Renters vs. Homeowners: Income and Liquid Asset Trends during COVID-19

Abstract

The COVID-19 recession hit the lowest-paid sectors of the economy the hardest, resulting in lower-income Americans losing their jobs and income at higher rates. Therefore, renters are more likely to have been impacted negatively by the economic shocks of the pandemic. While the Coronavirus Aid, Relief, and Economic Security (CARES) Act that passed in March 2020 provided one year of easily attainable mortgage forbearance for most homeowners, renters did not receive any form of federally-provided rent relief until the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, which provided $25 billion in rental assistance through the Emergency Rental Assistance Program to cover current or past due balances. We examine income and savings patterns for renters and mortgages holders during the pandemic and ask: is there evidence that renters needed more assistance than they received? We find evidence that renters indeed needed more of a financial safety net than was available during the pandemic. The renters we analyze are much more affluent than typical renters and even among this population, they were more likely than mortgage holders to have lost their job and suffered large swings in their labor income, including large drops. Even with unusually generous UI benefits and stimulus checks, more than one in five renters experienced a greater than 10 percent drop in their total income. These income swings were more negative relative to the pre-COVID period. Finally, renters not only had lower incomes than mortgage holders, they also had much less of a savings buffer entering the pandemic. While more generous UI benefits and stimulus checks dramatically boosted their savings, they had depleted most of the additional savings by the end of the year, their position relative to mortgage holders did not improve significantly, and nearly one in four renters saw their savings decrease in 2020.

Keywords: renters, homeowners, COVID-19, financial health, mortgage holders, savings, CARES Act

JEL Classification: D14, G51, H12, I15, J68, R28