The Case for Canceling Rent
By Lyric Kelkar and Marco Covarrubias
We have only begun to scratch the surface on what the economic impact of the COVID-19 Crisis will be. An unemployment risk report released in early April by the Economic Roundtable warned that workers in Los Angeles County faced some of the highest risk in the state of becoming unemployed during this crisis. So far, they’ve been right. Since March, 1.3 million people in Los Angeles County have lost their jobs, and there are no laws ensuring that they will get those jobs back should the positions become available again (though the Los Angeles City Council is reviewing a “right to recall” policy today). Meanwhile, rent is still due for 64% of the LA population, and mortgages are due for the remaining 36%.
Exacerbating an already dire situation for LA County renters, the COVID-19 crisis is leaving millions wondering whether or not they will receive any relief before May’s rent becomes due. Prior to the crisis, the median household income for renters in the City of LA was $48,253 (2018 ACS) - hardly enough to afford rent in one of America’s most expensive housing markets. Also prior to this crisis, many households in this country were unable to withstand a $400 emergency. So with no guarantee that the 1.3 million newly unemployed Angelenos will get their jobs back anytime soon, that May 1st rent payment is looking more and more like a $2000+ emergency that will multiply every 30 days.
Most of the rent relief efforts we’ve seen amounts to a rent deferral and an agreed upon “repayment period” for rent that has been deferred. Once the crisis is over, renters will owe “back rent” and can repay this amount over the course of a set amount of time - in both the City and County of LA, they have 12 months to pay that “back rent”. But one of the major issues with this approach to providing renter’s relief is that they will be saddled with debt for reasons they had no control over.
This is why governments at all levels should support and pass legislation that cancels rent and mortgage payments. Here are two reasons why we should work towards this:
First, there is too much uncertainty about when the COVID-19 Crisis will end and when, or if, renters will be able to earn an income again. Some experts estimate that it’s going to be a long time before COVID-19 is defeated. There is even more uncertainty about how long economies will take to recover once people can safely leave home. The recovery from the 2008 economic crash took many years and we know that people of color and low income communities had the most difficult time bouncing back. Mayor Garcetti has stated that he believes this pandemic is much worse than the Great Recession.There is no guarantee that workers will be able to immediately return to their workplaces and start generating income again.
Second, deferring rents during the crisis and expecting timely repayment on debts incurred places an undue burden on renters, 58% of whom were already rent-burdened prior to the pandemic. Let’s consider the real effect of forcing renters to accumulate and repay back rent. If a renter defers two months worth of rent during the crisis and then immediately begins paying their regular rent plus back rent owed, they will effectively face a 16.7% rent increase over the course of the 12 month repayment period. If they defer three months worth of rent, they face a 25% effective rent increase. For context, a 5% rent increase would push 2,000 Angelenos into homelessness. The longer the crisis goes on, the more unemployment will rise and the more “back rent debt” will accumulate for Angelenos and renters everywhere.
We are already seeing the mounting pressure that renters are facing during the COVID-19 Crisis. Stress from skyrocketing unemployment rates and the need to pay for basic necessities are compounded by harassment and devious tactics from landlords seeking to squeeze rent payments out of their tenants - such as demanding that their stimulus checks go entirely to rent. Demanding rent payments, either now or later, will ensure that millions of renters in LA County, and across the country, become further indebted. In low-income neighborhoods we know this correlates to a higher presence of predatory lenders seeking to profit from the debt and desperation of working class people. We cannot allow for renters to become further subjected to predatory cycles.
The movement to #cancelrent is growing in Los Angeles and throughout the country. Over 300 organizations in Los Angeles are calling for rent relief as part of the Healthy LA platform; protesters are taking to the streets to make their demands; and lawmakers locally and nationally are introducing proposals to deal with the looming rent crisis. We must do what is right to protect renters.
We are already seeing glimmers of hope. Lawmakers at various levels of government will provide rent relief in some form. At the Federal level, there is a call to canceling rent and mortgages by Congresswoman Ilhan Omar. The State of California negotiated with some banks to provide relief to mortgage holders. And even the City of Los Angeles has a role to play in this. Today, the City of LA is making amendments to their Responsible Banking Ordinance to hold banks accountable for providing mortgage holders relief tied to relief to renters (item 28 on today’s Council Agenda). All levels of government have a role to play in providing relief to those most in need.
An unprecedented time calls for unprecedented measures.