As a doomsday clock ticks down for millions of unemployed workers, student debtors, and renters, all eyes are on U.S. lawmakers negotiating a new economic rescue bill that could buy them a few more months to get back on track as COVID-19 vaccines are rolled out.
- Millions of unemployed workers, student debtors, and renters are waiting to see if lawmakers will extend government relief for a few more months.
- Without a legislative reprieve, several measures will run dry right after Christmas, leaving many Americans without income and vulnerable to eviction.
- Some economists say Americans’ financial hardships are likely to have broad economic effects without a rescue package.
A $748 billion legislative proposal unveiled this week would give many who’ve lost their jobs a new 16-week lifeline, extending two federal pandemic unemployment programs that are about to expire and giving recipients of regular state-level unemployment insurance an extra $300 in weekly federal benefits into April.
It would also give people with student loans until April 1 to skip their federal loan payments, extend the nationwide eviction moratorium for another month, and provide $25 billion in rental assistance to state and local governments.
“A deal is very important to the millions of Americans who, through no fault of their own, cannot get jobs in what is still a very tough economy,” Jason Furman, an economics professor at Harvard University who was a top economic advisor to President Barack Obama, said in an email. “It would also provide some overall insurance for the economy as a whole, protecting against larger job losses in the coming months and setting the stage for a stronger rebound as the vaccine gets distributed throughout America.”
After the COVID-19 pandemic brought the U.S. to a near halt in March, the CARES Act and other federal initiatives provided multiple lifelines to help people who had lost their jobs, propping up much of the economy even as the virus continued to spread and alter everyday lives around the country.
But nine months into the pandemic, 9.8 million of the more than 22 million jobs lost in March and April have yet to be recovered, and many of the relief programs are set to end even as the number of daily COVID-19 cases reach new heights. States are once again ordering businesses to close, suggesting even more jobs may be lost before widespread rollouts of vaccines against the virus allow the economy to fully re-open.
As lawmakers attempt to reach a deal, here’s the current status of federal measures:
- On Dec. 31 (technically, Dec. 26 because of the way the week falls on the calendar) everyone on two special pandemic unemployment programs will be cut off from their benefits. More than 14 million people were in these programs as of Nov. 28, the latest data available.
- Workers collecting regular state-administered unemployment insurance were eligible for an extra $600 a week from the federal government, but that benefit expired at the end of July. It was replaced with a separately-authorized $300-per-week supplement, but that’s also run dry.
- On Dec. 31, a Centers for Disease Control and Prevention federal moratorium on physical evictions of renters expires.
- On Jan. 31, student loan forbearance will end, meaning anyone with federal student loans will have to resume payments.
- Beginning in March and April, homeowners behind on their mortgages will begin to feel the pain as forbearance programs that could be extended for up to 360 days start to run out, making borrowers vulnerable to foreclosure.
- On Jan. 31, homeowners with mortgages backed by Fannie Mae and Freddie Mac will no longer be protected by a moratorium on foreclosures, meaning legal proceedings could start against people who have not entered forbearance programs.
Lawmakers lacked foresight when they set winter deadlines for many programs, when COVID-19 caseloads were predicted to rise, said Elise Gould, senior economist at the Economic Policy Institute, a progressive think tank.
“The trigger on and the trigger off should have nothing to do with a particular calendar date, it should have to do with the health and economic conditions of the country,” she said.
Here’s more about what’s at stake if federal protections aren’t resurrected or extended:
The Unemployment Cliff
Regular state-administered unemployment benefits average about $311 per week, so when the CARES Act provided an extra $600 through the end of July, it had a profound impact. One study by researchers at Columbia University estimated the $600 supplements, along with one-time stimulus checks authorized by the CARES Act, lifted more than 18 million people above the poverty line in April. By September, when those $600 payments had expired, the poverty rate was higher than in the early months of the pandemic and before the crisis, the researchers found.
But as much of the public discussion has focused on whether and how much the federal government should reinstate a supplement to regular state-administered benefits, the two special pandemic unemployment programs set to expire at the end of year could leave millions without any payments at all.
The Pandemic Unemployment Assistance (PUA) provides up to 39 weeks of unemployment benefits to the self-employed, gig workers, and contractors who normally aren’t eligible for unemployment benefits. And the Pandemic Emergency Unemployment Compensation (PEUC) program pays 13 extra weeks of unemployment benefits once regular state benefits expire (usually after 26 weeks).
Without them, an estimated 12 million people—7.3 million who will still be on PUA and 4.65 million who will still be on PEUC—will lose their benefits at the end of the year, estimates Andrew Stettner, a senior fellow at the Century Foundation think tank. And that’s to say nothing of the people who already exhausted their unemployment benefits, he said.
“People are going to be left with no lifeline at what will still be a difficult time in terms of the impact of the pandemic on the economy,” Stettner said. “It will be a pretty terrible end of the year for people who have been holding out hope for a long time.”
There is one other safety net for workers whose benefits expire—the Extended Benefits (EB) program—but Stettner estimates only 2.9 million of the 4.65 million on the PEUC will be able to collect under that program.
EB, which is not tied to the pandemic, allows workers to extend their unemployment insurance during periods of high unemployment for their state, but ironically, too many workers exhausting their benefits can cause states to lose access to the program, said Stettner. The program supported about 694,000 people and was only active in 24 states as of Nov. 28, the latest available data. By the end of the year, it may only cover 18 states, Stettner estimates.
“It’s a structurally flawed program, which makes it ineffective,” he said.
Renters’ Dark Winter
Right now renters who reach the end of their financial ropes are protected by the CDC’s eviction moratorium, which forbids landlords from physically evicting people for not paying their rent if their incomes have been affected by the pandemic. But this final bulwark is set to expire on Dec. 31, and in fact, the order doesn’t prohibit a landlord from filing eviction proceedings.
Unlike unemployment, the federal government doesn’t track evictions, so it’s harder to predict how this expiration may affect the country. But consulting firm Stout, which tracks data gathered regularly by Census surveys, estimated that as of mid-November, 2.4 million to 5 million households would face eviction or a housing disruption come Jan. 1, and millions more were at risk.
The moratorium, along with financial relief, appears to have kept many families housed, according to Princeton University’s Eviction Lab, an independent research group that tracks eviction filings in 27 cities that have easily retrievable weekly data. But the lab estimates that at least 1.6 million eviction filings prevented in 2020 could be pushed to 2021.
Not only is the CDC order about to expire, but struggling renters are still required to pay the rent they owe once the moratorium is over. Stopgap rental aid programs run by state and local governments have provided renters with emergency, short-term assistance, but many have run out of money as the pandemic has worn on. Twelve of the 25 largest metro areas have already exhausted their funds, according to a recent study from the Brookings Institution.
“If the federal government doesn’t intervene, tens of millions of people will lose their homes this winter, during the height of COVID-19,” the National Low Income Housing Coalition (NLIHC) said in a statement this week.
A flood of evictions would not only be devastating to individuals but could hurt the recovering economy, according to the NLIHC. If there were 6.6 million to 13.9 million evictions, the cost of providing shelter and other social services could run anywhere between $61.6 billion to $129 billion, the advocacy group said.
The Looming Foreclosure Wave
For homeowners facing financial hardships, one of the two provisions that have protected many of them from losing their homes was recently extended beyond the end of the year, but only by one month. The moratorium on foreclosures of Fannie Mae- and Freddie Mac-backed loans was extended until “at least” Jan. 31, the Federal Housing Finance Agency said earlier this month.
Then there’s a provision of the CARES Act that allows borrowers the option of forbearance on federally-backed mortgages for up to 360 days. This reprieve from payments has kept a lid on foreclosures, but economists expect a surge in defaults once people have run out the clock.
Indeed, mortgage delinquencies—which include borrowers in forbearance programs—are significantly higher than their pre-pandemic levels: In September, 6.3% of mortgages were behind on their payments, up from 3.8% a year earlier, according to housing data company CoreLogic.
What’s more, in a week in early December, more than 40,000 homeowners started forbearance plans for the first time—the most for any week since the beginning of September, according to analytics firm Black Knight. This increase suggests rising COVID-19 case rates are compounding the financial distress, Black Knight said. As of Dec. 8, 2.75 million, or 5.2% of all mortgages in the U.S., were in forbearance, the company’s data shows.
An increase in foreclosures and distressed sales is likely to start in April, when forbearance runs out for the large number of homeowners who entered into a program early in the pandemic, according to CoreLogic Chief Economist Frank Nothaft. If unemployment continues to stay high, and there are no further government relief measures, there could be more than 2 million homeowners over 90 days behind on their payments by the end of 2021, Nothaft said.