Federal Reserve Releases New Rental Debt Estimates, Bolsters Case for ERA Distribution

The Federal Reserve Bank of Philadelphia released new estimates of rental debt for households that experienced job loss or involuntary part-time work during COVID-19. The report, “Household Rental Debt During COVID-19: Update for August 2021,” finds that without federal interventions, rental debt for households that experienced job loss or a reduction in hours would continue to increase through the end of the year. The analysis estimates that renter households currently have $15.3 billion in debt, a figure that is expected to increase to $18.6 billion by December. The report also contains state-level estimates for the share and number of renter households in debt, amount of debt, and average household debt. These estimates do not take into account recent policies, such as the emergency rental assistance (ERA) program, illustrating the critical need for efficient disbursal of ERA funds to fill these gaps.

This report builds on previous reports from the Federal Reserve, “Household Rental Debt During COVID-19” and “Household Rental Debt During COVID-19: Update for 2020.” The estimates use data from the Current Employment Statistics, Current Population Survey, Census Pulse Survey, IPUMS, and more. The estimates only account for rental debt related to COVID-19 income losses, and do not account for debt from late fees or from increased borrowing to make rental payments. Because these estimates are narrowly focused on rental debt due to job loss and involuntary part-time work related directly to COVID-19, they are on the low end of rental debt estimates.

The most recent report was released in preparation for the CDC eviction moratorium’s expiration. Although a new moratorium has now been issued, the report findings provide critical insights into the continued need for robust policy intervention. The Federal Reserve estimates that households have an estimated average debt of $7,800, which is expected to increase to $9,300 by December 2021 without ERA or other policy interventions. The debt amounts and average debt vary widely by state. The report estimates that Wyoming has the highest share of renter-households in debt at 12.7% followed by Florida at 7.9%. Average debt also varies, with Alaska, Hawaii, California, and Nevada having the highest average debt amounts at $14,100, $13,300, $11,400, and $9,500, respectively.

The Federal Reserve’s conservative estimates of rental debt underline the continued need for efficient disbursal of ERA funds. As of June 30, ERA spending rates remained low, with states spending only 10% of their funds on average (see Memo 7/26).

Access the Federal Reserve Bank rental debt estimates at: https://bit.ly/3ly4jE2