward: 70%
This scenario considers the impact of dividing a higher-earning household’s wages between two workers, rather than one. It again imagines a pre-layoff household income of $60,000, split equally among two workers, and a pre-layoff rent of $1,750.
In this scenario, each earner will receive a base UI payment of $288, along with the temporary $600 federal supplement. Through July, this will total to a monthly household income of $7,637. It will not be rent-burdened, as it will be paying 23 percent of its income to rent. After July, the household’s monthly income will fall to $2,477. It will become severely rent burdened, paying 70 percent of its income to rent.
This scenario shows the importance of the federal supplement’s fixed nature, as well as the cap on base UI earnings. Compared to the household in Scenario Five, which has the same total income and pays the same rent, this two-earner household receives more UI benefits both through July and after, and experiences lower rent burdens.
Estimating the need for rental assistance in New York State and New York City when incorporating New York State UI Data
In a prior blog post we estimated that over 1 million renter households in New York City had at least one member who worked in an occupation at risk due to the economic fallout of the coronavirus. This analysis assumed 100 percent job loss in all industries we identified as particularly vulnerable to job loss. Now three months into the pandemic, we see, as expected, that job loss has varied greatly by industry.
To update and expand this analysis across New York State, we used publicly available data on New York State UI claims, and compared those claims to the number of jobs in each industry prior to the pandemic. This provides a sense of the proportion of jobs that have actually been lost in each industry. In New York State, we find that the industries with the highest proportion of claims relative to total jobs are: Accommodation and Food Services; Administrative and Support Services; Wholesale Trade; Construction/Utilities; Arts, Entertainment, and Recreation; Retail Trade; and Other Services (which includes working in jobs like dry cleaning, nail salon specialist, etc.). Using UI claim data alone as an estimate of actual job loss misses households unable to use UI. To gain an understanding of these households, we rely on an analysis by James Parrott and Andrew Stettner of the households that do not receive UI, and estimate that 67 percent of New York State households that experience job loss claim UI benefits. After accounting for this 67 percent take-up, we use job loss proportion by industry to simulate job loss using American Community Survey household level data. For this, we net out the 2019 claims in order to focus on COVID-related job loss that is in excess of typical monthly claims. We run this as a simulation because we do not have household level data on both job loss and housing characteristics.
Below we estimate the magnitude of scale and need for New York State and New York City renter households. In an effort to narrow down the analysis to renter households least likely to have savings or access to credit to help stem the tide during the pandemic, we limit most of our analysis to renter households with incomes at or below 80 percent of the local Area Median Income (AMI) prior to COVID-related job loss (lower income households). Because we do not know the incomes and location of those that make claims, we simulated job loss across the households that work in each industry at the proportion of job loss. You can find the code for all renters in New York State and New York City here.
Estimates of Affected Households in New York State and New York City
Using New York State UI Claim data to date, we estimate that 829,600 New York State renter households have at least one household member who filed a UI claim due to COVID-19. We estimate that an additional 327,200 households have at least one member who lost their job due to COVID-19, but do not claim UI Benefits.
Using available UI claim data, we estimate that 1,156,800 renter households in New York State have at least one member who has lost their job due to COVID-19. Aggregate wages lost per month for this group total about $4.9 billion. We estimate that monthly UI benefits (base UI and Enhanced Benefits) together provide about $3.6 billion per month to make up lost wages for households who qualify. In addition, we estimate that the one-time April/May Stimulus provided about $2.4 billion in total assistance to the 829,600 households who have claimed UI.
However, of the 1.1 million households, we estimate that 327,200 households have members who have experienced job loss but do not receive UI benefits. The aggregate lost wages for these 327,200 households is $793 million per month, with no UI benefits to make up for lost wages. We also assume that these 327,200 households did not receive one-time stimulus assistance either, as we have no basis for estimating what portion of these households would have received one-time stimulus assistance.
When limiting just to New York City renters, we estimate that 526,200 renter households have at least one household member who filed UI claims due to COVID-19 job loss. We estimate that an additional 208,700 New York City renter households have at least one member who lost their job due to COVID-19, but do not claim UI Benefits.
We apply the same method to estimate the scale of job loss for New York City renters. We estimate that 734,900 renter households** in New York City have at least one member that has lost employment due to COVID-19, representing about one third of rental households in New York City. In aggregate, the amount of wages lost per month for this population is about $3.5 billion, with $2.3 billion in monthly UI benefits (base UI and Enhanced Benefits) helping to make up for this loss. In addition, we estimate that the one-time April/May Stimulus provided about $1.4 billion in total assistance to the 526,200 households who have claimed UI.
However, of the 734,900 households, we estimate that 208,700 households have members who have experienced job loss but do not receive UI benefits. The aggregate lost wages for these 208,700 households is $622 million per month, with no UI benefits to make up for lost wages. We also assume that these 208,700 households did not receive one-time stimulus assistance either, as we have no basis for estimating what portion of these households would have received one-time stimulus assistance.
Of all New York State renter households with at least one member who we estimate filed a UI claim due to COVID-19 job loss, 451,300 are lower income (pre-COVID earnings below 80 percent of Area Median Income). We estimate that an additional 176,900 lower income renter households have at least one member lost their job due to COVID-19, but do not claim UI benefits.
We next limit our analysis to lower income households. We estimate that 451,300 New York State renter households with annual incomes below 80 percent of their local Area Median Income (AMI) have experienced job loss due to COVID-19, and filed a UI claim. We estimate an additional 176,900 households have at least one member that do not claim UI benefits, but experienced job loss.
Because of Enhanced Benefits, lower income renters who receive UI benefits may now temporarily receive more income than they did pre-COVID. In aggregate, we estimate that lost wages for lower income New York State renters are $1.3 billion per month. We estimate that $1.2 billion in Enhanced Benefits and $526 million in base UI make up for wage losses for lower income renters who qualify for benefits.
Again, not all households that lose income will use UI (as such, any aggregate estimates may be deceiving, as aggregate estimates may mask this issue). We estimate that the 176,900 households that will not be able to claim UI are losing $155 million in wages per month, with no UI benefits to help cover this lost income.
Of all New York City renter households with at least one member who we estimate filed UI claims due to COVID-19 job loss, 279,400 are lower income (pre-COVID earnings below 80 percent of Area Median Income). We estimate that an additional 111,500 lower income New York City renter households have at least one member that lost their job due to COVID-19 but did not claim UI benefits.
We estimate that 279,400 New York City renter households with annual incomes below 80 percent of the New York City AMI have experienced job loss due to COVID-19, and filed a UI claim. We estimate an additional 111,500 households have at least one member that do not claim UI benefits, but experienced job loss.
Because of the Enhanced Benefits, eligible lower income renters who receive UI benefits may temporarily receive more income than they earned prior to COVID. We estimate that lost wages for the 279,400 lower income New York City renters are $898m per month. These lost wages are made up for with $746 in Enhanced Benefits, and $339 million in base UI.
However, we estimate that the additional 111,500 lower income New York City households who do not claim UI benefits are losing $125 million in wages per month, with no UI to cover for this lost income.
Lower income New York State households that have lost wages due to COVID-19 pay a total of $796 million in rent per month. $538 million of that rent is owed in New York City.
Lower income New York State households affected by job loss pay an average of $1,267 per month in rent – in New York City, the average monthly rent for lower income renters affected by job loss is $1,376. For context, about $4.7 billlion in gross residential rent is incurred in New York State monthly. The amount of monthly rent owed by lower income renters who have lost wages due to COVID-19 is about 17 percent of all rent across the state.
When Enhanced Benefits wear off in July 2020, without job recovery or rent reductions, the effects for lower-income renter households in New York State and New York City will be devastating. The most at-risk households may be the estimated 227,000 New York State households, 142,000 of which are in New York City, that were severely rent-burdened before the pandemic and lost their job due to COVID-19.
As noted throughout this post, Enhanced Benefits expire in July of 2020, creating a cliff for the most valuable benefits. We estimate that base UI benefits are providing about $526m per month to lower income UI claimants in New York State, but the CARES Act Enhanced Benefits are providing another $1.2 billion per month to those eligible renter households. In New York City, we estimate that base UI Benefits are providing $339 million to lower income renters per month, and another $746 million is coming from Enhanced Benefits per month.
Workers in households that are not re-employed will be solely reliant on base UI benefits in August. As this date comes closer, affected households may feel more pressure to conserve cash, and be less likely to pay rent compared to rent payment rates in April, May, and June. If the economy has not recovered by then, or the Federal government does not provide more assistance, this pressure will likely spread further across the rental market when Enhanced Benefits wear off on July 31, 2020. It is important to note that we find that 227,000 households across New York State (142,000 of which are in New York City) who lost their job due to COVID-19 and made a UI claim were severely rent-burdened. These households may be at the greatest risk of housing instability when Enhanced Benefits expire.
Valuing Rental Assistance Need
Next, we estimate the need for rental assistance after accounting for both CARES Act benefits and households not likely to be receiving those benefits. To estimate this total need, we target the amount of money that would be required to bring lower income households to their target rent burden (the higher of 30 percent of their income towards rent, or their previous rent burden). We focus on returning households to their previous rent burden in order to ensure household stability, but assisting all affected households to the point where they are paying 30 percent of income towards rent would greatly increase the cost estimates that follow.
For additional context, nearly half (46.3 percent) of New York State households are renters, and even before the pandemic, many tenants struggled to pay rent. In 2018, 26 percent of New York renter households were severely rent burdened, paying more than half of their income to pay their monthly rent. New York State is home to 3.4 million renter households, and statewide, renters pay an average gross monthly rent of $1,370. If every New York State renter household did not pay their rent for a month, the maximum possible non-payment amount would be about $4.7 billion each month. This scale of non-payment would be extremely unlikely, but this number is a useful bound for estimates.
Rental Assistance Need for Lower Income Renters During Period of Enhanced Benefits
We first examine the monthly rental assistance need for lower income New York State renters during the period that Enhanced Benefits are in place. We estimate that $108 million per month would be needed to cover households that have experienced COVID-related job loss, with $95 million of that amount covering households that do not receive any UI benefits. New York City households comprise $83 million of the estimated need, with $73 million covering households that do not receive any UI benefits. Assuming these monthly costs stay constant for March, April, May, June, and July, it is reasonable to assume an upward bound estimate of total need across the state would be about $540 million (five months of need), and about $415 million in New York City.
An often overlooked benefit is the one-time stimulus assistance provided in April andMay for income eligible households. As mentioned earlier, we do not know what portion of households that do not receive UI benefits received one-time stimulus funds. But for lower income households that have claimed UI, we estimate that the one-time stimulus provided about $1.3 billion in assistance to lower income households across the state. The impact of this one-time assistance depended on household size. When spreading this total assistance out for five months (March-July), we find that the one-time Stimulus provides about $268 million in assistance per month. This assistance undoubtedly has helped to contribute to eligible renters’ ability to pay rent. If we assume that all households that have claimed UI also received one-time stimulus assistance, and that households that have not claimed UI did not receive stimulus payments, then our estimate of need for New York State drops to a cumulative total of $475 million over five months to cover the households that did not receive UI or stimulus ($95 million per month).
Rental Assistance Need for Lower Income Renters when Enhanced Benefits Expire
Of greater concern is how the need for rental assistance increases when Enhanced Benefits wear off. In this section, we show how the need changes when assuming that 25 percent of jobs lost during the pandemic return by August, and the need if no jobs return by August. We estimate that the monthly need for lower income New York State households will increase from $85 to $391 million in August. In New York City, the monthly rental assistance need will grow from $65 to $267 million.
The graph below compares how the monthly rental assistance need changes when Enhanced Benefits wear off, assuming a 25 percent job recovery. The graph also shows the potential monthly rental assistance need for all households in both New York State and New York City, as well as the need for just lower income households earning 80 percent of AMI, which has been our primary focus.
Assuming that none of the jobs lost return by August, the monthly rental assistance need would increase to $516 million across the state ($352 million in New York City). These figures take into account base UI benefits replacing lost wages, which stay in place for a total of 39 weeks for eligible households.
It is important to note that other factors are likely to mitigate this total need. The first is that some households might be able to negotiate lower rents upon lease renewal. Building owners may agree to reduced rents in order to retain tenants as housing demand falls, and uncertainty about the future remains. In addition, it may be the case as well that any housing assistance made available does not fully compensate for the rent owed, covering instead only a portion of it. The second is that while there is likely to be some job recovery by July, as evidenced by many parts of New York State opening this week, it is not clear to what degree jobs that are lost will return. As shown in this section, the rental assistance need varies greatly depending on actual job recovery.
Our analysis suggests that the CARES Act is currently protecting most renters who lost income due to COVID-19 and claim UI from elevated rent burdens. Without Enhanced Benefits, however, the scale of monthly rental assistance needed to help lower income households may reach up to between $391 and $516 million per month starting in August, depending on job recovery rates. Additionally, a subset of households who are left out of CARES Act assistance programs may have a cumulative rent need of about $475 million between March and July. A disproportionate share of the workers at risk of housing instability and nonpayment are Black and Hispanic, as evidenced by their over-representation in occupations that have faced higher rates of job loss.
It is important to note that throughout our analysis, we did not assume that rents would either increase or fall. It may be the case that rents do drop, or that building owners negotiate with tenants to reduce rents at lease renewal. If this occurs, this would decrease the rental assistance need estimates overall. Our method highlights the need to tie real-time monitoring of actual UI claims to housing status. Because UI is such an important benefit during the pandemic, it is critical to understand the intersection between the labor market and the rental market. Additionally, it would be beneficial to understand how other labor market conditions affect housing status, including the effect of reduced hours, which we did not build into our analysis; what the actual UI claim rate has been in comparison to actual job loss; and the actual job recovery rate. Finally, our analysis also underscores the need for real-time information on non-payment in New York City’s rental stock in order to understand which housing portfolios are most affected by non-payment. We look forward to forthcoming national estimates using a similar methodology from our research partners at the Urban Institute and the Joint Center for Housing Studies.
Whether assistance is provided directly to tenants, or directly to landlords to cover rents for tenants in exchange for not displacing tenants, the amount budgeted must match the scale of the issue, and administratively needs to be set up in the next 45 days to mitigate against a large, expected cliff starting in August 2020.
*We use the term Hispanic because of the way American Community Survey data are described by the US Census. You can find out more about the reason we use the term Hispanic here.
**Our earlier blog post estimated an upward bound of just over 1 million potential jobs at risk in New York City. This represents a revision of that estimate, but UI claims may still increase, at which point our 734,900 estimate would need to be revised.
We are grateful to Santander Bank, whose support made this blog post possible. Santander Bank is also the Premier Sponsor of our 2019 State of New York City’s Housing and Neighborhoods. Our special focus this year is on the State of Eviction in New York City.