The vast majority of renters continue to pay their rent despite historic levels of unemployment, landlords say, suggesting that state and federal programs to help the newly jobless are working.
Housing advocates say now is no time to let up, however, as the Legislature debates a package of up to $100 million in new rental assistance.
A survey of 36,000 units from across the state shows only a few percentage points difference between this year and last year in how many people paid rent.
The Minnesota Multi-Housing Association, which is a landlord trade group, conducted the survey. The group reports that 95% of renters in “Class A” units — consisting of the newest, most expensive units — paid May rent. That’s down from 97% the same time last year.
Landlords reported 93% of renters in Class B units paid May rent, down from 95% last year, and 88% of renters in Class C units paid May rent, down from 91% last year.
The same trend is seen nationally. In May 2020, 80.2% of renters paid as opposed to 81.7% in May 2019.
The data indicate the massive federal relief package known as the CARES Act is getting to people who need it.
“The speed of implementation of unemployment benefits by the state along with the federal stimulus checks and the additional $600 per week provided Minnesotans the support that was needed following the sudden stop to the economy,” said Cecil Smith, CEO of Minnesota Multi-Housing Association, in a statement.
Minnesota was among the first states to begin paying out the additional $600 a week in unemployment insurance. Gig workers and small business owners, who had never before been eligible for unemployment, are also receiving aid.
More than 536,000 Minnestoans have applied for unemployment since mid-March, when the coronavirus brought much of the economy to a halt.
In April, the likelihood of massive delinquencies in rent and mortgage payments seemed far more likely. People hadn’t started receiving an additional $600 a week in unemployment insurance or the $1,200 stimulus check for single people earning less than $75,000.
On April 1, nearly one-in-three renters didn’t pay rent, according to the National MultiFamily Housing Council, down from 19% the same time last year.
Local leaders signed a letter to Gov. Tim Walz asking him to support universal rent and mortgage suspensions. Rep. Ilhan Omar sponsored legislation that would cancel housing payments for the duration of the national emergency.
But people paid up as the month wore on; renters in 94.6% of some 11.5 million units surveyed nationally paid rent by the end of the month.
Some landlords may be working with tenants who have lost income by lowering rents or waiving late fees. The Greater Minnesota Housing Fund surveyed owners of subsidized and unsubsidized rental units and found rental revenues declined an average of 16% in April 2020 from March 2020. They estimate a 16% drop in rent statewide would equal $60 million in lost revenue.
Among the landlords they surveyed, the decline in rent payments was greatest among people with rental assistance such as Section 8 vouchers, highlighting the disproportionate toll the coronavirus has taken on low-income Americans. The organization doesn’t have data from May 2020 or 2019.
The Minneapolis Public Housing Authority, which runs nearly 6,000 rental units, reports they’ve not seen any drop in rent. There was a 30% uptick in late rent payments in April from the year before, but tenants bounced back. In May, the agency actually saw a 10% increase in rental income from the monthly average so far this year.
Public housing agencies are less vulnerable to changes in the economy, with many people living on fixed incomes from Social security or disability payments. Rents are also based on income and will go down if someone reports a loss of income. (For people who experience a total loss of income, rent drops to a minimum of $75 a month.)
Despite unprecedented federal investment, state and local leaders have pressed forward with their own rent subsidy programs. They say it’s needed to avoid calamity once Gov. Tim Walz’s moratorium on evictions and moratorium ends with the peacetime emergency on May 13, although it could be extended.
Minneapolis and St. Paul invested several million dollars in rent relief, and Hennepin County allocated $15 million in emergency rental assistance. The Legislature remains divided over how much to spend. The DFL-controlled House wants to spend $100 million, while Senate Republicans say they’ll only approve $30 million, and only under the condition that Walz relinquish his executive authority to extend an eviction moratorium past June 24.
The need for housing assistance will outstrip whatever state or local investment is made, given that only one in four households that are eligible for federal housing subsidies actually receive it. Even before the pandemic, 44% of renters in Minnesota were what’s known as “cost-burdened,” meaning they spend more than a third of their income on rent.
Some progressives continue to call for rent and mortgages to be suspended arguing much of the economic fallout from the coronavirus is still unknown.
“Renters have disproportionately experienced job loss and face much greater uncertainty about their future income as the plan to shift sectors of our economy ‘back to normal’ continues to evolve,” St. Paul Council Member Mitra Jalali wrote in an email. “We shouldn’t rule out the need for rent and mortgage cancellation as a policy tool given how long of a road to recovery we still face during and after this pandemic.”