Estimating the Need for Rental Assistance in Hawaii
by Philip ME Garboden and Isabelle Picciotto, UHERO, June 17, 2020 (excerpt)
Renters in Hawaii are at significant risk due to the economic downturn. Roughly 40% of all households in Hawaii rent their homes. They have significantly lower income than homeowners, with a median household income of $57,000 compared with $100,000 for homeowners. Their housing tenure is by nature less secure and their assets more limited. Federal protections for homeowners are far from perfect, but they are certainly more robust than those protecting renters, the majority of the responsibility for which has been pushed to states and counties.
Although data on the current housing situation is far from complete, it appears that the augmented unemployment payments (the Federal Pandemic Unemployment Compensation, FPUC) have done a fairly good job preventing the worst from happening so far. But that program is set to expire August 1. Unemployed workers will still be eligible for standard Unemployment Insurance (UI) but the payments will drop substantially – to roughly 60% of the individual’s previous income. Thousands of renters will then likely face unsustainable housing burdens.
Here we assess the additional burden renters will face in just the second half of 2020 – after the expiration of FPUC but before the deadline for CARES expenditures on January 1st. Our forecasts suggest that many families may struggle well beyond this date; we have chosen this abridged timeline because it’s most relevant to the immediate policy decisions currently being debated.
Our focus is the “COVID rent deficit” – the amount of rent subsidy that would be required to return all unemployed renters to the rent burden they experienced before the economic shutdown. We estimate this deficit under several policy scenarios, ranging from complete termination of the FPUC program to scenarios involving some extension of the FPUC or a state version of augmented UI benefits.
Two comments on our choice of measure: First, we recognize that a housing crisis existed before COVID, with many families homeless, doubled-up, or unsustainably burdened. To return families to baseline is simply a metric of the impact of the COVID recession, not an estimate of what it would take to fund a robust housing safety net. Second, the rent deficit metric does not distinguish between those households for whom the increased housing burden is manageable versus those whose burden places them a greatest risk for adverse outcomes related to the crisis.
It is also important to note that we are only estimating the amount of rent subsidy necessary to return households to baseline housing burdens. Food, transportation, healthcare, and education are not considered in this analysis. Under all of our scenarios, almost all households hit by unemployment will have fewer resources overall.
THE CHALLENGE
Given data limitations, job losses can not be cleanly connected to household income. We know how many people have lost their jobs, but we don’t have good data on what types of households those families lived in and what their rents are. Many households in Hawaii have multiple wage earners including spouses and adult children. It is hard to know, then, precisely how estimated job losses during the recession will impact housing burdens.
Consider the following examples:
1. A single mother earns $30,000 per year working in retail at the airport ($2,500 per month). She has two children and so pays $1,500 in rent for a small two-bedroom apartment. It’s a stretch under normal times, as 60% of her income goes to rent. To make matters worse, her job disappeared during the shutdown and doesn’t seem to be coming back any time soon.
While she was receiving the FPUC augmented unemployment insurance, her income actually increased to $3,900. Once it ends though, her UI benefits will drop to $1,500, meaning her rent will take up all of her income.
How much of a rent subsidy would be required to put her back at her pre-crisis rent burden? Since she’s now making $1,500 from UI, a 60% burden would mean she could pay $900 in rent ($1,500 * .6 = $900). To get there, she’d need a $600 subsidy each month ($1,500 – $600 = $900).
She’ll still have less left over for other expenses ($600 per month, compared to $1000 before she lost her job), but she should be able to keep her housing.
2. A middle aged couple lives with their adult son. The wife earns $55,000 per year as floor manager at a hotel, and the husband makes $30,000 part-time in construction. The son is in school, but has a part-time job that brings in $10,000 to the household. Altogether, the family earns $95,000 a year or $7,900 a month. They rent a single-family house for $3,000 which costs them 38% of their income – not bad by Hawaii standards. When COVID hit, the son and father kept working, but the mother lost her job. The augmented unemployment benefits more or less kept the household even in terms of income, but when FPUC expires they’ll lose 40% of the primary breadwinner’s salary, dropping their monthly household income from $7,900 to $5,750 a month. Their rent burden will increase to 52%.
While the family is in a better position than some, they’ll need a roughly $800 per month rent subsidy to get back to their pre-crisis housing burden. Again, their non-housing income will decline (in this case by nearly $1,500), but their housing will remain manageable.
These are just two examples among thousands, but they’re presented to help understand what our outcome variable, the COVID Rent Deficit, means. The sum total of all these calculations gets us to our final result….
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