Dave Friedman is Co-Founder and CEO of Knox Financial, the smart and frictionless way to turn a home into an investment property.
During a spring interview on CNBC, Redfin CEO Glenn Kelman said, “Housing has, in some ways, become a luxury good in America.”
Let’s pause and think about that statement for a moment. Kelman has access to more property data and housing market indicators than perhaps any other CEO on the planet. This is the very definition of an informed perspective. If he’s saying that housing is now a luxury, then Covid-19 has effectively crushed the American dream that homeownership is achievable for anyone who works hard.
While Kelman was referring specifically to homeownership, housing stability is in danger of becoming a luxury across the U.S. if we stay on our current course.
You don’t need to have access to as much real estate data as Kelman to see that housing stability in America has taken a turn for the worse during the pandemic. In many areas, housing prices are still increasing, making it even harder for many people to afford to buy a home. At the same time, renters are missing payments at extraordinary levels, and a record 8.5% of mortgages are in forbearance. These factors amount to a perfect storm of housing displacement for low- and middle-income individuals and families in the second half of 2020.
Avoiding widespread housing displacement over the next year will require cooperation, along with a good bit of creativity, from business leaders, policymakers and landlords. In making a plan to ensure housing stability during the Covid-19 era, here are a few areas that we should focus on in the coming months.
First, the federal government should provide additional money directly to the people who need it. Story after story shows people are choosing between paying their rent and shopping for groceries. Giving most people $1,200 and increasing unemployment payments is a good start. However, since it’s now clear that the pandemic will continue to impact the economy through the fall, additional stimulus is needed. Direct stimulus will not only help more people stay in their homes. It will also help landlords make their mortgage payments on time, which in turn helps keep many aspects of our financial system running.
Second, landlords have a role to play in doing their part to work with tenants who are having trouble making rent. I’ve seen some landlords work out creative solutions for giving their tenants more time to pay rent, while also being able to make ends meet themselves. For instance, landlords can offer tenants the option of using their last month’s rent or security deposit to cover all of their rent for a month, or subsidize a fraction of their rent over a number of months. Eviction should always be the last resort, rather than the first threat.
Third, I believe the business community, in cooperation with the state and federal government, should do everything in their power to get people back to work. Over time, policymakers have used a range of tools to support job creation and preservation, from tax credits to, most recently, the PPP. The problem with the PPP for some businesses is that it might keep the paychecks flowing for a couple of months, but if the enterprise isn’t viable at the end of the line, these folks will still end up unemployed. Lots of businesses just aren’t going to be able to succeed over the coming months and years. Instead of looking at the PPP as a silver bullet for keeping people employed, incentivizing companies to create new jobs will put people back to work — and for much longer.
Take the brick-and-mortar retail industry, for example. This year we’ll likely see the shrinking of staff in retail stores across America. Retail employees who excelled in their customer service roles could be great fits for a number of jobs in the digital economy, from training people on how to use business software to doing support for consumer internet products. All they need is training to help them adjust to the new economy. Let’s give a stimulus to companies who will hire them.
Housing stability is an incredibly complex issue, and no one of the suggestions above will offer a complete solution to the problem. Moving forward in a few of these areas will help more people stay in their homes over the next year, which will provide critical stability to our society as we try to get back on our feet.
Forbes Real Estate Council is an invitation-only community for executives in the real estate industry. Do I qualify?