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Where Can People on Unemployment Insurance Afford to Pay Rent?

By Thomas O'Shaughnessy | September 10, 2020

As of August 2020, the U.S. unemployment rate sits at 8.4%. Although this is down from April's high of 14.7%, it’s more than twice as high as this time last year — which hovered around 3.5%. That 8.4% unemployment rate equates to about 13.6 million people who currently aren’t earning a salary — many of them renters.

Even on unemployment insurance, people in 69% of the 109 biggest metro areas in the U.S. cannot afford basic expenses such as rent, food, and transportation, according to a recent Real Estate Witch study.

Renters are affected more financially by the pandemic

A Zillow analysis found that about 28% of renter households include contact-intensive workers — those in jobs that require a lot of face-to-face and close, physical interaction, such as healthcare professionals and front-line service workers. They have also been incredibly vulnerable to job loss and risk of illness during the pandemic.

Plus, renters with contact-intensive jobs usually have lower incomes than homeowners — a renter earns a median income of $32,000, compared to $49,800 for homeowners.

Most affordable cities on unemployment insurance

The Real Estate Witch study found the most and least affordable cities for renters currently on unemployment insurance.

Renting a two-bedroom apartment

According to the report, there are just 12 U.S. metros where residents on unemployment insurance can afford to rent a two-bedroom apartment on top of basic living expenses such as food and transportation:

  1. Springfield, MA
  2. Worcester, MA
  3. Spokane, WA
  4. Toledo, OH
  5. Dayton, OH
  6. Cleveland, OH
  7. Akron, OH
  8. Des Moines, IA
  9. Cincinnati, OH
  10. Columbus, OH
  11. Scranton, PA
  12. Pittsburgh, PA

People in these 12 metro areas spend an average of $1,541 on food, transportation, and rent for a two-bedroom apartment while getting about $1,881 on average in unemployment. This leaves about $340 left over for other expenses such as healthcare.

Renting a studio apartment 

 The 10 most affordable metros to rent a studio apartment on unemployment insurance are:

  1. Springfield, MA
  2. Worcester, MA
  3. Spokane, WA
  4. Toledo, OH
  5. Dayton, OH
  6. Cleveland, OH
  7. Boston, MA
  8. Akron, OH
  9. Des Moines, IA
  10. Cincinnati, OH

In those 10 metros, the average studio apartment costs about $687, with rent, transportation, and food expenses totaling $1,500. The midpoint unemployment insurance is about $2,100 monthly, leaving people with more than $500 left over to cover other expenses each month.

10 least affordable cities on unemployment insurance

The study also found the 10 least affordable metros on unemployment insurance: 

  1. San Francisco, CA
  2. San Jose, CA
  3. Washington, DC
  4. Oakland, CA
  5. New York, NY
  6. Miami, FL
  7. Honolulu, HI
  8. San Diego, CA
  9. Fort Lauderdale, FL
  10. West Palm Beach, FL

In these metros, residents can't even afford a studio apartment on unemployment insurance.

The average studio apartment in these 10 cities rents for around $1,400. Add in food and transportation costs, and residents have monthly costs of about $2,600. Yet, the average unemployment insurance payout is just $1,000 per month. This means people will need an additional $1,600 in unemployment benefits per month to afford rent on top of other basic expenses.

How much are renters receiving in unemployment insurance?

The amount of weekly assistance a renter receives on unemployment varies by state and is usually determined by a worker’s earned income prior to being laid off.

Additionally, Congress passed the CARES Act earlier this summer that included a nationwide moratorium on evictions and an additional $600 in weekly unemployment benefits through the end of July 2020, as well and a one-time stimulus check for most Americans.

After these federal benefits expired, it’s been up to the states to provide additional relief — one option being to apply for an additional $300 a week in unemployment benefits through the Federal Emergency Management Agency (FEMA). However, not all states are applying for the benefit.

Renters are struggling to pay rent in full

With these grim statistics and renters not earning a salary, it may come as no surprise to landlords that 12.4% of renter households paid no rent during the first two weeks of July. 

Almost a third failed to make full rent payments for that month.

Eviction protections for renters still in place

The CARES Act from early summer 2020 put off tenant evictions until the end of July. Some states passed their own moratoriums for a couple months following the expiration of this order. But, on September 1, the CDC barred evictions until the end of 2020 to prevent the spread of COVID-19.

With renters not earning a salary, some not paying rent as a result, and eviction moratoriums still in place, this puts landlords in a tough spot.

Federal mortgage payments are on hold for up to an additional 180 days due to the CARES Act — also known as forbearance. But, not all landlords carry their mortgage through federal programs such as Fannie Mae, Freddie Mac, FHA, VA, or USDA. Unless they’ve been able to negotiate this forbearance with their private lender, they’ll still be on the hook for the mortgage payments on their rental properties.

Tips for landlords during the pandemic

As a landlord, it’s important to take stock of your tenants, how many are currently unemployed, how much you owe on your properties, and your current profitability ratios. Be transparent with tenants, make sure they know of resources to help them pay rent, establish a protocol for those who can’t pay, and — since evictions are no longer on the table — work with them to get current on rent. You can also work with your lender to ask for a mortgage forbearance.

If absolutely necessary and in order to avoid foreclosure, you may consider selling your rental properties with the new owner taking over the leases. But do make sure you understand real estate commission fees before you do sell.

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