How the Coronavirus Pandemic Is Affecting Renters vs. Homeowners

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kate_sept2004 / Getty Images/iStockphoto

    Before the COVID-19 pandemic, over 37 million households were cost burdened in 2019, putting over 30% toward rent or mortgage payments, including 17.6 million spending over 50% of their income on housing, according to the Harvard Joint Center for Housing Studies 2020 State of the Nation’s Housing report.

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    Then, when ongoing financial struggles were coupled with the domino effect of a hard-hitting pandemic, many families have found themselves to the point of financial exhaustion.

    The federal government has tried to help by putting mortgage forbearance options and eviction and foreclosure moratoriums in place. But the protections of the measures vary for homeowners and renters. Plus, while these measures may provide some relief right now, the threat of losing one’s home to eviction or foreclosure is often looming.

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    And even for those who aren’t struggling financially, many wealthy renters have fled large cities to the suburbs, which can result in a new set of problems for them and those who already live there.

    Here’s a closer look at how the pandemic is affecting homeowners vs. renters, and what will happen in the weeks, months and years ahead.

    Last updated: March 6, 2021

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    Renters Are More Likely To Experience Income Loss Than Homeowners

    As the pandemic tightened its grip on the nation, both renters and homeowners experienced employment income loss between March and September, according to the report. However, renters proved more financially vulnerable with 49% suffering income loss, compared to only 36% of homeowners.

    And race does have an impact. For both homeowners and renters, Hispanics had the most employment income loss, followed by Blacks, Asians and whites.

    Additionally, the less income a renter or homeowner made, the more likely that person was to fall behind on rent or mortgage payments.

    For homeowners and renters who can’t begin earning regular income and come up with back rent or future mortgage payments, losing their home is a real possibility.

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    Homeowners Get Temporary Relief by Requesting Forbearances

    Over 6 million homeowners entered a mortgage forbearance plan between March and October, according to the report.

    Forbearance is when your mortgage loan servicer allows you to either reduce your payments or pause them for a set period of time and is often used to avoid foreclosure. Eventually, you will have to repay the missed payments or make up the difference on any reduced payments, according to your mortgage servicer’s terms.

    Under the CARES Act, homeowners who have federally backed mortgages have the option to request a forbearance for 180 days initially and then request an extension of up to an additional 180 days. The option to request an initial forbearance was set to expire at the end of the year. However, it’s been extended to Jan. 31.

    Once your forbearance period ends, the CARES Act prohibits your mortgage servicer from requiring you to repay what you owe in a lump sum.

    Homeowners who have a nonfederally backed loan or a private loan may also be eligible for forbearance options, depending on the mortgage servicer.

    Forbearance allows homeowners relief from their payments, so they can focus on getting back on track financially and avoid losing their homes.

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    Some Renters May Be in Deep Trouble on Jan. 1

    While 49% of renter households reported lost employment income between March and September, most renters have continued to make rent payments. However, 15% reported that they were behind on payments, according to the report.

    The CARES Act, which was signed into law in March, stipulated a ban on evictions from federally financed houses and buildings, which covers less than one-third of U.S. rental units. The ban expired at the end of July.

    On Sept. 4, to help prevent the spread of COVID-19, the Centers for Disease Control and Prevention issued a moratorium on evictions, which is set to expire on Dec. 31.

    The moratorium is not a forgiveness of rent, and renters may have to pay what they owe from the past few months once it expires.

    Renters who were struggling financially before the pandemic hit will likely face difficulty paying several months’ worth of back rent, which means eviction is a possibility.

    If a new stimulus bill provides rental assistance funding by way of financial aid to landlords, it could not only ease financial pressure by lessening the threat of lump-sum rent payments, but also make it easier for struggling renters to deal with other debts or repayment plans and start on the road to financial recovery.

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    Some Homeowners Get a Reprieve From Dec. 31 Deadline

    On Dec. 2, the Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac will extend moratoriums on single-family foreclosures and real estate owned or REO evictions through Jan. 31, 2021. The current moratorium was set to expire at the end of this year and is meant to help homeowners at risk of losing their home to foreclosure.

    Unfortunately, the moratorium only applies to federally backed loans, not private loans. However, homeowners with private loans may be eligible for an extended moratorium regarding foreclosure, depending on their lender.

    Unfortunately, foreclosure moratoriums essentially delay the almost certainly inevitable — eventual foreclosure. Plus, the delay could cause more harm than good, according to Richard Kruse, president of Gryphon U.S.A. and foreclosure auctioneer: “Continuing with the moratoriums indefinitely will significantly disrupt future economic performances as home payoff and credit card balances grow, leading to more debt issues and bankruptcy increases,” Kruse said in a Dec. 4 press release.

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    City Renters Turn Suburban Home Dwellers

    COVID-19 has resulted in less demand for apartments in expensive, high-density areas causing vacancy rates to increase by 3 percentage points in 2020, according to the report.

    Many of the well-to-do city apartment dwellers have opted to ditch the city and move to the suburbs where they can buy a home, which provides more living space in a less populated area. And the look of those suburbs may change as new homebuyers demand close-by amenities — much like they had in the city. Plus, overcrowded schools and traffic issues could result from the influx of newcomers.

    As for whether these ex-renters will return to the city when the pandemic dies down, it’s possible but mostly unlikely. Investing in a home and then turning around and selling it within two years is a risk that could result in a financial loss.

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