Data from the most recent round of the Census Bureau’s Household Pulse Survey, designed to monitor conditions during the pandemic, suggest that 1 in every 5 renters nationwide is behind on rent. Rental assistance is also critical for landlords, especially smaller landlords, who are struggling to make mortgage payments because of lost income.
The way that funds were allocated to the states, however, will lead to significant inequities. That’s partly the result of a familiar small-state bias, but also because Congress failed to consider that patterns of renting versus homeownership vary by state. As a result, large states with a high proportion of renters, such as New York, may find the federal help to be inadequate, while small states with few renters may end up with more money than they can use.
On its face, the formula that the Treasury Department used to allocate these funds — drawing on language in the legislation — makes sense: It was distributed proportionally, according to population. There is also a “small-state minimum”: No state got less than $200 million. Renters who meet certain criteria involving income and need may apply for these funds through state and local agencies and organizations, a process that will vary considerably across the country. By the end of the year, any unused money is supposed to be returned to Washington.
Under the population-based formula, California got roughly 12 percent of the rental aid, or $2.8 billion. Iowa, with just under 1 percent of the national population, got proportionally less: $210 million. And states with the smallest populations, including Alaska, Vermont and Wyoming (and the District of Columbia), got the $200 million minimum.
That’s the same formula used to distribute money in the Coronavirus Relief Fund established by the Cares Act, passed in March, which was designed to help state and local governments pay for the unanticipated expenditures incurred due to the pandemic. But the formula doesn’t make sense in the context of helping renters.
There are several problems. First, rent relief is obviously meant to support renter households, not everyone in a state. Some states have proportionally more renters than others — and the variations are not small. Across the entire country, just over a third of all households rent. In some states, however, as few as 1 in 4 rent; in others, over half do.
In general, states with larger populations tend to also have proportionally more renters. According to data drawn from the Census Bureau’s American Community Survey for the period 2015 to 2019, 46 percent of households in New York rent, as do 45 percent of households in California. While those states get a relatively large share of the federal rental aid — New York’s population is 19.3 million, California’s 39.4 million — they have to spread it across more renters. If you were to simply divide the rental aid allocated to those states by the number of occupied rental units, each unit in California would get $443 and each unit in New York would get $379.
The proportion of renters, however, varies even among large states. Only about a third of Florida households rent, so, using the same simple arithmetic, each unit in Florida would get $538 — 40 percent more per unit than in New York.
An even more extreme example plays out in the neighboring states of Utah and Nevada, both with populations of roughly 3 million people. Because only 30 percent of households in Utah rent, compared to 44 percent in Nevada, each renter household in Utah would get $739, compared with $434 in Nevada. (In reality, funds won’t be distributed to every single rental household in a state. Those states with more money available on a per-household basis, however, will be much more able to help renters facing shortfalls.)
The small-state minimum compounds the problem of irrational distribution. Seventeen states and the District of Columbia qualify for the $200 million minimum payment. Households in these states absolutely need rental assistance. But the way that we are allocating aid means that they could end up far better protected than their counterparts in larger states. If we evenly split the $200 million that New Hampshire is receiving among the 154,000 renter households in the state, for instance, each could get a check for $1,300. In Wyoming, each renting household could get even more: $2,936. That’s almost eight times the per-rental-unit figure for New York. Since median rent in Wyoming, according to the American Community Survey, is $855 per month, this amounts to paying over three months of rent for every single renter in the state, regardless of need. In New York, by contrast, that $379 per renter would cover only about a week’s worth of rent.
Distributing aid in this manner is a political choice, of course — and it reflects the ingrained small-state favoritism of the U.S. Congress. Unlike the smaller states, states such as California, New York and Texas may be forced to make hard choices about who stays housed and who is forced out.
As Congress hashes out the next stimulus plan — the Biden administration has already called for an additional $25 billion to help renters — lawmakers should rethink how we distribute rental assistance. In addition to allocating aid based on renter population, lawmakers should also take into account variations in rental costs. A renter who is three months behind on rent in California (where the median rent is over $1,500 per month) will owe a lot more than the equivalent renter in Ohio (median rent of just over $800 per month). And there are regional differences, too, in where renters are having trouble keeping up with payments. For instance, we know, based on data from the Household Pulse Survey, that 24 percent of renters in Nevada, with many workers in the hard-hit service sector, are behind on rent, compared to just 10 percent in Utah.
Congress has stepped forward to provide a significant amount of aid to renters who badly need help. But because of how it chose to distribute funds, the money isn’t going to do all the good that it might have. Aid may sit unused in some states as families are evicted in others.
In general, a lack of data about rental housing and eviction hampers policymaking, but we should take advantage of the data that we do have. That will allow us to more equitably and efficiently distribute assistance, keeping as many families as possible safely housed.