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Eighth District Housing Distress: Challenges, Demographics and Resources

By

Lowell R. Ricketts
Monday, November 16, 2020
African woman sitting on stairs at home, holding a sign for sale

As families continue to endure a loss of employment income due to the pandemic, financial hardship is rising across communities in the United States.

Housing distress—falling behind on rent or mortgage payments—is one particularly disruptive form of hardship. Housing loss is similarly disruptive to both renters and owners on varying dimensions. For homeowners, however, a foreclosure can destroy the accumulated equity on a home, which is often the largest asset a family owns. According to the U.S. Census Bureau’s Household Pulse Survey results from Aug. 19-31, 14.4% of renters and 6.3% of homeowners experienced housing distress.

A Common Challenge across Communities

Within each Eighth DistrictThe Eighth Federal Reserve District covers all of Arkansas and parts of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee. state (see the figure below), a greater share of renters have fallen behind relative to homeowners. Additionally, with a low of 11.4% in Tennessee and almost double the rate in Indiana (22.2%), distress rates varied more among renters. Given the uncertainty around the estimate for each individual state, it’s difficult to say for certain that rates meaningfully differed across states.If we were to hypothetically survey residents in these states repeatedly, 90% of the time the rate of distress would fall somewhere along the respective bands.

Unlike the effects of the Great Recession, which varied by region, the effects of the COVID-19 recession on housing distress appear to be a common challenge for communities across the District. The relatively high rates of renter distress across all states is particularly concerning and raises the specter of evictions.

Share Not Current on Mortgage or Rent, August 19-31

bar charts showing eighth district housing distress

NOTE: Bands indicate 90% confidence intervals.
SOURCE: Census Bureau’s Household Pulse Survey and calculations by the author.

While the overall distress rates are insightful, demographic factors like race and ethnicity, education and generation are more revealing when noting which groups of families are struggling with their housing payments. Nationwide findings (see below) show renters who were Black, Hispanic or Asian, without a bachelor’s degree, Generation X, millennials and Generation Z were more likely to experience housing distress than their peers. Reviewing the distress rate by demographic factors for Eighth District states reveals similar associations, but few comparisons have enough statistical power for firm conclusions.

Share of Renters Not Current on Rent, August 19-31

bar charts showing renter housing distress

NOTE: Bands indicate 90% confidence intervals.
SOURCE: Census Bureau’s Household Pulse Survey and calculations by the author.

Race and Ethnicity

In Illinois, roughly 33% and 40% of Black and Hispanic renters, respectively, have fallen behind on their payments. The data are in sharp contrast to the 5.4% of non-Hispanic, white families that are experiencing similar distress. This echoes inequities in housing distress by race and ethnicity observed during the Great Recession. Our Center for Household Financial Stability found that Black and Hispanic families typically have less accumulated wealth to draw on—leaving their families with less recourse in times of economic disruption such as these.

Education

Families with at least a bachelor’s degree are less likely to struggle with paying their rent than those without one. In Missouri, 6% and 2% of renters with at most a bachelor’s or graduate degree, respectively, were in distress. In general, the better outcomes likely reflect the findings in the most recent Survey of Household Economics and Decisionmaking—these families are working from home at almost twice the rate, avoiding the employment disruption seen in some industries.

Generation

Lastly, there are significant generational differences among renters. Gen X is experiencing the highest rate of renter distress among the five generations considered here, which is surprising given that we have found financial outcomes (e.g., missing a rent payment) typically improve with age.

The notable renter distress for Gen X is also reflected in some of the Eighth District states. In Illinois, around 34% of Gen X renters have fallen behind, which is roughly double the rate for millennials. Research also suggests Gen X has greater debt despite deleveraging and lower wealth accumulation than we would expect well into the recovery. This evidence suggests Gen X bears financial scarring from the Great Recession and entered into the current crisis with fewer financial resources to draw upon.

Housing Support Is Critical to Avoiding Foreclosures and Evictions

Shortly after the pandemic began, Congress passed the CARES Act, which sought to stem housing distress. For homeowners, the CARES Act offers mortgage forbearance; it also established a moratorium to suspend and stop foreclosures. These protections apply to homeowners with federal/government-sponsored enterprises (e.g., Fannie Mae or Freddie Mac) or funded mortgages. Renters living in federally subsidized housing or renting from an owner who has a mortgage that meets the above criteria may also seek relief through the CARES Act. For more information on this and other support options, the Consumer Financial Protection Bureau established a support page in collaboration with other federal agencies.

Recently, the Centers for Disease Control and Prevention issued a temporary national moratorium on most evictions for nonpayment of rent to help prevent the spread of coronavirus. The National Low Income Housing Coalition has also developed a guide to help renters seek assistance.

There is much economic uncertainty surrounding when the virus will be brought under control. In the long term, it will be imperative that a pathway to current payment status is devised for homeowners and renters who have fallen behind on their housing payments.

For now, it’s critical to build greater awareness of the available assistance for families and individuals struggling to make their housing payments.

Endnotes

  1. The Eighth Federal Reserve District covers all of Arkansas and parts of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.
  2. If we were to hypothetically survey residents in these states repeatedly, 90% of the time the rate of distress would fall somewhere along the respective bands.

ABOUT THE AUTHOR
Lowell R. Ricketts 

Lowell R. Ricketts is the lead analyst for the St. Louis Fed's Center for Household Financial Stability. His research has covered topics including the racial wealth divide, growth in consumer debt, and the uneven financial returns on college educations. Read more about Lowell’s research.