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Newly Unemployed Service Workers Owe More Than $1.7 Billion in Monthly Housing Payments

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As restaurants and bars nationwide shut their doors en masse beginning in late March, workers in the accommodation and food services industries were among the earliest and hardest-hit groups.

SEATTLE, Washington. June 20, 2020 (Zillow) — U.S. service-sector workers currently receiving unemployment benefits as a result of the coronavirus pandemic owe more than $1.7 billion in rent and mortgage payments each month — payments that could be in jeopardy if expanded local and federal unemployment assistance begins to fade.

As restaurants and bars nationwide shut their doors en masse beginning in late March, workers in the accommodation and food services industries were among the earliest and hardest-hit groups. In 19 states and the U.S. as a whole, these workers represent the largest share of those filing for unemployment protection among unemployed workers overall.

But bartenders and waiters weren’t alone — in 12 more states, workers in the arts, entertainment and recreation industries were the hardest-hit. Combined with workers in the retail trade industries — and together comprising the bulk of the wider “service” sector — these workers owe more than $1.72 billion in monthly housing payments nationwide, according to a Zillow analysis of data from the U.S. Department of Labor and U.S. Census Bureau.

Workers in the service sector face high housing cost-burdens even in relatively good times, and their vulnerability has only been compounded by income shocks due to lost hours and layoffs in the wake of the coronavirus outbreak. Stimulus payments, temporary renter/homeowner protections and expanded unemployment benefits enacted in response to the crisis — including the $2.2 trillion federal CARES Act — have undoubtedly helped many of these households stay afloat and keep a roof over their heads through the worst of the crisis.

In the first week of April — not long after the country as a whole began shutting down in the last weeks of March — 22% of U.S. renters paid none of their bill, according to the National Multifamily Housing Council, up from 17% in April 2019. But by the same period in May, the share of renters not paying had fallen to 20% — a small change, but a potential signal that federal stimulus funds and unemployment benefits that began to arrive in mid-April may be easing some housing stress for renters, at least marginally and in the short-run.

Disproportionate Impacts

In many states, newly unemployed food service workers are on the hook for huge shares of the total housing costs owed by their peers as a whole. In New York, more than $133.5 million in monthly housing payments are owed by accommodation and food service workers experiencing coronavirus-related job loss, almost half (46.8%) of the total housing payment owed by the entire industry.

In neighboring Massachusetts, recently unemployed accommodation and food service workers account for more than 42% of the total housing payments owed by this industry in the Bay State (an estimated $40.7 million per month). In both cases, the share of this bill owed by recently unemployed renters far exceeds that owed by homeowners.

Even in small states, accommodation and food service workers represent an outsized share of owed housing payments among those recently unemployed. In Rhode Island, recently out-of-work accommodation and food service workers owe almost two-thirds (63.2%) of the total monthly housing costs owed by all the state’s workers in this industry. In 38 states[1] and the US as a whole, newly unemployed workers in the accommodation and food service industry are responsible for more than 15% of total housing payments owed by all workers in the industry in each state.

But while accommodation and food service workers stand to owe the largest share of housing payments in many areas, vulnerable groups in other industries also contribute mightily to their local housing economies — and their payments may be equally at risk. In manufacturing-heavy Ohio, recently unemployed factory workers owe $184 million in total housing payments, more than half (53.2%) of the total owed by all manufacturing employees statewide.

Interestingly, far more of these Ohio manufacturing workers set to owe tens of millions of dollars in housing expenses appear to be homeowners than renters — driving home the point that while renters are more vulnerable in general, simply being a homeowner doesn’t make one immune to housing insecurity. Almost one-in-10 U.S. mortgages (8.8%) are in a forbearance program as an outcome of COVID, according to data provider Black Knight, up from 5.5% in mid-April and accounting for a total of more than $1 trillion in unpaid principal.

Widespread Impact, Limited Assistance

Between mid-March and the end of May, almost 40 million U.S. workers filed for unemployment protection — and millions were and are protected by umbrella programs like mortgage forbearance and/or eviction moratoriums. These kinds of assistance programs will continue to be enormously helpful in softening the impact of coronavirus-driven economic stresses. But these policies and programs are not created equal — and are not permanent.

The current federal eviction moratorium only applies to a subset of rental properties with federally backed mortgages. Beyond that, states are left to determine their own eviction policies and moratoriums, potentially confusing the situation. For homeowners, the CARES Act did extend relief to many borrowers holding mortgages backed by the government.

But again, not all borrowers fit the criteria — and for those that do, forbearance still requires missed payments to be paid back in some form once the forbearance period comes to an end, which may be a struggle for many households currently strapped for savings. Furthermore, the federal foreclosure moratorium put in place March 18 has thus far only been extended to June 30. New unemployment claims are slowing somewhat, but consistent weekly numbers in the millions suggest that this crisis will be far from resolved by then.

Additionally, unemployment benefits in some states only last 12 weeks, so even with a 13-week extension on state benefits and the extra $600 per week provided through the CARES Act, there may be a hole in the safety net leading into the summer as individuals slowly return to work and households struggle to catch up on missed payments.[2] Congress is exploring longer-term solutions, including the HEROES Act, but any additional relief must come quickly — some states are already experiencing a strain on unemployment reserves.

Additionally, some areas seem to be setting up for a next phase in the unemployment crisis, expanding beyond traditionally vulnerable service-sector workers to generally higher-paid and better-protected workers in even essential industries like healthcare. As states took action to slow the spread of the virus, nonessential medical care including routine dental procedures and medical checkups were paused, pushing thousands of healthcare workers out of a job.

In California, 8.9% of the state’s April unemployment claims were from workers in the healthcare and social assistance industry. California renters and homeowners in that industry whose employment status has been affected by the pandemic pay an estimated $110.1M in monthly rent and mortgage payments combined.

The Tip of the Iceberg

None of this implies that these at-risk housing payments will go unpaid. Aside from the benefits and protections currently offered to those that qualify,[3] many hardworking households will certainly get creative and maximize every potential avenue they can to keep enough coming in to satisfy their obligations.

It does, however, illustrate the scope of the housing market economy at risk should assistance fall short, income remain diminished and/or savings run dry. And this analysis is limited only to those currently receiving benefits, and does not account for the millions of jobless Americans without any safety net. Less than a third (29%) of unemployed Americans actually received benefits in March, according to the Pew Research Center, with the numbers varying widely from state-to-state.

If anything, the risks outlined in this analysis are a conservative measure of the actual fallout from the pandemic, and very likely represent just the tip of the iceberg of the true effects and potential damage of widespread, sustained unemployment on the housing market. Without a long-term policy focus on ensuring widespread and lasting access to even existing protections, the risks to the housing market will grow as summer approaches, benefits dry up and jobs are slow to return.

[1] Not including Connecticut, Kentucky, and South Carolina as these states did not have data available for April at the time this was published.
[2] Across the country, there are wide differences in states’ abilities to process this unprecedented flood of unemployment claims. The speed at which unemployment offices are able to process claims might be contributing to differences in levels of unemployment between states themselves, at least in the short-term, meaning even the reported numbers of continued claims are a conservative estimate.
[3] The data in this analysis represents unemployment claims, not initial filings, so the population examined does qualify for benefits leading to a conservative estimate on actual job and income loss.