Rae Oliver Davis: My name is Rae Oliver Davis, and I'm the Inspector General for the U.S. Department of Housing and Urban Development. These panels focus on financial sector stakeholder perspectives concerning the operation, efficiency, effectiveness in areas for enhanced oversight related to CARES Act programs in the pandemic response efforts of the federal government. With the help of our distinguished panelists today, today's event will focus on the effectiveness and efficiency of pandemic response programs as they relate to the issue of housing.
Rae Oliver Davis: By way of background, the Pandemic Response Accountability Committee or PRAC is comprised of 22 inspectors general from across the federal government. The PRAC is leading the effort to promote transparency and the support and conduct oversight of the government's pandemic response which totals to date more than $3 trillion in economic relief. HUD OIG and SIGPR are members of the PRAC's Financial Sector Oversight working group, which includes inspectors general with oversight responsibilities in the areas of banking, lending, and housing.
Rae Oliver Davis: Throughout the pandemic, stable housing and effective housing assistance have been of critical importance. The federal government and its state and tribal and other partners all play key roles in ensuring that CARES Act funding and HUD programs effectively reach the intended individuals and communities, many of whom have been so profoundly impacted by the COVID-19 pandemic. I'm now going to turn to my co-moderator, Special Inspector General for Pandemic Recovery Brian Miller, to further discuss the panel and introduce our panelists.
Brian Miller: Good afternoon, I'm Brian Miller. I am the Special Inspector General for Pandemic Recovery. My office was created in the CARES Act as part of what I call an oversight trifecta, the Special IG for Pandemic Recovery, the PRAC and the Congressional Oversight Commission. So, we are charged with making sure that the resources given under the CARES Act goes to the right places, and ensuring the effectiveness and integrity of the programs under the CARES Act.
Brian Miller: This listening panel is a unique opportunity for the overseers of these efforts to hear from our housing sector stakeholders and subject matter experts. We want to hear the panelists' insight into the effectiveness and efficiency of pandemic response programs related to housing. We also want to hear their views about specific areas where related HUD and oversight attention should be focused to enhance the efficiency, transparency and accountability of pandemic relief efforts. Today we have with us, Ms. Jenny Schuetz, who is a Senior Fellow at the Metropolitan Policy Program, Future of Middle Class Initiative at the Brookings Institution.
Brian Miller: We also have with us Ms. Marietta Rodriguez, who is the president and chief executive officer of NeighborWorks America, and Ms. Nani Coloretti, the senior vice president for financial and business strategy, and treasurer of the Urban Institute. All three panelists offer an insight of the unique constituencies they serve, and the areas of study they and their organizations pursue. Before we get on with our questions, let's take a moment to have our panelists introduce themselves and the organizations they work with. Ms. Coloretti, would you go first and then Ms. Rodriguez and then Ms. Schuetz? Thank you.
Nani Coloretti: Absolutely. Absolutely. Thank you so much for that kind introduction and for holding this listening session, which I think is really important. My name is Nani Coloretti, I'm a senior vice president at the Urban Institute. I want to tell you a little bit about the Urban Institute because I'll be talking about a lot of the research we have, and I'll be sending my links to all of that research to the PRAC so that if people want to find out what I'm talking about, they can click on and learn more.
Nani Coloretti: The Urban Institute is a leading research organization, we're dedicated to developing evidence based insights that help improve people's lives and strengthen communities. We've got nearly 50 years, actually over 50 years of expertise and experience. So, Urban is a trusted source for timely nuanced analysis of social and economic policy. But our work doesn't really end with the research, we actually take that, translate it, and help apply facts to today's world. So we help federal, state and local leaders solve problems and put policy into practice. We partner with organizations and advocates seeking to drive change, including philanthropy, nonprofits, and local organizations to refine their strategies and measure whether their efforts are making a difference.
Nani Coloretti: We've got over 550 staff working across 11 research areas, and on over 150 research topics. We've been tracking the effect of COVID on a whole host of issues including foods insecurity, health, employment, and of course housing, ever since the pandemic started. We've taken a particular interest in seeking ways to address racial disparity and recovery. So, as we know, the COVID pandemic has really strained our economy, and it's particularly strained the ability of people to stay in their houses. These stressors come on top of what was already an affordable housing crunch.
Nani Coloretti: So, we know from the National Low Income Housing Coalition, that there is no state, metropolitan area or county, where a U.S. worker earning the federal prevailing state or local minimum wage can afford a modest two bedroom rental home at the fair market rent value, if they're working 40 hours a week. So that's pretty astonishing, but just tells you the crisis we were facing before the pandemic and that we're facing now. As you all know, housing is critical to our ability to manage right now. It looks like I'm calling in from Urban Institute, but I'm actually calling in from my house, as are most of you, and many parents right now, as we speak, are educating their kids at home on Zoom.
Nani Coloretti: We've all been asked to limit non-essential travel and we know that congregating in groups is a proven way to spread the coronavirus, so we've all been asked to stay home. So it turns out that staying housed is actually a public health issue. As we all know, solving our public health issue is critical to getting our economy back on track. So this is a really great topic that we're having today, and I just want to say thank you very much for the conversation, I'm looking forward to it.
Brian Miller: Ms. Rodriguez, would you share a few remarks? Thank you.
Marietta Rodriguez: Thank you. I want to thank the PRAC for hosting this incredibly important and timely topic. Also, thank you for including NeighborWorks to add our perspective in this discussion. For those of you that may not be aware, NeighborWorks is a congressionally chartered public nonprofit. We have origins that date back to our creation in 1970s, where Congress created us to help fight disinvestment in urban neighborhoods, and fight redlining. We've evolved over the years, and today we stand with more than 240 locally based network nonprofits, they are locally run and we support them, they make up the NeighborWorks network, and they are all focused on housing and community development issues.
Marietta Rodriguez: We provide funding through our congressional appropriations through private sector investment. We also provide a fair bit of technical assistance as well as capacity building for these organizations. Many of the remarks that I will refer to today will really come from real time information that we're getting from these network organizations. We began surveying them at the beginning of the pandemic, and we've been doing so pretty regularly for the last almost a year now. So those are the remarks, the way this is impacting communities, housing and individuals across the country, we really inform many of my remarks.
Marietta Rodriguez: Additionally, I would further say that NeighborWorks provides a fair bit of training and capacity building to the community development field. Many people may know us through our national training institutes that have now pivoted to a virtual execution, where we provide courses and training to other nonprofits outside of our network, municipalities, other government agencies, I think, that is also helping inform some of our strategies and what we're hearing on that front. But we have a long standing history of working in communities, responding to things that impact healthy communities, including the foreclosure crisis of 2008, and so we have some lessons that we've learned in that crisis that we think are particularly ripe to pull forward today. So I look forward to the discussion. Thank you.
Brian Miller: Ms. Schuetz, would you please share some remarks? Thank you.
Jenny Schuetz: I'd like to start by thanking the PRAC for holding the session, as the previous panelists have mentioned, this is a particularly important topic, given how crucial it is for people to be housed during a public health crisis. My name is Jenny Schuetz, I'm a Senior Fellow at the Brookings Metropolitan Policy Program and the Future of the Middle Class Initiative. The Brookings Institution is a nonprofit public policy organization based in Washington, D.C. Our mission is to conduct in depth research that leads to new ideas for solving problems facing society at the local, national and global level.
Jenny Schuetz: My own research focuses on housing affordability and housing policy, particularly focused on the availability of stable housing for renters. My comments today will focus primarily on how the federal policy interventions during the pandemic have helped low income families, especially renter households who have been very hard hit by both job losses and the public health crisis. Federal policies have helped mitigate the pandemics effect on low income renters, but they are not a comprehensive solution. Since the start of the pandemic, federal, state and local governments have provided support for households through three channels, first through direct financial support. Second, through Emergency Rental Assistance, and third, through temporary eviction moratoriums, and moratorium on foreclosures.
Jenny Schuetz: All three of these channels have played important roles in mitigating the impacts of the pandemic on low income families. But they are a far cry from providing a comprehensive safety net. Millions of families have fallen behind on their rent, accumulating debts that they cannot pay. Others have had to double up with family and friends living in crowded homes that increase health risks. The financial hardships faced by low income households have consequences for the U.S. economy overall, and for local communities across the country. Families who have spent down their savings and accumulated debt, have fewer resources to spend at local businesses, putting downward pressure on the economic recovery.
Jenny Schuetz: Children living in families with high levels of stress will struggle at school. The nation's affordable housing stock is in danger as small landlords face cash shortfalls. Local governments are on the frontline of providing services to a growing number of vulnerable households, and yet they face falling revenues and tight budgets. Ongoing federal assistance is needed to support families and communities until the Public Health Emergency is over, and the economy returns to full employment. Better real time data is essential to design and implement effective policies.
Jenny Schuetz: The pandemic has led to a great deal of policy experimentation from local governments and nonprofits. The variety of efforts on the ground, could provide useful insights into future policy design, but only if we are collecting usable data now to enable rigorous evaluation. Thank you again for the opportunity to speak today, I look forward to expanding on my comments.
Brian Miller: Thank you all for your comments and remarks. Now, Inspector General Rae Oliver Davis will ask the first question.
Rae Oliver Davis: All right. Moving on, and you all have already offered some really interesting perspective. But let me specifically ask, have pandemic response programs and moratoria on eviction foreclosure been effective in stabilizing housing, and providing the intended housing assistance and relief to low and moderate income families and individuals? Ms. Schuetz, can we start with you?
Jenny Schuetz: Sure. My comments provides some context for housing stability before the pandemic, and then discuss the effectiveness of three different types of policy responses. As the other panelists have noted, it's important for us to recognize that housing insecurity was a widespread problem for low income renters well before the COVID-19 pandemic started. Even before the current crisis, more than 10 million households spend over half of their income on rent. That puts them in a very precarious position, where any loss of income leaves them likely to fall behind on their rent and increases the risk of displacement.
Jenny Schuetz: We know that low income Black and Latino workers, have been particularly hard hit by the current recession by job losses. Research from the New York Federal Reserve Bank says that households earning less than $30,000 a year, have experienced the highest rates of job loss and the slowest recovery of those jobs. Federal policies have helped mitigate the pandemics impact on low income renters, but they're not a comprehensive solution. There are three categories that we can think of under the federal government's response.
Jenny Schuetz: First, direct financial support to households through expanded unemployment insurance and stimulus checks directly to families. Second, Emergency Rental Assistance from the federal government that was dispersed through state and local governments. Third, the federal moratorium on evictions and foreclosures. Direct financial assistance was highly effective at helping people stay in their homes for households who received that assistance. So we know for instance, through the Census Bureau's Household Pulse Survey, that many people were spending their stimulus checks or their unemployment insurance benefits to help them pay rent and utilities and the mortgage and help them stay safely housed.
Jenny Schuetz: During the spring and summer when job losses were first being felt, landlords consistently reported still high rates of rent collection, largely enabled by this household financial assistance. Anecdotally, some landlords are also reporting that while people were receiving UI benefits that were actually above their pre pandemic income, they were using those benefits to pre pay rent essentially as an insurance policy against future job losses. This shows us that these were really effective policies in helping people stay current.
Jenny Schuetz: Helping people stay current on their rent is much better both for households and more cost effective for governments than trying to catch up once people fall behind. Once people become delinquent on their rent, they have a higher probability of displacement, increasing their public health risks. Missed rent payments also have downstream impacts. Landlords rely on rent to pay their mortgages and property taxes, to pay for maintenance and housekeeping staff and to keep the buildings in good physical condition. The process of helping people after they become homeless to become rehoused is substantially more difficult and complex and expensive than simply keeping people housed initially.
Jenny Schuetz: There were two main limitations of the direct financial assistance. One is that some people fell through the gaps. We know that state unemployment insurance systems were outdated, they were overloaded with a number of people applying, and so many people who are eligible for these benefits didn't start receiving them until weeks or even months into the pandemic, allowing them to accumulate rent debt in the meantime. Some people who lost jobs simply weren't eligible even with the expanded range unemployment insurance programs. Second, the financial assistance stopped too soon before the Public Health Emergency was over, and the economy could safely reopen.
Jenny Schuetz: The initial expanded UI benefits ended in late July, other pandemic unemployment insurance programs ended in December, we are still not back to full employment, and so people have been falling behind the longer this has gone on. It's more difficult to assess the effectiveness of rent relief programs and the eviction foreclosure moratoria because there was so much local variation in how those programs were implemented. Local governments made very widely varying choices in how to structure and implement relief programs. Some places already had programs and kept the central structure but added on additional money. Many places had new programs, and they had to figure out who was going to be eligible, how to do outreach to tenants and to landlords, how to administer the funds and triage the applicants.
Jenny Schuetz: So there were a lot of different ways that these played out on the ground, which makes it harder to give an overall assessment of how effective the program was. Similarly, there's a lot of local variation in how the eviction moratoriums were interpreted, often even by judges within the same state who had a different interpretation of how this should be interpreted, including things like whether the onus was on the tenant to request to notify their landlord or whether landlords should notify tenants or there was some public mandate to tell people about this.
Jenny Schuetz: Local variation is nothing new in housing policy. Many of the programs that pre existed are also run through state and local partners. Often that's an advantage, because you can adapt to local housing market conditions, but it is important when designing these programs to recognize that there is a lot of difference in capacity of local governments. So things like how many staff they have and their experience in working with kinds of programs, places that for instance, how the rent relief program already had an easier time getting it going in places that never had run a program like that and had to stand it up.
Jenny Schuetz: Lack of clear direction from federal agencies made local governments jobs more difficult. There was a lot of confusion about eligibility, who was allowed to get assistance through the rent relief programs funded through the CARES Act, particularly confusion around immigration status. Local governments often waited for clarification from the federal government before spending money so they would know that they were within the rules, but there was also a deadline to spend it down and so they had to make choices in a fairly short time frame with imperfect information, some more clarity would have helped with that.
Jenny Schuetz: Then finally, the scale of the federal rent relief is small relative to the outstanding rent debt. So the December aid package included $25 billion for rent relief, which sounds like a big number, but we actually have estimates from Moody's, the total amount of back rent utilities and late fees is somewhere in the order of $50 billion. There are about 9 million households who have accumulated rent debt with an average burden of over $5,000. Full employment is not yet in sight, we don't know how much longer before people can go back to work, and so just the scale of the assistance has not been comparable to the impacts. Thank you.
Rae Oliver Davis: Thank you. Ms. Rodriguez, what do you think about this topic?
Marietta Rodriguez: Here's what I would say, well, moratoria are very important, they're not a panacea, or a silver bullet. Nearly all of the organizations in the NeighborWorks network report that there are subsidies available in their communities, including rent subsidies, utilities assistance, and eviction, or foreclosure moratoriums, that have been helpful, and in some cases even exceed the federal mandates. However, they also report there's still a tremendous need for services, clear consistent guidance and information and assistance.
Marietta Rodriguez: Nearly 90% of the NeighborWorks network organizations have eviction prevention or cash assistance programs for renters, and they're reporting an increased demand for the service, particularly in the last quarter of 2020. But because many of these programs were opt in programs, information didn't reach many of the people who needed it the most. Many of the outreach and information that was circulated, wasn't available in different languages, and so many missed out on the opportunity to take advantage of these provisions.
Marietta Rodriguez: When we find this kind of information in symmetry, it traditionally results in homeowners and renters particularly in low to moderate income communities, and communities of color being disproportionately negatively impacted. Furthermore, our network reports that courts have been very uneven in enforcing moratoria on evictions and foreclosures. Again, most low to moderate income renters don't have consistent access to counsel. I would say forbearance plans that have tapped payments on to the end of the mortgage, we're short term good solution. Although, again, many homeowners were not well informed of these options, and much of the early information on how to access forbearance was confusing, especially when the servicers, own communication and own waterfalls lead with a lump sum repayment versus other options.
Marietta Rodriguez: We should further know that each payment that's added to the back end of the mortgage increases the outstanding principal balance. At this point, so much principle has been added to the loan balance that in some markets for some homeowners, it's getting close to being the same as the value of the house itself. Now a year later, we're at risk of wiping out some or all of the equity that homeowners may have accrued. Excuse me. Additionally, I would say one of the most important lessons learned in the foreclosure crisis included the benefits of utilization of standardization around loan workouts and loan modifications.
Marietta Rodriguez: I would say, in the foreclosure crisis when the FDIC took over IndyMac and they established a standardized waterfall, a standardized metric for the loan modification It was a game changer. It resulted in consistency, consistent communication to borrowers, and greater accountability among mortgagors and the mortgage servicing industry. Another important lesson is when the federal government played a leadership role in convening the mortgage industry with a responsive solution based approach that resulted in innovations such as, Making Home Affordable, HAMP, the heart program, they were all born out of this leadership, where government pulled financial services leaders together alongside shoulder to shoulder to the nonprofit sector, and we came together around the same table. We shared information, we shared effective strategies and we committed together to a comprehensive, coordinated plan.
Marietta Rodriguez: I would also say there has not been enough outreach around forbearance and other options. And that's one of the reasons we applaud it and join the mortgage servicers in creating a public information campaign, not okay, it's okay, the theme of the campaign to get the word out to borrowers that are in financial distress. The latest data from the NeighborWorks network shows not a huge spike in clients seeking foreclosure mitigation, but with a 12 month forbearance period ending soon for many homeowners, and many continue communication challenges, we think that's going to change early this year, early in 2021, and it's something we need to watch.
Marietta Rodriguez: Three quarters of our housing counseling organizations are hearing from homeowners that are delinquent or about to become delinquent on their mortgage payments. So it's important to note that they're hearing from customers and borrowers both with government back mortgages, as well as privately held securities. So it's across the market. I think the data coming from the NeighborWorks network is very clear. There's more work that needs to be done. I want to note that there is an inherent connection that is very strong between health and stable housing.
Marietta Rodriguez: The November 2020 study by public health experts across the country noted that lifting eviction moratoria was associated with increased COVID-19 incidence and mortality, as families are forced to move from one place to another place, double up in crowded conditions, and live more in groups. I think that's something we need to continue to watch and monitor.
Rae Oliver Davis: Ms. Coloretti, can we turn to you for your perspective?
Nani Coloretti: Sure. Thank you. I'm just so happy to be on here with my two colleagues, because they have laid out the problem and some of the solutions really well, and particularly the three buckets mentioned at the top of this question. I wanted to just draw for you, though, the scope of our problem here, we did just get $25 billion in rental assistance that was passed in the last federal package, but it hasn't yet been distributed by state. So, it will take some time for that money to flow through the federal government to states and localities and for us to really measure the effect.
Nani Coloretti: The other thing I wanted to mention that someone else had mentioned earlier is, it is really hard to track consistent eviction results because we have great local variability as mentioned before, and we just don't have consistent data. But I can tell you a little bit about more about the problem. So we did some analysis, my colleagues, Jim Parrott and Mark Zandi, based on the Census Housing Pulse Survey that was mentioned earlier, and we expected that by the January rent payment, and prior to distribution of the funds I just mentioned, there will be over 10 million delinquent renters. To just put that in context for folks. Approximately 7 million households lost their homes into foreclosure during the worst five years of the global financial crisis that we experienced starting in 2008.
Nani Coloretti: This is more people than that in just since March 2020, who are at risk of losing their homes. As others have mentioned before, you really want to prevent people being removed from their homes through eviction or losing their home, because it is so much more costly to put them back into a house. Our analysis has found that it would cost about $12 billion a month to eliminate all rental burden. So these are really high numbers and hard to even get your mind around, but from the pulse survey, that same survey, we noted that nearly 18 million rental households, tell us that they have little or no confidence that they can continue to make rental payments, and half of those who are already late on their rental payments believe they would have been evicted by the end of January if the eviction moratoria had not been kicked out to the end of March.
Nani Coloretti: We actually at Urban had recommended it be kicked out until June because we think March is too soon. Our evidence shows a little bit of green shoots though, so combined with the CDC eviction moratoria, if you couple that with state and local laws that has served to keep people in their homes, there's some really good data coming out of L.A. County, and that the level of eviction was about 66% lower than it had been the year prior. That's because of not just the CDC moratoria, but state and local laws.
Nani Coloretti: Furthermore, we estimated that if lawmakers had not passed the $900 billion relief package back in December, the economy would have likely suffered a double-dip recession, more lost jobs and rising unemployment as adding significantly to the number of distressed renters. I can link over to our work on that after the session. So, the package that was passed will help some 3.5 million renters pay back rent and utilities by February. While this is meaningful, it still leaves us with 6.8 million delinquent renters owing an estimated $34 billion. I've seen a range of numbers for that estimate, so it could be higher and it could be a little bit lower, but that is an eye popping number.
Nani Coloretti: So, the result is that we expect more evictions over typical levels after the moratoria is lifted, and or if we're unable to get more funding into the system the ways that are being debated right now in Congress. Just to give you a sense of how this impacts, this burden falls more heavily on Black indigenous people of color. We did a coronavirus tracking survey back in September, and what we found was, nearly 14% of renters have reported problems paying rent in the previous 30 days, and about 17% of Black renters and almost 23% of Hispanic LatinX renters reported problems compared to 8% of white renters.
Nani Coloretti: Over 10% of all renters are behind on rent, but about 17% of Hispanic LatinX renters are behind on rent, and almost 14% of Black renters are behind compared to 4% of white renters. More than one in four renters were worried about not being able to pay their rent in the next month, and about 5% of renters or 3.3 million renters reported receiving an eviction notice or threat since March 2020. So we know that while some of these policies have been very helpful, including the federal forbearance and foreclosure policies that Marietta mentioned, we still have a significant gap, significant gap remains.
Brian Miller: Thank you very much. It's so good to hear the views of our stakeholders, it's important for inspectors general and other members of the oversight community to hear your views. For our second question, I would preface it by noting how important it is, not only that our state and local partners have the resources they need, but also have the ability to provide the effective assistance. My question is, do state and local government and organizations have the flexibility and resources under the CARES Act and December 2020 supplemental relief to provide effective assistance to renters, homeowners, the homeless and other at risk populations? Ms. Rodriguez, may we begin with you?
Marietta Rodriguez: Frankly, it's hard to evaluate given the state of the Treasury FAQs on Emergency Rental Assistance. Their website notes that additional guidance is forthcoming as of February 9th. But let me say this, standing up a rental assistance program has been complicated. The December supplemental appropriation improved on some of the major weaknesses of the CARES Act in part by actually having a Rental Assistance Fund, which has certainly helped. But we're hearing from our network that the requirements for documentation of income lost is still the biggest obstacle, and there's certainly gaps in what local governments are able to provide.
Marietta Rodriguez: Local nonprofits like our network organizations have been trying desperately to fill those gaps. They have pivoted to add new services that they haven't had to have before such as food and security and food distribution sites, which is something that many of them are new to. I would say the consumers need trusted advisors. As one of the largest housing counseling intermediaries, we know the critical role that housing counseling plays in helping people navigate really complex financial decisions around home ownership, loan modifications, workouts and foreclosure prevention, it's really hard to be able to get a trusted adviser or figure out of all of these programs that I'm hearing about in the news, what do I qualify for? What's my best option?
Marietta Rodriguez: So I think that's really our call to action often, is to reach out to the local nonprofit who can serve as a resource hub of everything that's being offered and help you determine which is best for you. So I think we're definitely better off today than we were a year ago, but I think there's still some gaps that remain.
Brian Miller: Thank you very much. Ms. Coloretti, do you have views on this question?
Nani Coloretti: Thank you for that. I think there have been some good, helpful flexibilities that were put in place for the CARES Act. So we have evidence of some of those flexibilities are helping, for example, and this is small but meaningful. The CARES Act provided $5 billion for the Community Development Block Grant, which was an existing program that block grants to local governments, and that has allowed states to have some flexibility, it has removed funding caps and other requirements. There is probably more flexibility that could happen through that funding vehicle.
Nani Coloretti: Public housing authorities also received more flexibility in their funding through the CARES Act, which helped them respond more quickly to local needs. But of course, they also have pre existing budget shortfalls in their capital budgets to actually put more units available to the people who are qualified for them. We actually did an interesting analysis that I can share with you that showed how states could use the flexibility under the Temporary Assistance for Needy Families program, the TANF program, to provide rental assistance and support families. President Biden recently ordered that FEMA must reimburse 100% of local efforts to shelter homeless individuals and non congregate housing like hotels.
Nani Coloretti: I think previously FEMA only allowed up to 75%, and this order allows for retroactive reimbursement to January 2020. So many communities have been using combination of FEMA reimbursement and funding from the CARES Act to serve their community. So those are helpful flexibilities, those kinds of temporary placements have been effective at keeping folks safe during the pandemic, but communities still need to be able to house people after they go into traditional shelters. So, I think the answer is those facilities helped and more is needed.
Brian Miller: Thank you very much, very helpful. Ms. Schuetz, would you like to comment?
Jenny Schuetz: Sure. So, it's come up a couple of times today that we learned some lessons from the Great Recession for some of the mortgage interventions. One of the key lessons from HAMP and other programs was that, if we want people to be able to access government help, particularly at times of financial distress, that we need to make the program's relatively simple and accessible, and unfortunately, that's a lesson that I think we haven't applied to the pandemic relief programs effectively enough.
Jenny Schuetz: So, a number of the programs have really had a pretty high administrative burden for both households to access and in some cases also for local governments to administer. So for instance, the unemployment insurance systems are quite complicated for people to get access to the state and local rent relief programs also. Many of those were designed to have an online application to minimize contact between households who are applying for it and the local governments or nonprofits that are providing that. But then that makes it difficult for people who don't have internet access at home, which is particularly important for low and moderate income households, and during a time when schools and libraries and other sources with public internet access are not available. So if you can't get access to the internet, you may be cut out from being able to apply.
Jenny Schuetz: Also, heard a little bit about the extensive documentation that's necessary for households to get access to these programs. So most of the rent relief programs require people to document the loss of a job, the loss of income, their current housing situation. In some cases, people have to show that their landlord has already filed for eviction in order to be able to qualify, or to be able to document the amount of the rent debt. Again, these are complicated things for people to pull together paperwork, particularly people under financial stress, and so many people have just had trouble getting all the paperwork together to even apply and get into the queue for the process. I think that's not what we want to do, we want to encourage people to apply and to be able to get access to the help that's been allocated.
Jenny Schuetz: There are a couple of blind spots in the system, most notably renters who are living in informal housing arrangements. So, the rent relief programs are designed to work for renters who live in a professionally managed building with a landlord, and that they have a lease that they're able to get access to. And often they require, in fact, the cooperation of a landlord. Unfortunately, we know that a lot of low income households have informal housing arrangements that just don't fit into this bucket. So for instance, a lot of low income renters rent a room or a basement in somebody's house, but it's an informal arrangement that doesn't have a lease, and so they're not able to document what their rent is, and that they're behind on that.
Jenny Schuetz: Lots of doubled up households have multiple people who are essentially sub renters, but they may not have their name on the lease, and so some of the household income is lost, but it's not equivalent to the entire rent. Those are cases where local governments have been unclear what they're allowed to do, and have made different choices. Many of the households who are in these situations are low income, Black and Latino households, immigrants. These are households with low levels of trust in government anyway, and so they are reluctant to ask for help even when they would be eligible. Then there's these additional hurdles, that make it difficult to serve that. So this is particularly problematic.
Jenny Schuetz: We know that a lot of these are families with kids. So these are families who really need to be getting help, but the system is just very complex and not designed to work with them. I think there has been some discussions about allowing renters to self certify loss of income similar to what's being done on the home ownership side, to get access to mortgage forbearance, and that would certainly help make this more accessible for people who have trouble with the documentation.
Rae Oliver Davis: Thank you all three of you for your thoughtful responses to our questions. As we turn to the third question, I'm hoping that you all can draw on your expertise to help us read the tea leaves a bit and predict what's for future. As our nation begins to normalize, what do you see as the greatest post pandemic challenges to housing stability? What do you see as the lasting impacts of the pandemic on affordable housing for low and moderate income families, and for home ownership in the United States? Ms. Coloretti, why don't we turn to you first?
Nani Coloretti: Great, that is a huge question, but I'm glad you are asking it. I'll just say, I do think as we move from relief to recovery, there are things we can do to very effectively and efficiently target the funding that is coming through and that yet to come through. So these are large amounts of money that come through the federal government. I've already made the case for more here, but we can be effective and efficient.
Nani Coloretti: One of the things we have talked about a lot is targeting the populations most at risk with the funding that is coming through, we created a rent Emergency Rental Assistance priority index, that is a map of all counties in the local areas in the country. It basically can give states and localities some data based on housing instability, homelessness measures, and other income measures to prioritize housing assistance, rental housing assistance to where it is needed most geographically. Then we would also recommend prioritizing and targeting the lowest income households instead of allocating funds on a first come first serve basis.
Nani Coloretti: So, the bill that has just passed said the funding can be used for renter households making up to 80% of the area median income, which is a little over $70,000, if you're in New York City, but more like 48 to $50,000 a family if you're in Iowa. That number does change, but that's the targeting that is in the bill, but it could also prioritize households with incomes below 50% of the area median and we would recommend that localities do that. We also recommend considering not capping the amount of back rent owed. And then also having the Treasury Department as they put together their guidance about funding to state or local governments to actually implement simple guidance, and I think other panelists have said this, it's very important to do that.
Nani Coloretti: I'll just do a shout out to one of my co panelists Marietta, one of the research based implementation and programs that we have found to be very helpful is housing counseling, which is part of the NeighborWorks network. We recommend making sure that people know their rights and that they also are getting HUD backed housing counseling and those kinds of services, because they have been shown to keep people in their homes. But I'll say if you pull back the aperture a little bit wider and broader, the real issue here is housing affordability, and we're in a crisis now.
Nani Coloretti: Some researchers at Urban have said that it really is more like a Hurricane Katrina crisis versus a long tail of a crisis if we're able to contain the coronavirus, get the vaccines out there, get people back to work, that we may be able to recover more quickly, as if it were kind of a shock to the system, as opposed to the long tail that we had with the financial crisis of 2008, 2009, it took many years. We don't know the answer, but to some extent, the answer is up to us in terms of how we put money into communities and also contain the coronavirus, but I'll just say the biggest issue of housing affordability is there are not enough units of affordable price for people who want to rent or buy them. Right?
Nani Coloretti: So, we have a three part strategy, and we talk a lot more about this in Urban's website and I can provide those links. But it's really about preserving existing affordable housing, producing new housing and protecting housing that exists now. If you do those three things, you can actually both stabilize and increase the availability of affordable housing and really get at the crux of the issue that we're all dealing with now, that's been amplified by the pandemic.
Rae Oliver Davis: Thank you. Ms. Schuetz, how would you answer the same question?
Jenny Schuetz: Yeah. I'd say we can think about the threats to housing stability in a couple of different groups, first on individual households, second on the housing stock, particularly the affordable housing stock, and then third on the larger macro economic impacts. So, starting with households, as Ms. Coloretti said, the impacts are really been disproportionately borne on low and moderate income households who were vulnerable before the pandemic, but have also faced the highest rates of job loss, and tend to be concentrated in industries where jobs have not come back and will not come back probably until the public health threat is contained.
Jenny Schuetz: So workers under $30,000 have won the worst job losses, because low income households tend to be renters, the rental market has really sustained a much bigger hit than the home ownership market. So the Philadelphia Fed estimates that a quarter of renter households have experienced some sort of job loss. That's a really large share of the rental market. Then again, concentrated in the low income segment of that, they estimate the average renter household that has accumulated debt has over $5,000 in rent debt at this point, for households who weren't earning a lot before and had very little in savings, that's almost insurmountable money for them to be able to repay even once they regain employment to pay that off.
Jenny Schuetz: Many people have been putting their rent and other expenses on their credit card, and so beyond what we know of their rent debt, there may be other short term consumer debt. If we think about this as a whole group of renters having a bunch of people, many of whom have rent that may have an eviction filing against them, and have lost income. Collectively, this means a lot of people who are going to have a difficult time renting an apartment, even once they get another job, these are all black marks in the apartment application process, and it's not clear how our rental markets and how landlords will respond to that. But it's worth thinking about whether there needs to be some blanket clearing of eviction filings from people's records for some period of time to make it easier for people to access housing again.
Jenny Schuetz: Second area to worry about is the overall stock of affordable housing, as Ms. Coloretti said, we didn't have enough units for low income households to start with. The rent debt burden is accumulating more on smaller nonprofessional landlords, because they tend to own most of the unsubsidized affordable housing stock. So, older buildings. These are buildings that often had maintenance issues before, and so falling behind on rent means that landlords can't maintain them. Some of those units are at risk of becoming not inhabitable for future renters.
Jenny Schuetz: Landlords are facing financial pressures, including being able to pay their own mortgage and property taxes which may for some of those buildings also to go through sale. That again puts tenants at higher risk of eviction when there is a foreclosure and a sale, and this also in some locations raises the possibility that currently affordable properties will transfer to new owners who may raise the rent, and then it shifts out of the affordable stock. So we should think about what the impacts are and ways to target assistance to those landlords.
Jenny Schuetz: It's also really important to remember this is not just about the families who are facing difficult finances, but the overall economic recovery depends on people having a strong balance sheet. So we know that coming out of the Great Recession, households who didn't get jobs, who had debt, who weren't able to spend were a drag on the economy. So families who spent down their savings can't go to their neighborhood stores and services. So the the money that they don't have isn't circulating throughout the local economy, all of the lost savings mean losses of future investment. So for instance, renters who may have been saving up as a down payment to buy a house have now spent down their savings to pay rent, that delays their possibility of entry to home ownership, the ability of people to start businesses, go to school, all of these are hampered when people have lost savings and accumulated debt.
Jenny Schuetz: Then finally, we know that local governments are taking an enormous financial hit, many of their typical sources of revenue, sales taxes, hospitality taxes are hit, because of the industries that are being impacted. Local governments are also facing increased services, social services to vulnerable families, they're providing many of the health interventions, vaccines, COVID testing clinics, and so forth. So they have an increased demand on services, and reduced revenues, which puts them in a really untenable position. We also saw in the great recession that when local government start laying off their workers, that also drags down their local economy. So, teachers and bus drivers and firefighters, when they lose their job, are no longer able to spend in their local community where they live and work.
Jenny Schuetz: Again, local governments have many fewer ways to raise resources, they face budget caps, they're required to balance their budget, states have limitations on the kinds of taxes they're allowed to impose. So, the federal government is the only entity with deep pockets and can print money to keep both families and communities going. So thinking about all of the places, the overall economic recovery is going to get slowed down if we don't provide enough assistance to people.
Rae Oliver Davis: Thank you. Ms. Rodriguez, can we get your thoughts as well?
Marietta Rodriguez: Yes. I think stable housing must be the center of normalization as we go forward. I agree with a lot of the previous comments. What the pandemic has underscored is what those of us working in housing have known for a long time. Home is at the center of everything, particularly right now. I think there'll be some ripple effects that we have yet to know. But for example, we know that access to reliable broadband is incredibly important right now. We don't know how workplaces may change in the future as a result of all of us working from home, and having access to reliable broadband in the home is proving critically important for working, for educating our children, to even accessing telehealth
Marietta Rodriguez: Particularly in rural and some markets, where access to reliable broadband... we still find some particular gaps. So I think we'll see some ripple effects in other industries that will be compounded as normalization happens. I also think that eviction and foreclosure records are going to continue to cast a shadow over households and their financial futures for a long time to come. We certainly saw that in the 2008 foreclosure crisis. I think we'll similarly see it here. Especially as we've heard, for low to moderate income communities and communities of color, they feel those effects even more acutely.
Marietta Rodriguez: Then let's not forget about the impacts of unpaid utility bills, utility disconnections, unpaid medical expenses, any financial distress that's being experienced, will ultimately impact credit scores and individual's ability to access credit in the future, and that will feel. So I think we need to think about that in our solutions. I would absolutely agree with Jenny's comments about small landlords and Nani's comments about inventory, as we see properties particularly on the rental market that are owned by smaller landlords where we're managing smaller portfolios, as they experienced financial instability, it's unclear if they'll be able to hold on to those properties, and if those will be sold out to other investors and whether or not those investors will keep those properties in the affordable inventory.
Marietta Rodriguez: If they're not, we're already behind on inventory, that will just exacerbate the problem. We really see the potential for a wave of investor purchases and distressed assets as a result of this. Our network of nonprofits, the NeighborWorks network owns and manages over 175 affordable rental units, and they have lost over $92 million in rent collections from the start of the pandemic that we pegged at mid March 2020 through December of 2020, due to this crisis. So we know that landlords are hurting particularly on the affordable space, and how will they continue to maintain those properties.
Marietta Rodriguez: According to the Mortgage Bankers Association, there are currently 3.8 million homeowners who are past due on their mortgage. The Census Bureau's Household Pulse Survey tells us for the period of December 9, and 21st, over half of those people that are facing delinquencies are people of color. One in five Hispanic households and nearly a quarter of Black mortgage holders have reported being late on their mortgage. So I think we need to really think about how we're addressing the needs of communities of color.
Marietta Rodriguez: The NeighborWorks network is committed to increasing the home ownership rates and providing access to affordable rental for all people. But I think we're in deeply challenge as we continue to see the effects of this pandemic ripple through our economy and through communities, and I think we'll start to see those ripple effects even more pronounced. So I think any solution really has to think comprehensively at the community, in addition to the household.
Brian Miller: Thank you so much, these answers are great. It's so good to have an opportunity to hear from our stakeholders as to what may be on the horizon. This brings me to our final question. As you know, inspectors general strive to improve our agencies, and we do that through trying to root out fraud, waste, and abuse, and mismanagement, as well as finding ways in which we can make the agencies more effective and efficient. Where do you see the greatest need for government oversight? Are there risks for fraud, waste, and abuse in housing assistance, and relief programs that may jeopardize their effectiveness? Ms. Schuetz, may we start with you? Thank you.
Jenny Schuetz: Sure. I'm going to reframe the question a little bit. As an economist, I focus on efficiency and effectiveness. So those are the areas I'm going to focus on here. Thinking about, I think, the spirit of your question, how can federal government oversight improve the effectiveness and efficiency of housing programs? The answer to that is that you can't design or implement effective policies without having good data, and we don't know whether policies are effective unless we have good data. So there are two ways that HUD and some of the other federal agencies could improve the quality of relevant data that lets us know how well these programs are working.
Jenny Schuetz: First, HUD should take a more active role in encouraging data collection, short term monitoring and longer term program evaluation of locally administered housing programs. Notably, we've been talking about emergency rent relief programs that have been stood up, and also the eviction moratoria, and presumably also some of the foreclosure moratoria. So there's been a lot of really interesting local government experimentation. This is great for researchers like me, we learn a lot by seeing for the variations, different structure design implementation of these programs.
Jenny Schuetz: We'd like to know more about how these work and how they work in different local market contexts and what the circumstances are for the rollout. But you can't do good evaluation and understand the effectiveness of these programs if we're not collecting the right kinds of data. In particular, if we're not doing that as the programs are rolled out, it's much harder to go back retroactively and create metrics to capture what happened and what the outcomes were. So to that end, local agencies and HUD should be partnering to develop appropriate sets of monitoring programs. This can be really helpful for grantees as the programs are rolling out.
Jenny Schuetz: So for instance, thinking about as they offer rent relief, who are the people they expect to be applying for that, and are they seeing representative applications, so that they can be monitoring this and tweaking as necessary to make sure that as the program moves forward is as effective as possible. This is often very difficult for local grantees to do in the midst of things, they have limited staff, they have 1000 responsibilities. Many local governments don't have expertise in data collection and analysis and monitoring. HUD's guidance could be very helpful. HUD could provide a clear and consistent set of metrics or benchmarks that grantees know that they should be monitoring, so sort of indicators of success, or potential trouble points, so that they know what they're looking for.
Jenny Schuetz: HUD also has a network of researchers, many of them in local research centers or universities, who could be partnering with local grantees to do some of the evaluation, and these partnerships are often very easy to form with a little bit of nudging, and so that would be a terrific role for HUD to play. Moving beyond the monitoring of these programs, there's also a role for federal agencies to produce better real time data on housing distress, which would allow policymakers to design and implement assistance targeted towards the people and the places that need it the most.
Jenny Schuetz: So we've talked a bunch about how this is really targeted at certain income groups in some locations, Black and Brown neighborhoods, we haven't traditionally had good real time data on housing distress. So if you think about labor markets, we have weekly indicators of unemployment insurance and the monthly job stay. Housing data doesn't have an equivalent to that, the real time data are things like the volume of sales for owner occupied homes, which doesn't tell us anything about the day to day distress that low income renters are facing. So there's really a need to have these constant indicators, particularly broken out by renters and owners, and by income and race, and geography, so that we know who is in trouble and needs help, and are able to provide the right kind of assistance to the right places.
Jenny Schuetz: A number of us have talked about the Census Bureau's Household Pulse Survey that's been incredibly useful to policymakers and researchers during the pandemic. That's actually a brand new survey that was stood up in the midst of the pandemic to provide this real time effort. It's one of their experimental programs. So it's not clear how long it will last, but that's been so useful in telling us, for instance, how many households are behind on their rent and are worried about eviction day that we just didn't have before. So, I hope that that will be made permanent and also expanded. At the moment, it only goes level which means that it's much harder within a state to figure out places that are in need of assistance.
Jenny Schuetz: I should note that the Biden administration is setting up an equitable data working group to make sure that the federal statistical agencies are considering racial equity, and make sure that all the data that we collect can be broken out separately by race, to allow for analysis. HUD is not part of the federal statistical agencies, and I don't know whether it's going to be included, but having some housing metrics in this equitable data working group would be really useful.
Brian Miller: Thank you very much, very thoughtful comments. Ms. Rodriguez, do you have anything to add?
Marietta Rodriguez: You know there's always risks for fraud, waste and abuse in any rollout. But I think there will be mistakes, and we should always go after those who would defraud the government, business or consumers. But I would remind us that we can't forget what's happening right now is completely unprecedented, particularly with respect for rental assistance programs. I feel like we're building the plane while we're already in midair. In fact, maybe it's not a plane at all, but a series of parachutes.
Marietta Rodriguez: But to the maximum extent possible, I think IGs should play a partnership role to help ensure these programs are rolled out as quickly and effectively as possible. But if modifications need to be made, to ensure that these programs remain responsive as issues evolve, program managers and agencies are enabled to do so. I think as a result of this pandemic, and the result in decline in our economy, many consumers are desperately looking for solutions, and that includes remaining in their own home. But I think that also leaves particularly communities in high distress vulnerable to scams, and scam activity we're learning from our network is on the rise both stimulus scams, vaccine scams, foreclosure and rent scams.
Marietta Rodriguez: I would really encourage also partnership with the federal enforcement agencies. As our last COVID survey of our network reports, 47% of the organizations reported an increase in scam activity in their service area in comparison to the pre pandemic. As of July of 2020, the Federal Trade Commission estimated $90 million have been lost at that point to coronavirus related fraud. So, as a result, we've created a partnership with local and state and national agencies to create the Stop Home Scams campaign that can be accessed on stophomescams.org. It's really designed to inform and protect homeowners and renters who are at that greatest risk for scam activity.
Marietta Rodriguez: We did something similar in 2008 during the foreclosure crisis. So I think that's an area we don't hear about a lot, is the scam activity. I would encourage IGs to put this on their radar screen, and really work with the federal enforcement agencies as well on this issue as they think about fraud and abuse.
Brian Miller: Thank you, we will try and do that. Very, very helpful comments. Ms. Coloretti, I know you have thoughts on this as well.
Nani Coloretti: Yeah. I might be the last question answer here, and I just wanted to thank you all, again, for having this conversation. It's really helpful. I agree with both of my panelists, my co panelists, Jenny and Marietta, and what they're saying can be done, both from an accountability perspective and data perspective, using data to make better decisions. My comments are really going to lean more heavily on how to be more effective. I think the challenge whenever you have a whole bunch of money going out the door, and you need to do it quickly, because it's an emergency, and we need to give people relief is of course, the chance that something bad might happen or something might be scammed is very out of set or money might not go where it needs to go.
Nani Coloretti: So, I do think that your continuing efforts on that is very, very important. I also think that the challenge in the federal government as we sit so far up above things that we don't have eyeballs on where the money is flowing to and where it's going at all times, and I know that you all have better data tools than we may have had at the beginning of the Recovery Act. Because the last time we tried to put a bunch of money out the door this quickly, and lessons learned from that effort will be helpful here. So, I would just say, one of the things we learned from the Recovery Act, and I'm thinking about the HAMP program, is that when you have programs that are relying on voluntary participation, and resources going out the door, your results vary based on the organizational capacity to implement.
Nani Coloretti: So, in this instance, particularly for rental assistance and some of the other funding streams coming through, you're relying on individuals and renters and also landlords. I think in the latest bill passed, landlords can now apply on their renters behalf, and there's going to be varying capacity. So, one way to partner with folks in states and in localities is to really lift up where you're seeing it work well. I would say that for any of the programs that you're doing, because what you want to do is quickly illuminate those best practices so that other folks may replicate them, and actually do the program as it was intended.
Nani Coloretti: Because I think one of the challenges here is that ... and as I look across your website USAspending in the PRAC website, you have some states that are doing a good job getting the money out the door, and some states that haven't really done that great of job, and I don't know what the story is behind those numbers. But as much as you want to prevent fraud, you also want to have the funding go for the purposes for which it was intended. So, I would say highlighting best practices particularly for local and state capacity is going to be really important.
Nani Coloretti: Then I also think partnering with states, and I think one of my other panelists, maybe Marietta said that, is really important as well, because they actually do have some eyes on the ground. Large states are going to have the same problem the federal government does, but they do have ways of understanding what's happening. And they can flag for you areas where they need more assistance or more technical assistance as to how to implement some of these funding streams. I think that the IGs can play a really proactive role in that. This listening session series is a really good example of something different that you're doing this time around and I really appreciate it.
Nani Coloretti: Then the final thing I'll say on data, I agree completely with Jenny that, in order to really understand what's happening here, we need data, better data, all kinds of data. It's good news that the Treasury Department is required under the most recently passed bill to collect data and also have a disaggregated by gender, race, ethnicity, of the primary applicant in the household. I think that will go a long way when cross hatched with other data for researchers, like the folks I work with at Urban Institute to really understand what's happening here. So, the extent to which you all can be a source of clean, good data, I think that's going to help both with accountability and effectiveness.
Rae Oliver Davis: Well, thank you, thank you all. We want to express our gratitude and that of the PRAC for all the time and effort that your panelists have given us here today. Thanks for sharing your expertise, I mean, your insight into these weighty complicated issues, is really just invaluable to the IG community. I think as you pointed out, I think, repeatedly, the federal government's really facing challenges in the area of housing that they've never seen before. So, it just makes our work that much more important as we strive to meet that challenge. So, thank you.
Brian Miller: Thank you all. I want to echo my colleagues in thanking all of you for your very thoughtful and helpful comments. It was very good to hear your views and the views of those of your organizations that are on the ground. As IGs we need to provide timely and effective oversight, and we need to gain on the ground information from key stakeholders such as yourselves, and your organizations. Your unique experiences, constituencies and areas of expertise have been very helpful to us this afternoon. Thank you once again.
Nani Coloretti: Thank you.