Remarks prepared for the Federal Reserve Board of Governors Fed Listens event on May 21, 2020
Like most other low-income families, our residents are managing through the crisis, but are facing significant challenges. Chief among them is a lack of access to child care and having to home-school their children, often without the necessary tools —while struggling to meet monthly expenses with very limited savings. Some are “essential workers” helping on the front lines of the crisis.
Recent studies have found that low income renters are particularly vulnerable to the economic impacts of the pandemic. An Urban Institute analysis found that these households are more likely to work in the five industries experiencing the greatest number of layoffs. And a Boston Federal Reserve study released yesterday shows that 664,000 households in the six New England states are at-risk of missing monthly rental payments.
National data indicates that rent collections are down by approximately 5%-10% in April compared to previous months and it appears that May rent collections may be similar to April although this can change during the remainder of the month. This is less of a decline than some had predicted, but it is still significant. This drop is true for POAH as well, but it varies across properties and locations.
Many properties are facing much sharper reductions in rent revenue--as much as 20-30%--due to tenants experiencing higher levels of unemployment and lacking rental assistance. In addition, we expect the coming months to get much worse. And smaller, community-based owners, in particular, will be less likely to absorb sustained losses.
While many renters have been helped by the CARES Act and other supports, we are very concerned about what happens once this assistance ends and eviction moratoria expire at the federal, state and local levels. The confluence of these events is likely to happen around September 1 or earlier, at which point millions of renters will be at-risk of possible displacement and homelessness with the possibility of owing several months of back rent.
Therefore, immediate action is needed at the federal level to provide significant rental assistance to help tenants remain stably housed over the next year while also ensuring that owners can pay their mortgages, keep up with local property taxes, and maintain their properties. We support such proposals pending in the House and Senate.
It’s important to deliver rental assistance through a variety channels, however, to reach as many needy households as possible. One such mechanism is through affordable housing property owners, which could achieve greater efficiencies and scale. We are hopeful that some municipalities and states will move forward with this innovative approach.
I want to also highlight the need for new multifamily construction to meet immediate housing needs and to help jump-start the economic recovery.
Harvard’s Joint Center for Housing Studies found that 5.3 million renter households with at-risk wages were cost-burdened prior to the COVID-19 pandemic. It projects that this number will rise to 9.3 million as a result of the crisis. Clearly, more affordable housing is needed to meet this growing demand.
The good news is there is a healthy pipeline of projects that are shovel-ready, financing markets remain stable, and an existing CRA provides appropriate private market incentives. It is critical that CRA remains strong.
However, there are funding gaps in construction budgets because of at least three factors: increased costs to comply with COVID-19 construction standards; some supply chain challenges; and, most important, a drop in the 4% housing tax credit rate to 3.07%, the lowest on record.
Compounding the problem are current and future reductions in housing resources from state and local governments, which are facing enormous budget deficits.
Fortunately, there is a simple, quick solution: Congress could pass a minimum 4% housing credit rate. This was done for the 9% tax credit rate several years ago. Doing so--along with increasing capital grant programs--would greatly expand affordable housing opportunities for the millions of low-income families and seniors who will desperately need it in the coming months.
To close, I would like to address potential future changes in the affordable housing field. The COVID-19 pandemic is likely to accelerate a number of changes in the housing sector that could have lasting impacts. Some of these may include:
Health care and housing: The pandemic has shown how housing conditions are inextricably linked to public health. For example, some public health experts believe there is a correlation between over-crowded housing (families living doubled-up) and positive COVID-19 cases. Partnerships between the health care and housing sectors, forged over the past few years, may expand as a result of the crisis.
Internet access in multifamily housing: The current crisis has also exposed the digital divide and reinforced the importance of having access to the internet and devices (tablets, laptops) so both parents and students can complete school work and access various forms of emergency assistance. We need to redouble our efforts to provide greater access to the internet and other technologies in affordable multi-family properties.
Delivery of resident services: Finally, social distancing and stay-at-home orders have meant that service providers have had to adapt their methods of providing services to residents of affordable housing. It’s quite possible that providing virtual and remote services, when appropriate, could expand in the coming months and years. For example, POAH has moved to remote financial coaching as part of its Family Self-Sufficiency Program and is piloting new technologies and best practices with our partner, Compass Working Capital.
Thank you for giving me the opportunity to comment.