WASHINGTON– The Consumer Financial Protection Bureau has released a report that offers a warning millions of renters and their families may suffer previously avoided economic harms of the COVID-19 pandemic as federal and state relief programs end.
The report, “Financial conditions for renters before and during the COVID-19 Pandemic,” finds that some government relief efforts likely helped maintain the financial stability of renters and their families, suggesting that many may be at risk as those programs expire, noted the CFPB.
The report, which compared homeowners and renters, found that, on average, “renters’ economic conditions were significantly more responsive to relief measures such as stimulus payments and changes in unemployment benefits. When these programs end, renters and their families may be at heightened risk,” the Bureau said.
The CFPB said the findings in the report will help inform its ongoing work to support renters and their families.
‘Falling Further Behind’
“Today’s report confirms that renters, when compared to homeowners, are more likely to be Black or Hispanic, more likely to have lower incomes, and more likely to be women. They are also at particular risk of falling further behind as the nation recovers from the economic impacts of COVID,” said CFPB Acting Director Dave Uejio. “Past recessions and depressions have seen communities of color and low-income communities of all races and ethnicities left behind when the broader economy recovers. We cannot repeat that history. The CFPB is committed to helping renters and their families thrive. We must amplify and protect the modest gains renters made during the pandemic to ensure this nation’s full and equitable recovery from COVID-19.”
Using its Making Ends Meet survey and consumer credit data, the CFPB said its researchers found that financial conditions faced by renters and homeowners were divergent before the pandemic, with renters generally experiencing more financial vulnerability than homeowners.
“Renters therefore had more to gain from some pandemic relief efforts than homeowners,” the CFPB said. “They also could have more to lose from the termination of relief.”
The Findings
According to the CFPB, when comparing renters and homeowners, researchers found:
- Compared to homeowners, renters are more likely to be Black or Hispanic, are younger, and have lower incomes. “Prior to the pandemic, average credit scores among renters were 86 points lower than those of homeowners with a mortgage, and 106 points lower than those homeowners who reported paying no mortgage,” the Bureau said. “Renters’ Financial Well-Being Scores were nearly eight points lower than those of homeowners with a mortgage, and more than 13 points lower than homeowners who reported paying no mortgage.”
- Renters’ debt obligations also differed considerably from those of homeowners before the pandemic. “In June 2019, renters were more likely than homeowners to have student debt and to have used some form of alternative financial service, such as payday, pawn shop, or auto-title loans.”
- During the pandemic, despite poor labor market conditions, renters’ financial conditions, on average, appeared to improve as much as, or more than, those of homeowners. According to the Bureau, renters’ credit scores grew by 16 points during the pandemic, compared to 10 points for mortgagors and seven points for other homeowners, for example. “However, renters’ credit scores, though improved, remained substantially below those of homeowners, even accounting for the modest improvements of renters’ credit scores,” the CFPB said.
- Renters’ financial conditions throughout the pandemic have been more responsive to changes in government financial assistance than those of homeowners. “Delinquency, credit card use, and credit card debt among renters rose and fell in conjunction with stimulus payments and changes in federal unemployment benefits, while homeowners’ delinquency, credit card use, and credit card debt remained comparatively stable,” according to the Bureau.
- Among renters, some credit outcomes among groups who qualified for targeted pandemic relief appeared to be more responsive to policy changes than those among other groups. “For example, credit scores among renters with student debt leapt 40 points during the first months of the pandemic,” the Bureau stated. “Additionally, delinquency rates among renters with children saw a considerable decline following stimulus payments during the pandemic (dropping from 42.1% to 34.4%), perhaps reflecting that stimulus payments could be larger depending on the presence of children in the family.”
Falling Further Behind
In releasing the findings, the Bureau added that as government pandemic financial supports end, renters are in danger of falling further behind the broader national recovery.
The CFPB noted renters represent over 30% of U.S. households, and their welfare is “critical to the welfare of the larger economy and the communities in which we live.”
The Bureau added that as part of its work to support an equitable economic recovery, it has reminded credit reporting agencies and furnishers of their obligations to report rent payments and evictions accurately.
For more info: Read the CFPB’s full report, “Financial conditions for renters before and during the COVID-19 Pandemic.”