Stop Gap Measures
Enough has been written about the toll that COVID-19 has taken on the nation and the world. According to the CDC, the virus has resulted in 6.3 million cases and 191,000 deaths in the US alone. The World Bank estimates that the pandemic will result in a 5.3% decline in global GDP resulting in recessions in nearly every country in the world. New unemployment claims are trending up with an additional 857,000 new claims last week. The economic pain is widespread, but the scary part is that the worst may be yet to come for our most vulnerable citizens. Temporary measures in the CARES Act and other relief programs that have helped stem waves of evictions, foreclosures, layoffs, and business closures are sunsetting.
The CARES Act eviction moratorium ended on July 24th requiring the CDC to step in and declare their own moratorium on evictions through the end of the year. That moratorium is predicated on slowing the spread of the virus. There is no guarantee that when the population’s physical health returns that they will be financially healthy enough to pay the past due rent this winter. Expert opinions have placed eviction forecasts as high as 43% of rental households across the country. (Source) Those numbers begin to come into focus in a July survey with 20% of renters saying they were late on July’s rent and one in three that saying they were unsure if they could pay rent in August. It is important to remember that in July, those on unemployment were still receiving enhanced benefits. (Source)
The foreclosure moratorium has also been extended through the end of the year (Source), but millions of homeowners were forced into forbearance, and it is unknown how many won’t be able to pay their mortgage in 2021. Back rent will continue to accrue, and small-scale landlords are likely to bear the brunt of these policies. Congress has yet to extend enhanced unemployment coverage, and hopes of a V-shaped recovery have been dashed as millions of people still filing initial unemployment claims every week. (Source)
From a small business perspective, Payroll Protection Program funds helped keep employees on payroll for a few month, but it was designed with the idea that business activity would resume in a few months. The “Main Street” lending program for medium sized businesses has failed to take off because terms are too onerous for borrowers and lenders. (Source) American Airlines, MGM Resorts, and Coca-Cola all announced major layoffs last week as travel and spending have remained weak.
The bad news is that millions of renters, homeowners, and business owners are all in a financially precarious situation. The good news is that we have so far been able to fend off disaster.