During the Covid-19 crisis, many states enacted moratoriums on evictions and foreclosures. This was to stop people from being made homeless during a pandemic when the government was ordering people to stay at home. Many courts quit holding session anyway so even if the moratoriums had not been enacted, the courts wouldn’t have been able to order the eviction or foreclosure either way. However, these moratoriums are beginning to end and courts are beginning to open. This means that many Americans will be facing homelessness in short order.
While many Americans were unable to pay due to losing their jobs during the pandemic, rent and mortgage payments were still due. For those that were able to stay in their homes, that rent and mortgage money is still due. This means that many Americans are facing rental bills in the thousands of dollars for the time they didn’t pay. With 42 million Americans out of work and businesses only opening slowly and certainly not hiring anyone new, this crisis faces Americans at a time when they are least able to pay and least able to find a new job to try to begin to catch up.
Although many Americans were able to get on unemployment, at $600 a week, the amount was less than many people made at their jobs leaving a financial gap in their budgets. The $1,200 stimulus was only issued once and often wasn’t enough to cover rent or a mortgage (depending on where people lived and their rental/mortgage amount) and more time has passed with only unemployment as an income. The rent piled up higher and soon the 2-3 months of missed rent will come due. The rent is still piling up.
Unlike our European partners who have helped their citizens out with the financial cost of this pandemic and have ensured that people can stay in their homes through the crisis and into the recovery, no such help is coming for Americans. The federal government is not instituting any rules to stop evictions and foreclosures and they aren’t ensuring Americans can either pay back rent or not have to pay back rent at all. The Federal government is still talking about additional stimulus for regular people but with Congress gone for the summer on the campaign trail, the earliest time another round of stimulus could happen is the fall. It has also recently been reported by the IRS, 35 million Americans have yet to receive their first stimulus for a variety of individual reasons.
Unemployment was raised from state levels to more than $600 a week for most Americans. This provided a helpful stopgap for many, at least once they were able to apply and be approved, and has certainly muted the economic storm. If tenants have been able to pay they will be fine but for those that were unable to pay the full amount, late fees can pile up and for those that weren’t able to pay at all they can face debt in the thousands of dollars that will render them homeless even if they are able to find work or were able to keep their jobs at reduced hours. That unemployment will not last forever and finding new jobs for 42 million people any time soon may be difficult as companies admit they are scaling back hiring during this time and many businesses will simply not reopen. Even major chains are cutting back. Starbucks announced that it will shut 400 stores and remodel 200 more into pick-up only. The post-COVID economy has arrived.
A Perfect Storm
Right now, the economic situation is difficult for many Americans. There are 42 million people out of work and still rising weekly. 30% of Americans did not pay their June housing bill which means there are millions of people who are out of work, can’t pay their bills, are standing in line for food, and are at the beginning of a difficult struggle. What is even my mystifying is the fact that the stock market seems fairly unaffected by this dire economic mood. In most other circumstances, if these many people were out of work and this many people were weeks away from being homeless, the market would be plummeting on the news. However, the stock market is being held up by cheap money from the Federal Reserve and the inflow of cash into the banks giving them a greater ability to make loans and enlarge their balance sheets.
Back on mainstreet, Americans are facing a financial meltdown. Those in food service, hospitality, and travel faced an early crisis and due to the shut down it has been hard to find new work. The boost to unemployment has helped giving some Americans more per week than they made at their jobs. This has even caused Larry Kudlow and others in the Trump administration to muse if Congress needs to pay people to go back to work and that unemployment (set to end in July) is keeping people home rather than out finding new jobs.
Layoffs are beginning to reach white collar workers too. Companies are seeing major drops in business and cutting back on payroll is a quick way to save money. The covid economy will reach everyone and no one is safe. That would certainly explain those savings rates.
Back to the housing crisis, an important question remains, where are all the newly homeless going to go? Without jobs, finding new places to live will be tough. Some will bunk up with friends and family but still others will end up on the street living in Americas ever-expanding tent cities. This is going to be a massive crisis heading into the fall. Marriages will crumble, families will be torn apart, people will commit suicide, and others will become addicted to drugs and alcohol never to return. The economic fallout from Covid starts with housing and then becomes so much more. Much like the Hooverville’s of the Great Depression, people will be forced to move to new towns and new locations. They will become homeless and dreams will be shattered. Unfortunately, because this will mostly happen to the poorest and most marginalized, many people most likely won’t notice as the country returns to some kind of normal but it is going to happen and it will be painful as it sets in.