The one-third of American households who rent their homes are facing unprecedented pressure from the economic fallout of the coronavirus pandemic. Without immediate help, families will face either eviction or crippling unpaid rent bills. The owners of rental properties will increasingly find themselves without the money needed to pay regular expenses including for health and safety measures, utilities, property taxes and payroll.  

If ignored, the problems will get worse. Without federal support, the country will suffer cascading negative impacts throughout the economy.

There is a solution. We propose a program like the Small Business Administration’s Payroll Protection Program (PPP), but directed specifically at the businesses that own and operate rental housing. It would be structured to provide funds, on an ongoing monthly basis, to substitute for lost rental income for as long as it is needed.

The Terner Center at the University of California Berkeley estimates that nearly 50 million people live in a renter household likely experiencing immediate job or income losses and collectively face $19.5 billion each month in rent payments due. Reliable reports from rental property owners predict that rent delinquencies will rise in May. A large proportion of these owners are small businesses. More than 50% of rental units are in buildings with one-four units and 88% are “mom and pop” owners with no more than 10 units, according to the Urban Institute. 

Renters are far more likely to be lower-income, minorities, new immigrants and other vulnerable groups that are dealing with multiple dislocations caused of the pandemic. The money owners collect through rent payments help support local economies and governments and pay for the mortgages held largely by the pension funds and retirement accounts of working Americans.

The CARES Act authorized mortgage forbearance for homeowners and a limited number of owners of rental properties and added limited emergency funding to aid renters and property owners. 

The CARES Act’s one-time $1,200 cash supplement and its bump up of unemployment insurance payments undoubtedly will aid renters. But those funds do not consistently cover renters’ full household costs, particularly in higher-cost rental markets.

For instance, for households with workers in immediately-impacted industries, typical rents would take up roughly two-thirds of the minimum expanded UI benefit in the Los Angeles and San Diego metro areas, and more than 80% in the Bay Area. Many renters will not benefit from unemployment insurance, because of uneven employment history, immigration status, gig or informal employment. The Terner Center estimates that more than a third of all renter households have workers in the occupations most vulnerable to disruption.

The next phase of emergency relief will require multiple approaches. Congressional leaders are considering more than $100 billion in new ongoing rental assistance to tenants. We strongly support these efforts because helping tenants directly is the ideal way to provide support –– and the best hedge against likely systemic disruptions to the economy that could take years to unwind.  

But getting assistance into the hands of millions of tenants will prove a daunting challenge of outreach, verification, registration and disbursal. To buy us much needed time, we need to concurrently implement a direct loan program to cover lost rent receipts.

Under our proposed program, owners would receive support in the form of a long term, no interest rate loan only for the difference between the amounts collected from tenants and the normal baseline collections.  Owners would qualify for the support in  exchange for a pledge not to evict tenants whose nonpayment is due to COVID 19 related economic circumstances. The credit line should be repayable over a suitable term such as 10 years after the end of the national emergency.

The program should have limits to focus the aid on properties serving low, moderate- and middle-income tenants.  

This proposal must complement rather than a substitute for any system providing direct aid to renters themselves. And owners would only receive enough to match their normal rent collections while tenants cannot pay.  

More than ever, housing security in the U.S. is a priority. Congress and the Administration should act quickly to adopt comprehensive relief to renters and to the small businesses that provide them a home.