Charles Davidson: Welcome to another Economy Matters podcast. I'm Charles Davidson, a staff writer with Economy Matters, the digital magazine of the Federal Reserve Bank of Atlanta, and I'm here today with Sarah Stein of our Community and Economic Development Department. Sarah is a senior adviser in what we refer to as the CED. Sarah, thank you for your time today.
Sarah Stein: My pleasure, Charles. It's great to be here discussing housing stability with you.
Davidson: Yes. What we're going to talk about today is some research that Sarah and her team conducted examining rent-stabilization programs—I may not term that exactly, precisely the right way, but during COVID...well, just to establish a little background on that, Sarah, what was it that you guys were analyzing? And an even more basic question: why is it that you took on this particular research?
The Atlanta Fed's Sarah Stein. Photo by Stephen Nowland
Stein: In the Community and Economic Development Department, we shape our work around a process of engagement and research. Our research is informed by engagement, and our engagement in communities is research-backed. A lot of times we like to bring what we know into communities and help spread knowledge that they may or may not have had access to. But equally important is understanding how economic conditions are affecting communities. During the onset of the COVID-19 pandemic we were hearing, from contacts across the district, about a lot of concern within low- to moderate-income communities about how renters were going to fare in the pandemic.
The US Congress passed the CARES Act pretty early on after the onset of the pandemic, and there were many provisions in there, on many different areas of financial stabilization. But within housing, there were programs for mortgage products—mortgage forbearance programs—that were rolled out through that act. And then on the renter side, there was an eviction moratorium, but it was unclear who exactly it would apply to, and there was a lack of clarity around it. Looking at that, I think people started to understand that the landscape of stability for renters—that a lot of the information that you might need in order to understand what that looked like—wasn't all tied up in a bow, that a lot of this is based on maybe local area or state laws, different from state to state or place to place. Rental agreements are private contracts, so unlike a mortgage that might have a document that's recorded publicly, very few rental agreements—leases—are recorded anywhere for public view. So really, the understanding of, "Well, where are the renters, and how many units are there?"—it became clear that more understanding might be necessary as the financial fallout of the pandemic rolled out. And so that's where we began, thinking, "How are renters going to fare—and then, in retrospect, how did renters fare—during the pandemic?" So trying to collect that information and learn from it.
Davidson: So you're talking about, say, "mom and pop"-type landlords. And this isn't about me, clearly, but—I do recall years ago once renting an apartment, and the landlord—the owner—owned probably a dozen properties in Atlanta. And he wrote a lease quickly with a pencil on a piece of paper, and I signed it right there. So, just a really tiny example of how informal those kinds of arrangements can be—and that certainly, as far as I know, is entered into no database anywhere, at all.
Stein: Well, it really does run the spectrum. Even in large complexes that are owned by entities that own many of them, the leases aren't recorded anywhere. That's a private document. And yes, a good portion of the rental housing stock is owned by what you might refer to as a "mom and pop" landlord: somebody who owns a handful of units, perhaps. But it really does run the spectrum, and we have to also think about the difference between larger or medium-size multifamily buildings and single family. All of that makes up the housing stock for rental housing, and the knowledge about how much of each type there is, and who owns it, can be kind of piecemeal.
Davidson: Sarah, on a very basic level here—why are issues like this that affect renters, let's say, and I think in particular low- to moderate-income renters, probably—why do those issues matter to the Fed, and to the Atlanta Fed in particular?
Stein: In the Community and Economic Development department, we focus on low- to moderate-income [LMI] communities because they're important parts of our overall community, important contributors and consumers in the economy—and also because they are sometimes not included in some of the economic analysis...or their inclusion is disaggregated from the overall economic analysis, so it's really important to understand how these communities are faring, how they are being affected. And sometimes issues that arise in low- to moderate-income communities, they might be the first place that an issue could arise. An important example of that might be the housing crisis of the 2000s. We had subprime mortgage lending that was occurring in low- to moderate-income communities, and we know now that that accumulated into a much larger problem for the economy as a whole. So from a broader Fed perspective, some information like that could be very vital. But also because—especially here at the Atlanta Fed—we're very concerned about everyone's economy, about the economy being an economy that everyone can participate in, benefit from, and experience economic mobility and resilience. When we say everyone, we mean everyone across the income spectrum, across the housing spectrum, and we want to make sure that those opportunities for economic mobility and resilience are presenting themselves in all of our communities. So for that reason, this kind of research is very important to us.
Davidson: Got it. So now, this piece in particular—looking at the COVID-era rental-stabilization programs—let's set a couple of baselines here. What were the basic objectives of the programs? It was about making sure people didn't get evicted, for one thing, obviously. But I think there was a little more to it than that, right? And in broad strokes, how well did the programs work, did you find?
Stein: When we think about the formation of the programs, we have to remember that all of this was rolling out in the context of an unprecedented crisis, a pandemic of proportions that no one living had experienced. And one of the concerns that arose, in addition to the idea that people were in fact dying from this disease, was that people needed to isolate from one another—this idea of sheltering in place—and that immediately implicates your housing situation. That arose concern around people being able to be in a place, and what about their financial situation if workplaces were shutting down and people were not getting income? How are they going to pay their rent, pay their mortgage, in order to stay in those places—perhaps primarily as a public health matter, but in addition to that, as those sorts of matters roll out into other economic consequences. If people are not able to pay their rent, will landlords be able to pay whatever their mortgage perhaps is, or their taxes? And if those things are not paid, how will that fall out?
So the consequences could waterfall, and I think the idea was, how do we create programs that could stopgap this? No one had any idea how long the pandemic was going to last. We could look, but I recall some people thinking it would be a matter of months—right? And so, as these policies were rolling out, you have to remember that we were in this context where people weren't really sure how long this was going to last. So, I think when you look at, say, the CARES Act—which implemented the first nationwide eviction moratorium—that would have been an effort to stop people from being evicted. And that targeted the filing of evictions by and large, but it only applied to certain buildings that had certain kinds of financing, or that were attached to some kind of federal funding—so it was really a patchwork. I think probably a lot of people, a lot of landlords, didn't even know if their building fell under this provision—much less, say, a tenant, who may not have any insight into the financing of the building itself.
So you have a program like that, very specifically targeted to stop evictions and keep people in place, and then you have emergency rental assistance programming that rolled out much later. That really didn't begin until 2021, as a federal program. I think before that time, localities and philanthropies had tried to pull together rental assistance funds to help folks be able to continue to pay their rent—a lot of worry about the backlog of rent, and how that would roll out when eviction moratoriums were lifted. And then also concern about landlords being able to maintain their buildings, and their costs. So the emergency rental assistance programs that rolled out were maybe more of a short- to medium-term solution of, "Well, let's keep the rent getting paid." But I think the overall picture, it was always the idea that these are programs that will sunset, and at the end of the pandemic people will be able to resume their jobs if they didn't have them or had lost income and continue paying rent like they had before. Just looking at the policies that were in place and the timelines that they rolled out on, I think that was very much the idea. Then, when you think about their implementation, I think one thing that we really learned while researching this paper is that when you make policy at a federal level on a matter such as rental housing, that big federal policy is going to filter through a lot of different legal systems, financial systems, local networks—and the way it will filter through across the country may not be the same.
Davidson: Yes, and the money filters through, too, importantly. So, it comes from the federal government, but then local and maybe state...correct me if I'm wrong, but officials have a lot of discretion in how they—
Stein: Yes. If we're talking, for instance, about the emergency rental assistance programs that were part of the pandemic response at a federal level: those funds were dispersed by the Treasury Department, and the recipients of those funds were the states and then localities above a certain population. So, you had local recipients—such as the city of Atlanta, or Fulton County, or the city of Jacksonville—and then you had more statewide recipients. And so those programs then were set up by each recipient entity. They would choose what the documents you need to apply for the program would be and, to some extent, what the requirements for eligibility would be. Now, some of those requirements were set at the federal level. But there was much discretion that could be in place at the more local levels in implementation.
Davidson: So someone—say, in certain circumstances, with a certain income, a certain rent, a certain employment status in Atlanta, say—may qualify, and then someone in almost the same circumstances in unincorporated Fulton [County] or Miami maybe wouldn't? Not to pick on those places, because that scenario is just a very, very crude example.
Stein: Well, certainly you'd have to look at the rules for each program, and there may be different burdens of documentation for each program. So it may be that that person, maybe the income would be the same, but a question of how they prove their income might be different. If that person is a gig worker, the burden of proving that may be different: "What do I need to bring in order to qualify in one place versus another place?"
Davidson: We're going to pause right now for just a quick minute, for a few words about other material you can find on our website at atlantafed.org.
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Davidson: Welcome back. I'm going to summarize what I'm pretty sure the core findings of this paper were, and that is that the programs in our region, the southeastern US—our six states: Alabama, Florida, Louisiana, Mississippi, Georgia, and Tennessee—in general didn't work quite as well as those in some other parts of the country. Was it these local and statewide idiosyncrasies that mostly explain that, or were there other forces at work too?
Stein: In the paper, we do have some charts that show the difference between the rollout of these funds across the states that you mentioned, versus at a national level. And certainly, in September of 2021—which would have been about nine months into the existence of the funds, and maybe March might be where a lot of programs started to get up off the ground—so, six months, maybe, into the operation of programs across the nation, because there was somewhat of a runway. A lot of these were created out of nothing. So within the states in February of 2021, all of the state-run programs in the six states that you mentioned—Alabama, Florida, Georgia, Louisiana, Mississippi and Tennessee—their expenditure ratios, the money that they had gotten out the door, were far lower than the US state program level. So across the entire United States, 63 percent was the expenditure ratio on average. For the states within our study area, that ranged from 6 percent in Georgia to 24 percent in Florida—so lower at the state level. When we look actually at the local government levels—so, those are the programs that local governments received and implemented—we actually see the local programs in the states across the Southeast that we were looking at were running at par or even in some cases above the national average in September of 2021. I think that that's one thing that was an interesting lesson, was to see how localized programs were somehow able to get those funds out the door at a higher rate, and faster, than the larger statewide programs.
Davidson: So not uniformly bad news then, essentially.
Stein: No, I wouldn't say it was uniformly bad. I think that when you look at that, you have to think about the households that are living in the balances of those states. Those local programs are going to be programs in places that have higher population numbers, more households—whereas in rural areas or small towns or even smaller cities that don't meet that threshold, they would be relying on the state programs and the disbursement that was coming out of that.
Davidson: Sarah, another thing you guys write is that a lot of working renters in our region were hit—and their communities were hit—especially hard by the COVID recession, and that they're at risk of being left behind as the country at large more or less progresses beyond the pandemic-era conditions and the policies like the rental stabilization programs. And that in turn means that future economic stresses could leave some of our communities further behind still. That's not a real cheerful message, necessarily, but it's a very important one that I would think needs to inform policy moving forward. Is that message resonating, you think, with policymakers and others who are in positions to confront some of these issues?
Stein: Well, I certainly hope that it will resonate with people. I think that it's important to note that the majority of renter households at risk of pandemic job loss earned less than $50,000 a year and were cost-burdened heading into the pandemic.
Davidson: What's "cost-burdened?"
Stein: "Cost-burdened" means that you spend more than 30 percent of your income on housing expenses. To think about the situation going into the pandemic, to know that the renter households that analysis has shown—like working renter households that were in industries and jobs that were at risk of being hit by the pandemic: reduced income, reduced hours, or closing altogether—that those folks were actually already experiencing tremendous cost burden beforehand. And so, when we talk about renter stabilization during the pandemic and what things might look like going forward, you can think about that low level of resiliency that might have been in those households going into the pandemic. And then coming out of the pandemic, really trying to think through and understand, "Well, how might we make sure that, should another event like this happen—as ‘recovery' happens—how do we think about that baseline level of resiliency going in?" Because that almost certainly led to a lot of the difficulty that households experienced across the region, in addition to what we talk about in the paper as the difficulty accessing some of the pandemic rental relief opportunities and programs. And then also, the cost of rent that increased significantly in many, many places across the Southeast and across the nation, over the course of the pandemic. That, I think, was something that was truly unforeseen. Certainly, it's not something that the policies contemplated. There's nothing in there that shores folks up against increased rent. For instance, somebody who may receive rental assistance, they're going to receive rental assistance on their existing rent. That may stabilize them through the end of their existing lease, but then if their landlord raises rent by 15 percent, 20 percent, 25 percent—I mean, we saw in some places in our jurisdiction 40 percent rent increases on average across units. So if the landlord then is doing that, that's not contemplated in a policy that would cover rent that is reflected in a lease that's submitted at the beginning of an application period.
Davidson: Right. Not to turn this into too much of an economic discussion about rents, but I think increases in rents have slowed down somewhat more recently. Is that correct?
Stein: Yes, I believe that the rate of increase has tapered.
Davidson: Still increasing—much like overall inflation, where the rate of inflation—of price increases—has slowed, but prices continue to increase, as do rents.
Stein: Yes, I imagine in some markets maybe rents are even going down, but I don't have those data in front of me.
Davidson: Going back to a point you made earlier, Sarah, about the fragmented nature of the rental housing business in general—and I suspect that is one reason why it's so hard to gather good, solid data that can inform policy. So, what can be done about that? And what about crafting better policies that do contemplate these big differences across localities? I'm sure there are no easy answers for those, but what can be done?
Stein: Well, certainly the availability of data to understand the experience, and the depth and breadth of the experience, of rental instability, is a challenge. In the paper we use eviction data—the filing of evictions. Now those data, as an example, are not available everywhere, or even in the same way everywhere that they are available. That really is a county-by-county availability question—unless you're in, say, a state that already collects that information and makes it available. And that's very much a patchwork, so when you read the paper, you'll see that we aren't able to use eviction data from every town, city, and county across our district, or even across the country. We can only use it for those that are able to be collected.
Davidson: Is that some sort of a public filing in some places and not others?
Stein: It's a public filing everywhere, meaning that if a landlord is following a legal eviction process that they would initiate a court case. Where they initiate the case may be a different kind of court. Even within a state, in some areas they may do the cases in one kind of court, maybe in an area that has more population, and a different kind of court in another area. Also, some of those courts are going to have electronic filing, and some of them may not. So that's when you get to the availability of it—and then even in courts with electronic filing, they may not make the case information public for analysis. So an individual who has a case may have a website they could go onto and look up what's going on in their case, or they can go to the courthouse and look it up in the court system computer. For broad analysis of what's going on with evictions in such and such place, it's not necessarily available for that purpose. Some places "yes," and many places "no."
Davidson: That's interesting.
Stein: That's a challenge of data access that you run up against. And then even beyond that, with eviction data, is the question of: what does a filing mean? A filing is really an indicator of instability. It's not an actual measure of it, in the sense that there are many, many displacements of renter households where a court case may never be filed. An eviction might be threatened and they leave on their own accord—they may know they can't afford the rent and just leave. Then in some cases, there may be illegal lockouts where a landlord locks them out of the house. That's not a legal avenue, but there is evidence that that sort of thing does happen. So eviction filings aren't necessarily going to capture every instance, and then not every eviction filing is a displacement. And so, there's the question of, what can you do to analyze eviction filings such that you could understand more? And that is going to be very different from one jurisdiction to another.
Davidson: Sarah, before we wrap up, I wanted to ask you a question that's a little bit sort of under the surface here, but this notion of—which we discussed earlier—that the pipeline for federal funds passing through the local and state channels: unemployment insurance is an ongoing, constant program that works similarly. Did you guys at all look at whether that fundamental structure—can it be tweaked? Are there ways to make it work better, or in most cases, does it work well enough, maybe? That was a lot of questions in there—sorry about that.
Stein: Well, certainly I would say that what you pointed out—this variation across states—that is true, like you said, for unemployment claims, and was very much true for emergency rental assistance funds. I think that the question of whether that's the best way to do it, I think that's an open question. I think we can see that it was not the most equal way of doing it, in outcome—maybe in disbursement. But as our paper shows, the places and households in and across the Southeast were not receiving those funds at the same rate that perhaps other places across the country were. When we see a disparity like that, we really have to start asking: if our intent is to have the same impact everywhere, how is it that we can make that happen? What are the right avenues? Where did things go right? What were the conditions in place where things did go right? And honestly, I think looking at those local entities and seeing their disbursement rates, that might give us some clues. In the Community and Economic Development department, we also did some listening across the district over the course of the pandemic, as ERA programs were being stood up and funds were being dispersed.
Davidson: "ERA"—can you define that?
Stein: "ERA" is the Emergency Rental Assistance. And what we heard was that many places that were able to quickly disburse funds, they had existing networks in place—existing systems where this kind of activity already existed, where somebody in one department or one organization already had existing relationships with necessary individuals in other governments or departments or organizations, such that collaboration was more readily available. I think that that's maybe a takeaway, that that kind of ecosystem and relationship and network infrastructure could be a very important element of the rollout or the contemplation of these kinds of programs, to differentiate with, say, unemployment claims—I'm pretty sure all of those are run just through state entities. And so, the ground game on those kinds of programs, I don't have a basis for comparison on that. But when we think about emergency rental assistance, we do have a little bit more information around what may have gone well and what the conditions for success might be.
Davidson: Sarah, looking ahead at these issues, can you talk a little bit about what research that you guys are working on right now, or you anticipate doing ahead with regard to rental housing, rental stability, and economic mobility and resilience more generally for LMI communities?
Stein: Sure, certainly. One of the data sets that we used in this paper is a data set that collects eviction data for the five-county area, and we are doing more thinking around—
Davidson: Is that the five counties of metro Atlanta?
Stein: Sorry, yes—the inner, core five counties. So that's Fulton, DeKalb, Clayton, Gwinnett, and Cobb—those five. And we worked in partnership with folks at Georgia Tech as well as the Atlanta Regional Commission to stand that up as a tool for people during the pandemic. You know, a small piece of this paper uses those data to understand rental instability, and we're thinking more and more about how data like that could be useful to community organizations and people who are concerned about rental instability, maybe that are housed in government offices. An avenue of work that we are pursuing is thinking about how that dataset in particular, and data like those, could perhaps be more readily available. And then also in other areas, I think right now we're seeing a lot of questions around rental housing stock. In some places in the country, housing stock is quite low. And actually, in the Atlanta metro area the stock that's coming on the market is quite an increase from past years. So, there's a question about will the increases in rental stock perhaps alleviate some of these issues with rising rent? And if so, will that reach the depths of affordability that we need? Because we know, and we have an ongoing tracker—the Southeastern Rental Affordability Tracker—that our communities are still deeply affected by cost burden. Not just regular, old 30 percent cost burden, but 50 percent. So, households paying more than 50 percent of their income toward housing costs, and the increase and spread of that experience over the time of the pandemic, and ongoing. So we will continue to be tracking that and thinking about maybe the expansion of how you could drive housing to areas of need by cost burden status.
Davidson: So more housing—more supply—tends to bring prices down. Basic economics, right? Supply and demand.
Stein: Hopefully so, yes. And I think that there is recent research that indicates that that could be the case. That's certainly what most people would say. "Well, if there's more of it, it will cost less." And there was some skepticism around that, but there's some existing research that does show that in some places where housing stock was able to increase significantly, the benefits of that did reach into affordability across the board. And I think—just like in this paper, we think about, how is that different from place to place? How does that play out from place to place? We'll be watching how that plays out here in our district and understand maybe what the local conditions and local policies and practices play into the effect of what may be an increasing housing stock. But certainly, the availability of land and resources to build housing cannot hurt the overall cost of housing in an area.
Davidson: Well, Sarah—good stuff. Thanks so much for your time today.
Stein: Thank you, Charles.
Davidson: And thanks for listening to this Economy Matters podcast. To read the paper that we've discussed today, and to find more research on rental housing, economic mobility, and a range of other economic topics, please visit our website at atlantafed.org. Thanks very much.