The president’s bungled response to the coronavirus pandemic has landed America on the verge of another real estate-driven financial crisis.
Inaction on deploying enough COIVD-19 testing kits to target public health responses left huge swaths of the country with no recourse beyond shutting down much of everyday life. The moves, while necessary to contain the virus in the absence of adequate information, had the terrible side effect of throwing what are likely to be millions of people in the hospitality, retail, construction and manufacturing sectors out of work.
Without jobs, these people can’t buy food or pay their mortgages and rents – pre-coronavirus studies showed a disturbingly large section of this country couldn’t come up with $400 in an emergency.
They also can’t patronize businesses which, in turn, along with these Americans’ now-shuttered employers, can’t pay their mortgages or rents. And just like that, lots of lenders, developers and landlords – and through the latter two, even more lenders – face a crisis in their own balance sheets.
Thankfully, it looks like President Donald Trump’s administration is beginning to come to its senses, giving its backing to a more aggressive COVID-19 testing regime and trying to staunch the economic bleeding.
The Federal Housing Finance Agency and the Department of Housing and Urban Development last week declared a 60-day moratorium on evictions and foreclosures on mortgages backed by the Federal Housing Administration, Fannie Mae and Freddie Mac. And the administration and Congress appear to be nearing a deal to send one or two emergency checks to every American.
Coupled with the Federal Reserve’s eagerness to lend banks extremely cheap money to tide them over, these actions will go some way to buying the economy time while the country fights to get the coronavirus under control.
Locally, steps were taken in the right direction, too. The state Housing Court declared it would not hear any non-emergency eviction petitions until mid-April, hopefully putting off a crisis that would make Massachusetts’ familiar housing problems pale in comparison. And local banks are announcing they will put their Dodd-Frank-mandated cash reserves to work accommodating borrowers suddenly put in jeopardy – an idea corporate apartment landlords should take a cue from.
But what happens when these moratoria run their course? Both unemployment insurance, which pays merely half a recipient’s most recent weekly wages, and Trump’s checks will be laughably insufficient in the face of Greater Boston housing costs.
We can hope the coronavirus will be contained at a manageable level soon. But in the interim, and likely for some time afterwards, the federal and state governments must keep money flowing into workers’ hands to stabilize the situation.
A good start would be launching a federal housing subsidy, paid out through states’ existing unemployment insurance systems and perhaps equivalent to an unemployment recipient’s most recent month’s rent or mortgage payment. Ten years after the Great Recession, home values and apartment rents are largely based on market conditions, so this money would not be spent delaying an inevitable collapse in an asset class’ value. Instead, it would lay the groundwork for a speedy economic recovery by preventing the brutal physical, social and economic destruction a tidal wave of evictions and foreclosures would bring.
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