With one out of five California households struggling to make their next rent or mortgage payment, hundreds of thousands are facing the threat of eviction or foreclosure, according to the latest report by UC Berkeley’s Terner Center for Housing Innovation.
The study found that 48% of California households suffered some form of income loss since March, and 23% have fallen behind on either their rent or mortgage.
We spoke with the study’s lead author, Carolina Reid, Terner’s faculty research adviser, to learn what the consequences of that could be.
Q: Is California facing an eviction and foreclosure crisis in 2021?
A: So much depends on whether the federal government steps in with significant stimulus or some sort of assistance package.
But based on the data and based on our analysis, we know that a broad cross-section of households in California has lost income due to the COVID pandemic. That extends from a complete income loss because they’ve lost their job to having lower wages because their hours have been cut back.
The data show that Californians are struggling to pay their rent and their mortgage. I do think that without significant intervention by the federal government, we will see heightened evictions and foreclosures next year.
I think it will have profound implications not only for the housing market in California but also for the broader economic recovery.
Q: How bad will things get if Congress doesn’t act?
A: About 9% of owners and 14% of renters in California are behind on their payments.
While the eviction moratoria are providing some immediate relief in terms of not seeing a lot of evictions right now, those renter households are still going to owe that back rent.
And given the high cost of housing in California, given that most households that are renters already are cost-burdened, the likelihood that they’re going to be sustaining their rents and also paying that back rent, it’s going to be difficult.
We could see as many as … one in 10 families in California facing eviction.
Q: What are the most striking findings in your latest study?
A: There are three big findings that surprised me.
The first is how many households are saying they’re not current on their rent or their mortgage. It was higher than I had anticipated.
Another was the degree to which households are anxious about foreclosures and evictions, particularly because we do have eviction moratoria right now. But we still found that for those who missed their payments, 42% of renters think they may face eviction in the next two months. That was a pretty striking figure.
The other thing that came out of this survey is the disproportionate impact this crisis has had on Asian households.
There has been a lot of important research pointing out that the Hispanic/Latinx community in California has been hard hit, as well as the African American community. But the data also show that Asian households are more likely to be behind on their rent or their mortgage payment. That was something that was new to me.
Q: Why is that?
A: Asians are disproportionately likely to work in those industries hard hit by the pandemic. The study that I cite in the report said nearly a quarter of the Asian American workforce is employed in industries such as restaurants, retail and personal services such as nail salons.
Q: You found the impacts are worse for minorities and for families with children. What are the implications of that?
A: The pandemic is likely to heighten disparities in access to homeownership, potentially disparities in who is evicted and foreclosed upon, and then the long-term consequences of that for wealth inequality.
We also find that about 10% of households with children in California, which is more than 540,000 households, are behind on their rent or mortgage payments. That’s about double those without children.
That has significant implications because we know that housing stability is critical for kids’ wellbeing. Everything from educational outcomes to health outcomes for kids. The potential for these families with kids to lose their housing or experience housing instability is likely to have larger-scale repercussions.
Q: Your study finds landlords — and in particular smaller landlords with just one to four units — have higher rates of tenants who are behind on their rent. Why is that?
A: There’s two reasons. In California, most of our rental stock is in these smaller buildings. But second, a lot of the higher density or larger buildings tend to be higher-rent buildings. So people who live in those luxury towers are more likely to have higher incomes and be more (insulated) from this crisis.
And these landlords really do rely on the income from rent, both to pay their mortgages and to keep up their properties. For many, it’s a critical source of income as well.
If renters aren’t able to make their rent payments, those landlords are going to struggle with their mortgages and other payment obligations. It really could have a domino or reverberating effect throughout the rest of the housing market.
Q: What can be done to prevent these impacts?
A: This isn’t complicated. This housing crisis or this looming rental eviction crisis is due to the fact that people are losing income because we are undertaking a public health intervention to ensure that more people don’t die because of COVID-19. It seems absolute that the role of the federal government should be to provide that income support in this time of need.
There is some evidence that the earlier CARES Act and the extension of unemployment insurance did really help cushion households from the impacts of COVID-19 income losses. We need to think about how to ensure that the recovery is broadly shared by all households, so we don’t have this K-shaped recovery, where wealthier or higher-income households are doing just fine … and lower-income households continue to struggle with income and job losses.
CAROLINA REID’S PROFILE
Title: Associate professor and faculty research adviser
Organization: UC Berkeley’s Terner Center for Housing Innovation
Residence: Oakland
Education: Bachelor’s degree, Stanford University; master’s and doctorate, University of Washington, Seattle
Previous jobs: Center for Responsible Lending, Federal Reserve Bank of San Francisco
FIVE FACTS ABOUT CAROLINA REID
1. Loves teaching and is constantly inspired by UC Berkeley students and their commitment to advancing social and racial justice.
2. Is a loyal Warriors fan.
3. Plans to vote in the 2020 election (every election, really).
4. Lived in Penang, Malaysia, for three years, and still misses hokkien mee.
5. Favorite activity is a toss-up between going for a walk and getting lost in a good book.
