At Least $1.4 Billion In Lost Housing Payments Likely
May 27, 2020
The Federal Reserve Bank of Boston’s New England Public Policy Center has issued a new report that paints a bleak picture for New England’s homeowners and renters. It predicts more than 1 million NE households are at risk of missing their rent or mortgage payment due to coronavirus-related job loss.
The Boston Fed report adds under the best-case scenario, $1.42 billion in lost housing payments is likely to accrue in New England from April through July 2020.
Just over half of this sum would be missed rent payments; the remainder would be missed mortgage payments. Although fewer homeowners than renters would be at risk of not making housing payments, their housing costs are higher, and so the total value of at-risk mortgage payments in New England would be comparable to that of at-risk rent payments.
The situation could have been more dire without the CARES Act that was signed into law on March 27. The Boston Fed report says the federal funds could prevent 694,400 to 836,200 New England households from missing monthly housing payments.
The Boston Fed adds, “Even with these efforts, 2 to 3% of New England homeowners and 9 to 13% of New England renters may be unable to make their housing payments. Many states have temporarily halted evictions, foreclosures, or both to protect people from losing their homes, at least in the short term. However, once the economy begins to recover, these households will remain responsible for their unpaid rents and mortgages.
The share of homeowners at risk of missing housing payments would reach almost 13% in Rhode Island, while the share of renters who would be at risk ranges from a low of 30% in Maine to just over 36% in Connecticut.
Homeowners are more insulated than renters from losing their housing as a result of job loss, because compared with renters, a smaller share of this group has a monthly housing payment. In New England as a whole, 66% of homeowners and 96% of renters have these monthly housing costs. Across the region, the share of homeowners with housing costs ranges from a low of 60% in Maine to almost 70% in Rhode Island, whereas in any New England state, at least 94% of renter households pay rent every month.
To determine the impact that pandemic-related job losses could have on households, the report identified occupations that are at high risk for layoff or furlough under public shutdown orders. Workers employed in occupations that are determined to be nonessential, cannot be done at home, and are paid hourly are defined as at high risk for unemployment.
According to American Community Survey data, some 35% of all homeowners and approximately 36% of all renters in New England had at least one person in their household who was employed in a job that was at high risk for unemployment under this definition. The high-risk job definition represents a worst-case scenario for unemployment in that not all high-risk workers will actually be laid off.
The total number of workers actually laid off in the region, however, is approaching the numbers of high-risk workers used in this analysis. For the weeks ending March 21, 2020, through May 9, 2020, the total number of people in New England who filed initial unemployment insurance claims was 61% of the total number employed in high-risk jobs in the region.
Read the complete report here.