For decades, escalating housing costs have outpaced income growth for middle- and lower-income earners. As a result, millions of American households struggle to accumulate a savings buffer with the little income they have leftover after paying rent, and are therefore left vulnerable to evictions or forced moves when unexpected financial shocks occur. In this chapter, authors Ingrid Gould Ellen, Paulette Goddard Professor of Urban Policy and Planning at the NYU Wagner Graduate School of Public Service and Faculty Director of the NYU Furman Center, Amy Ganz, Deputy Director of the Economic Strategy Group, and Katherine O’Regan, Professor of Public Policy and Planning at NYU Wagner and Faculty Director of the NYU Furman Center, document the costly externalities that such housing instability poses and propose the creation of a Federal Emergency Rental Assistance Program to provide one-time, short-term financial help to low-income renters who face unexpected financial shocks.
Although renters across the income spectrum now pay far more in rent than they did in 1970, the rising cost of rent has been particularly challenging for the lowest-income renters, given that the increase compounded pre-existing high levels of rent burden. By 2018, the authors estimate that nearly 82 percent of renters with incomes in the bottom fifth of American households paid more than 30 percent of their income on rent, and 61 percent paid more than half of their income in rent. Shrinking residual incomes mean that many rent-burdened households have a limited ability to accumulate savings and would struggle to absorb unexpected expenses or income losses.
Yet financial shocks occur frequently and may be important drivers of evictions or other forced moves. The authors emphasize that such housing instability is extremely costly, both for households and for society as a whole, and cite studies that show formal evictions elevate the risk of homelessness and long-term residential instability, and also increase the likelihood of emergency room use. However, as costly as they may be, forced moves appear relatively cheap to prevent. Emergency assistance can significantly reduce the likelihood of missed payments or eviction filings. To this point, Ellen, Ganz, and O’Regan note that donor preferences, social and fiscal externalities, and private benefits give political favor to housing assistance programs over simple cash transfers.
The authors propose the development of a short-term rental assistance program to address temporary income and expense volatility that can threaten housing stability. This tool would provide households with one-time emergency federal assistance covering rent, utilities, and other qualifying expenses in order to protect them against forced moves and evictions in the face of unexpected financial shocks. The program would be limited to renters with incomes of 80 percent of AMI or less prior to the income or expense shock, which balances the desire to target the very neediest households with the interest in serving somewhat high-income households, for whom short-term help is more likely to be sufficient to prevent a forced move.
Their federally-funded proposal complements current federal housing programs, many of which are ill-suited for addressing one-time financial shocks. Additionally, while intended to address idiosyncratic events in renters’ lives, the program could be modified and scaled up to mitigate harm during a common shock, such as the COVID-19 pandemic. The authors state that the costs of such a program would be modest relative to the benefits of stabilizing low-income renters and avoiding the cascade of other social problems (and costs) that may follow from forced moves.