NEW YORK – The Federal Reserve Bank of New York today released a white paper on the rental crisis facing New York City. The paper builds on ideas around the city’s rental crisis raised in a meeting the New York Fed’s Community Development department convened earlier this month with a cross-section of housing leaders. While New York state has recently expanded rent relief and the federal government is poised to extend its eviction moratorium, the paper finds a housing and commercial property crisis is still looming for New York City.
The paper, “The COVID-19 Eviction Cliff: Key Issues and Insights to Help Mitigate a Crisis,” reports that job losses, small-business failures, and the gap in enhanced federal aid and unemployment benefits have made both tenants and landlords vulnerable. The situation is especially critical for already rent-burdened tenants, especially Blacks, Hispanics, and poor communities. The paper further highlights the data gaps in quantifying the full extent of the risk.
“Although the extended national evictions moratorium before Congress would offer some relief, it is not a long-term answer to the challenges facing landlords and tenants. Finding a solution to these challenges, which threaten neighborhood safety and stability, is critical to avoid intensifying existing racial, gender, and economic disparities,” write the authors, the New York Fed’s Marisa Casellas-Barnes, senior associate director, and Jessica Battisto, senior analyst. The paper goes on to outline the challenges, potential solutions, and needed next steps to reach longer-lasting solutions.
Key findings in the paper include:
The Scope of the Crisis:
- While 30 percent of renters had little or no confidence in paying their December rent, as of November 11, the crisis is worse for Black and Hispanic renters, with 37 percent of Hispanic renters and 42 percent of Black renters reporting little or no confidence in their ability to pay their December rent.
- The share of renters expecting to be evicted in the next two months was 46 percent overall, 39 percent for Hispanic renters, and 48 percent for Black renters.
- Many landlords have become financially stressed during the pandemic. Affordable properties, which already had higher operating expenses than other properties, have seen costs increase during the pandemic. The National Leased Housing Association commissioned a report of affordable owners and found that 74 percent experienced higher operating expenses as a result of the pandemic. Many owners are deferring longer term capital needs to pay for these costs.
- Creating multiple layers of help—a reverse waterfall—starting with a program that has broad coverage and an as-simple-as-possible mechanism for determining need, backing it up with rental assistance for those not covered, with further backing from government emergency grants and philanthropic programs for people not helped by any of the previous layers and programs.
- Extending federal rental assistance beyond what is currently provided. One possibility: Rent vouchers to those eligible for unemployment. The Urban Institute estimates that supplementing state unemployment insurance with a $600 weekly stipend would reduce the share of renter households experiencing rent burden to 39 percent.
- Providing federal, state, and philanthropic grant dollars to landlords to protect tenants. For instance, banks and other financial institutions could work together to create a grant program.
- Marshaling philanthropic dollars to fill in some gaps, distributing money through nonprofit and community-based social service providers to renters who may find it hard to access aid for reasons including immigration status or the lack of a legal lease.
- Leveraging “patient capital” from asset management entities to support small business owners and bridge the gap between government lending programs and philanthropic grants.
- Engaging “validators” in the work toward solutions, ensuring that stakeholders with community perspectives and a racial equity lens help design proposed programs.
Possible Next Steps:
- Assembling data to more clearly measure the magnitude of evictions, likely evictions, and rent burdens across all communities, with the understanding that perfect data on buildings and neighborhood characteristics may not exist.
- Shaping a local pilot program based on one of the solutions above to test program features on a smaller scale before scaling up the solution to more communities.
- Forming and convening a work group comprised of researchers, capital providers, real estate entities, affordable housing providers, policy influencers, and advocates focused on reaching vulnerable populations, who often face the greatest risk of evictions and who are least likely to be served by fiscal policy. It is imperative to engage key validators in the work group to ensure that programs reflect community-based perspectives and are designed to help the “hardest to reach.”
The paper follows a December 4, 2020 virtual listening session, hosted by the New York Fed’s Community Development unit on what can be done to lessen residential evictions in New York City. The meeting, held with the objective of bringing together the many conversations on the issue, consisted of a small group of landlords and tenant leaders, relevant financial institutions, lawyers, regulators, and the Partnership for New York City.