COVID-19 and Renter Distress

- Well, good afternoon, everyone, welcome to "Lusk Perspectives." My name is Richard Green. I'm director of the USC Lusk Center for Real Estate, and I am very happy today to bring you a collaborative "Lusk Perspectives." As I think most of you know, I am very much into collaborating with UCLA, as I am married to a UCLA physician with whom I published a paper earlier this year, so I'm really proud of that. It's the first time we published a paper together, and-

- But I thought economists weren't supposed to try to be epidemiologists.

- It's not on epidemiology, my wife is an expert of falls, and the paper was on how Medicare should cover falls because the savings from falls prevention, not fall, well they should cover falls, too, but putting grab bars in people's homes, which is a real estate thing, because the incidents of falling drops dramatically when people install grab bars. And the reason we know this is if you look at someone who is prescribed grab bars because they have a fall, so you can get them as an after-the-fact measure, and you look at the spouse, the spouse's propensity to fall drops dramatically, and so you pay back the cost of false within a year, and at the same time improve quality of life. So that was what the paper was about. It was falls and real estate.

- Very interesting. She's doctor Falls, I'm dr. Real Estate, so it worked, so "Ageing Research Reviews," if you're interested. But anyway, the three gentlemen we have here from UCLA today are Michael Manville, Michael Lens, and Paavo Monkkonen reached out to me last spring and asked whether we would be interested in participating in a study on how people are paying their rent in COVID times in Los Angeles County, and so that's what the subject matter of this webinar is today. And so to kick it off, just to summarize what we did, I'm gonna turn it over to Mike Manville, Mike.

- Oh, thanks Richard. So, yeah, as Richard mentioned, the three of us over at UCLA, like many people, and as the COVID pandemic started, and as the stay-at-home orders in particular started, got very concerned about the situation of renters in general, and of course in Los Angeles County in particular 'cause that's where we are. And our main concern was twofold, which was that there are attributes of renters themselves and attributes of renting that would make people who rent their property particularly vulnerable to this pandemic. And so with the attributes of renters, it's just the fact that renters tend to be very low income, renters tend to be low income and to have very low savings. And they also, because of their low income and lower socioeconomic status, tend to be the people who are first to lose their jobs in recessions, right? And this is not because there's no affluent renters, right? It's just because most people who are low income rent. So if you look at the bottom quintile of our income distribution, it's almost all tenants. So you had a kind of a vulnerable group who might be particularly vulnerable to the economic downturn. And then compounding that is just the fact that when you rent, you don't have some of the built-in protections that come from when you own a home. So if you own your home free and clear, you're protected a little bit from a lost job or something 'cause you don't have housing costs or they're very low. And even if you don't, if you own your home, you might be able to convert the house into cash by renting out a room, or worst comes to worst, you can sell it and you have a little bit more legal protection because it's a little harder to be foreclosed upon than it is to be evicted and all that. And so we had this concern that our renters would be struggling, that that struggle would manifest most obviously and sort of most consequentially as eviction, but then, of course, that eviction wasn't the only thing. It was probably the worst thing for someone who was a renter, but that we could have tenants out there really struggling to make their rent and managing to do it, but doing it in ways that we're gonna come back and burden them later, like putting rent on a credit card, taking out an emergency loan and things like that. And so we sort of joined up with Richard and thought about ways to try and get at this question. And we were able to get a little bit of data, or get a lot of data, but that answered part of the question because the Census Bureau, to its great credit, in April began doing something it's almost never done, which is running a very fast turnaround weekly survey called the Pulse. The hallmark of the Census Bureau has been very careful, long, long turnaround. The surveys in the Pulse, they would ask people and get data back very fast, and some of the questions they asked, dealt with, "Is your rent late? Do you think you'd be able to pay your next month's rent? Have you lost a job? Have you lost income?" And things like that. And so we did analyze the Pulse. What the Pulse wasn't able to tell us that was in many ways most important to us, was we wanted to be able to follow individual renters over multiple months, right? To say like, "At the end of last month, did you pay your rent? At the end of the month before, had you paid your rent?" Because the real concern is that this subset of renters could actually fall multiple months behind. And in addition, the Pulse also didn't get at some questions that we had about was this more likely to happen if you lived in a particular type of rental unit, right? Were you less likely to be able to pay your rent if you were in a bigger, 50, 60 unit building, or is it more likely to happen if you rent from family and friends or from a mom and pop landlord, did the level of your rent matter? And then going back to what I had said earlier, this question of, let's say you are making your rent, how are you doing it, right? Is it just that you've kept your job and so you can keep paying or is it that you're leaning on your family and things like that? So to get at those questions, we actually designed a survey and then commissioned a firm that does a lot of these surveys in the LA area to sample tenants in LA County. And I'm happy, all of us are happy in the Q and A, or the discussion to try and get at how representative that ended up being, to try and find out how these these tenants were doing. And one of the really big questions we asked in addition to everything I mentioned was, "Are you getting some assistance from the government, right? If you lost your job or lost your income, and if you are, how are you fairing under that?" Because I think at the end of this project, we wanted to see how people were doing, but we also wanted to get a sense of the best way to help people who are struggling. And so I think our real interest going in was if we can say something useful about how to help tenants who are having a hard time, and we wanna be able to do that. So, yeah, I mean, that's kind of the background. I'll stop short of jumping into all the results and things like that, but that's sort of what the motivation was and what we did. We combined the census data with this original survey that we designed and tried to get a picture that had been lacking before of how tenants were fairing in these shelter-in-place orders.

- So, thanks, Mike. So let's start getting into the weeds of what the survey found, and let's start by noting that this asked people about their rent status in May, June and July, a lot of demographic questions were asked of people. Unfortunately, so a thousand people were surveyed for Los Angeles County, which gets you on a yes/no question as what we call a confidence interval, sometimes known as the margin of error. We hope our margin of error was a real margin of error, as opposed to what we've seen the last week or so. It would be about 3%, one way or the other. And so we really can't say a lot about specific locations because of thousand people spread across Los Angeles County means that like in Santa Monica you have one person on average, in Pasadena you have maybe two. 'Cause people have asked me, "Well, can you say something about particular locations?" And the answer's, "Not really," but we can say a lot about a number of other things. So let's start by, just generally, any one of the three of you, how did rent collections look in our survey results and how did that sort of match up with external data on how rent collections looked? And I'll ask any one of the three of you to weigh in on that.

- Yeah, I can dive into some of that, and Mike and Paavo can clean up what I miss. So I think one highlight here is that nearly two thirds of our sample had income losses. We knew that people's earned incomes took a huge hit across the country and certainly in LA County. And we'll talk a little bit more about how people kind of made do with that in rent, but we also know that income supports were pretty high during May, June and July in particular, due to the federal stimulus programs, so in a lot of cases, people were able to stay apace with their household income, when you account for those additional supports from the government. But during this time, we definitely found that the vast majority of people were able to pay their rent on time and in full each month, though, about 22% paid late in at least one month from May to July, and about, there were definitely about 2% of our sample that had really acute rent non-payment problems, right? People that represent potential 40,000 households in LA County were three full months behind on rent when we talked to them in July. Well, talked to a few people in August as well, but over that time period, there is this sliver that represents a pretty large number of people who were way behind on rent. And if they had more permanent job losses, you can only kind of assume that things weren't necessarily gonna get much better all that soon. As you pointed out, Richard, with geographic, with some of the limitations in terms of pinpointing geographic differences or specifications there, some of the demographic strata fall victim to that somewhat as well, but we were able to conclude that late payment and non-payment was more common among low-income households, not surprisingly, but also Black and Hispanic households. So I think that's what I gather from the non-payment questions. Is there something I'm missing there, Paavo or Mike?

- Well, I would just jump in to comment that I think it was striking that May and June, people were still really paying rent. I mean, 90% of the respondents were paying rent in full, May and June, it wasn't until July and August that that started falling to kind of 83%. And so this resilience in the face of job and income loss, I think is something that was surprising to me at least, I don't know about you guys.

- [Michael] Absolutely.

- I think, the only thing I'd add, I think that was a great summary, but then like in Paavo is that, you asked about external data, our results do roughly line up with what the Pulse shows, right? That the Pulse only asked about late payment, but that the rough average the Pulse reported for the combination of LA and Orange County is about 16% of tenants were paying late, and that's, in any given month, that's sort of what we found as well. I think that prior to these surveys being available, the main source people were looking at to check rate payment was, one of the national associations of apartment trade groups has a rent payment index that showed substantially higher compliance with rent. And I think the reason for that is just that this is a group that represents sort of big, kind of more corporate landlords. Those places tend to have higher rents and that the folks who live in those units have higher income and are less likely to sort of be taking a hit as a result of the recession. I mean, for instance, I live in a building that probably reports to that group.

- That's the Multi Housing Council.

- Yes, thank you. As it was not gonna come to my head, I appreciate that.

- I was waiting, but yeah.

- Wasn't gonna come out, yeah. And so I do think that one reason that it's important to do a kind of deeper dive survey like we did is the fact that the tenants who are most vulnerable, they're gonna be more likely to be living in smaller rental arrangements, and so they can be missed if you just look at the NMHC sort of rent tracker.

- Yeah, and, first of all, before I ask my next question, to the audience, you're welcome to ask questions in the Q and A box, as always, and I will forward those questions on to our panel today.

- And just a quick teaser, and we'll probably get to it later, but this renting from friends and family, it turns out to be not the best.

- Paavo, that was going to be, so Paavo, you stepped on my segue question. I was gonna ask about that. So what did we learn about these types of landlords, sort of the mom and pops, friend- Well I'll say friends and family, to mom and pop, to professionally managed. Did we find any surprises in what we found there?

- Paavo?

- I'm trying to find the percents on the later. I mean, it was a surprise to us that it was kind of higher rates of partial and non-payment to friends and family. Although, then we started thinking that, well, probably it's easier to not pay your friends and family, right, rather than a company, but then when you look at the being threatened with eviction and evictions initiated, it's about the same share of people that are having trouble paying are threatened with an eviction or actually have an eviction initiated against them if their landlord is a family member or friend compared to individuals or management companies, so that was surprising to me.

- My recollection is, and you guys can correct me 'cause I don't have the paper in front of me right now, so shame on me, but that there were zero attempted evictions by the professional management companies. Is that correct? That is correct, yeah.

- Yeah, yeah, so that was a little bit of a surprise to me. I don't know if we could say anything statistically about it 'cause they were small numbers anyway, but nevertheless it was a very interesting one.

- I mean, and it was an interesting area to even study because we had conversations amongst ourselves about do people, how well is someone able to say what their landlord is, really? And then there is this question about kind of self-selection into not paying, and if your landlord is a management company, then maybe you're more likely to keep up on payments.

- Yeah, I think that's exactly right, and to Richard's point, fortunately, I guess, the number of evictions in our surveys is sufficiently, or a threatened evictions is sufficiently small that we can't say much about it, but I think what we saw going on is that the large landlords were just in general less likely to have non-payment. And I think that a lot of that might have to do with what Paavo mentioned, which is just like, if it's coming to the end of the month and you realize you're not gonna be able to make your rent, you might just reasonably expect more forbearance if you rent from your uncle or your brother, or even from just like somebody who runs a fourplex who you see every day than if you rent from like faceless LLC Incorporated. And I think we can talk about this later. You wouldn't want to jump to the conclusion that the person renting from faceless LLC Incorporated is doing fine, right? They felt like not paying their rent was a bigger risk than the other tenant. But I do wanna emphasize, as Paavo said, that even conditional on non-payment, those big companies were not evicting people. And we could speculate as to why that is. It might just be, they might just have an easier time carrying a unit for a few months. If you rent a duplex to somebody and they're not paying it, you could just worry about your own income much more than perhaps if you have a portfolio of properties and they each have 50 units, but yeah, we just did not see those big companies threatening or initiating evictions.

- Well, there can be... So Dan Epstein, from the audience, makes a very good point, which is, of course, you were forbidden from evicting anyone. There was an eviction moratorium at the time. And perhaps what's going on is the professionally managed companies knew that this was true. And, by the way, Dan, there were two questions. One is, "Have you been threatened with eviction?" You can threaten all you want. And the other is, I mean, you shouldn't, but in principle, whatever the law says, you can threaten whatever you want. But there was also a question about whether your landlord had instituted proceedings against you to evict you, and that was the one that it surprised me that there were any because I didn't think it was allowable to do it over that period of time, and it may just have something to do with how well-informed certain sets of landlords or tenants are with respect to what policy is it.

- You were able to get that on the books, right? Depending on where you were, right? The court wasn't gonna act on it.

- That's right.

- So what we had asked was basically, did the landlord show up with these papers and say, "I'm gonna file these?" And it's true that in LA County that that threat was greatly deferred because of the moratorium. It was just gonna go, at worst, sit in a courtroom for a while and no one's gonna look at it, but technically speaking, you could start that proceeding.

- So- I'm sorry, go ahead, Mike.

- Well, yeah, I mean, I think that a couple of things come to mind in this specific discussion for me. One is, I think it does lend some credibility, certainly to a lot of the anecdotes that you hear over the years from advocates and tenants rights groups that landlords use a lot of strategies that are above and below, against what the official law or whatnot says, right? Like that there are strategies that people use to try to get you out of a unit or react to non-payment in ways that are not exactly through the letter of the law. But one thing that I knew, when I look at the extent to which individual landlords, roughly 15, 20%, were threatened with eviction, conditional on non-payment or late payment, it's like just a really interesting finding about that I think you could go in a couple of different ways about this archetypical mom and pop landlord, right? Where like the mom and pop landlord is held up as somebody that we need to protect because if they don't get their rent every month, they're going to go under or they have a lot invested in this relationship, right? And so you could say, "Well, they're acting to protect themselves as best they can." On the other hand, if you already are really suspicious of landlords and you put mom and pop landlords in that suspicion, like you see mom and pop landlords threatening people with eviction when they're maybe not supposed to, and you think, "Well, they're just as bad as everybody else." And so I think there's almost a Rorschach test about how you perceive mom and pop landlords or how you would view like some of our charts on what landlords did to react to nonpayment.

- Well, one of the things that was, we also asked a question about how much you like your landlord.

- [Michael] Yeah.

- And so one of the things, this won't surprise you, is if you were late on your payment, you liked your landlord less than if you were not late on your payment. But it was sort of interesting, the rank order of how people liked their landlord did not necessarily line up with priors, so one of you guys wanna comment on that? So with respect to, my recollection is people disliked their mom and pop landlord more than they dislike their professional management landlord, and it wasn't by a big margin or anything like that, but there was a difference.

- Yeah, I don't remember the specific numbers, but I think because it was so connected to people's renting situation, if there's more threats of eviction among the mom and pop landlords, it's no wonder that the average level of feelings is worse.

- Well I can't help but think about, on this issue of landlord type, is I served on the Los Angeles County study group on rent stabilization and tenant protections a few years ago. As part of being on that group, we heard a presentation from the City of Los Angeles building inspector who does the inspections on rental units in LA, very impressive presentation, I still remember quite a lot about it. But anyway, I asked him the question, "Who is more prone to violation, mom and pops or professionally managed units?" And he said, I mean, he didn't hesitate, just like, "Mom and pops." That's where our problems are. I mean, it's not that they never have problems elsewhere, but professionally managed does seem to be a real thing. It's not just a label that's attached to just certain kinds of buildings. I wanna come to how people are paying their rent. And Mike, and your introduction you talked a little bit about credit cards. Any one of you, a little bit about findings in that dimension, you know, friends and family, other kinds of loans, not entirely sure what that meant when we asked the question, whether people who took... What were we finding there?

- Yeah, I mean, if you look at those, of those who were late in at least one month, we find that about 50% are going to friends and family, slightly higher share than that like 55% are withdrawing money from savings, and then more formal debt is credit card debt just under 30%, and then, one thing that I think is particularly troubling is nearly 40% discuss going to payday or other emergency loan sources, which, of course, have extremely high interest rates a lot of the times that can blow up in your face down the line. So there is a lot of, even though income was relatively stable during this time, you didn't have, of the people who were unable to pay, people clearly going into some form of debt or relying on some savings to make up the difference.

- [Richard] Paavo, yeah.

- I mean, I'll just quickly follow up and say this is something that it would be great to have dug into further were we to have been able to have a longer survey, and if anyone out there wants to fund a follow-up survey, which is something we'd also like to do.

- Yeah, we've raised a little money toward this end, but we need to raise some more.

- Because yeah, I mean, I feel like there were a couple aspects of this question that we could have followed up on. I mean, how much debt people are going into, that came up as a big deal and we didn't get great detail on it.

- So I'm gonna put you guys on the spot here because I'm gonna ask you a question that I'm not sure you know the answer to this. I don't recall the answer to it, but maybe one of you can. If you look at use of credit cards over May, June and July, did it increase or was it pretty stable?

- It went up a little bit and we had also asked a question of people, "How do you normally pay?" And so, before COVID began, a very small share of people reported using a credit card for any part of their rent before COVID, for obvious reasons, oftentimes you get hit with these big fees or things like that.

- Right, well the reason it's an important question though, so like when the last time I was a tenant, when I worked in DC four or five years ago, I did just have an automatic credit card payment to the landlord, and then I pay my credit card every month, so it's just a convenience, right? There was no cost involved to it. And so I was curious about how frequently people did that, and again, thanks Mike for the answer, is the answer was not very often, and so the extent we saw credit cards being used that was new, and clearly that's just not a sustainable way to pay rent. Very high interest loan is really problematic, which comes back to our need to go back into the field. And so I'm gonna ask the second question to put, so given that you answered the first question I didn't know the answer to so brilliantly, I'm gonna try a second. I was planning on sitting down this weekend and going through the most recent Pulse survey, which I think goes through October 15th, and have things been getting worse on collections according to that survey? Have people's feelings of rent insecurity been increasing since the end of the CARES Act?

- It seems like it, and like you, I have not spent a lot of time with the most recent Pulses. The Pulse has also, it seems, changed some of its questions.

- It has, yeah.

- They're asking questions that are in some ways evocative of more dire circumstances, and so you're getting positive responses to bad questions that weren't on the initial result on the initial survey, so it's hard to say if things have really gotten worse or if the Pulse is just capturing it, but the Pulse now asked people questions about whether they worry about eviction, and it seems like people really do. The big question, I guess, would be is this just a more distilled version of, "Hey, what's going on with the question you're being asked in July and August, like how confident are you you can pay your rent?" It would be great to, again, really be able to take that new Pulse micro data, match it up with another round of our survey. We have every reason to believe, I think, that things are worse just because the benefits dried up.

- Yeah, and one of the findings is we ran regressions on this stuff 'cause that's what we do, and we found that people who had lost their jobs, but had received their unemployment check by that time were 60% less likely to miss a rent payment than those who were just unemployed, so it clearly was really important getting that aid out there. I'm just gonna share a couple of comments from the audience from Michael Banner, just speculating that maybe mom and pops are under-capitalized. I think that's not even speculation, that's true. One of my favorite, there's a census of rental housing that my former colleague Raphael Bostic developed while he was running policy development and research at HUD, it's a successor to what was the old National Housing Finance Survey, and a couple of things that fall out of that that are really interesting to me, anyway, 62% of landlords own one property, exactly one property. Now they own, of course, many fewer units than 62% of units, because their properties tend to be smaller, but the point is your typical landlord is not a particularly wealthy person. And if you look at the survey of consumer finances among those who own investment property, mean net worth, or excuse me, mean net worth is a different number, a much bigger number. Median net worth is well under 200,000, which puts it basically in the same category as median net worth of the country as a whole, and the median person in the US is not particularly well off from a wealth perspective, so I think the point about under-capitalization is almost certainly correct. From Gene Berinsky, just asked, "I wonder how much of the non-use of credit cards pertains to small landlords taking checks and cash and being unable to accept credit cards? It'd be interesting to see if more of the non-housing spending was shifting to credit cards." And that would be great to know, but there were only so many questions we could do on a survey. Something to think about if we go back in the field with this stuff. So any responses to either of those points.

- I think that's absolutely right. I mean, I think that we worry about tenants and then we talk about this to some extent in the report, but this is a two-sided equation, right? So the tenant has to figure out what their best course of action is. Do they withhold some rent or do they try and put the money towards other things? And then once rent is withheld or late, the landlord has to decide what to do. And in an era when you have two thirds of your renters facing some income loss, it's not a small thing to say you wanna kick someone out because, and again, conditional on you really can't right away, but then even if you could, could you get someone in there, right? And so to be hit with a situation, to be in a situation where you are sort of taking steps to threaten someone with eviction or so forth, it really does suggest that you kind of feel like your back's against the wall. And I think the under-capitalization makes a lot of sense.

- Well, Carry Wilflong also makes the point that many workforce housing tenants don't have enough credit to put rent on a credit card, which again is I think an excellent point and something that a professor sitting in his comfortable home doing a Zoom seminar didn't think about and he should have thought about that, the credit capacity of people is probably, of lots of people, is not $2,000 a month, which, of course, may send them down the road to the payday lender, which is far worse than using a credit card for trying to repay rent. One thing I think about in this conversation is, and this is getting outside of the survey work a little bit, but there is a coordination problem with all of this. Suppose every landlord were to say, "You know what? Once you're three months late on rent, we're gonna kick you out." And then once you're kicked out, you take a hit on your credit history, which means you can't go anywhere else, now you have a city with a bunch of vacancy, without good tenant candidates, in the sense of ones that you feel comfortable are gonna pay the rent, rents go down. And so, you know, Dan Epstein said if you can get the tenant out, no problem re-renting. I'm not sure, like in San Francisco that's clearly not happening as vacancy rates are heading up toward 15% up there. Downtown LA vacancy rates have soared and what we see is landlords basically buying occupancy by giving two, three months of free rent, There are externalities here that go beyond the externalities of somebody being kicked out of their house. That alone creates externalities for society because that tenant is in that position, but sort of as the market as a whole, it's very hard to think about how do you keep it from spiraling into an abyss under these sorts of circumstances?

- I think that's something we did discuss a lot a couple of months ago when the state government was gonna do something more aggressive on this topic, and thinking about the idea of a rent registry and these other kinds of rental support through that registry involving landlords needing to be involved with some kind of discussion with their renters. I mean, it does seem like there's a lot of potential mitigation to larger problems by having some kind of intervention in the kind of worst case scenarios to prevent people from being kicked out, right? I mean, I think that that didn't happen, unfortunately, but I mean, at the same time, I don't think the eviction abyss is happening as much as people were worried about, so.

- So comment from Carrie Wilflong that there's a delicate balance because tenants that can't pay blame the landlord for the financial position and sometimes take it out on the units. So Carrie, I'm gonna ask you to type. I mean, how often do you actually observed that? Like a tenant's behind, how often do you find that the property is defaced as a result of that, one way or another? I guess we'll wait on it for an answer on that 'cause, I mean, it is, you know, there is the really important book "Evicted" and one of the things about the book that's so good it talks about how fragile the lives of tenants under certain circumstances can be. This is long before COVID. Book's about five or six years old now, I think, But that there are a lot of mom and pop landlords that do their best by their tenants, so they do tend to be mom and pops in the book, but they get into trouble because, these landlords get into trouble because the units are not treated well, so I think it's fair. So Carrie is saying, "Less than 5%, but I think that's why Dan is saying vacant and release is a better option." And so the idea there is you just say to the tenant, "We're gonna forgive your past rent if you're willing to move out, so that we can bring somebody in who can pay the rent." And I'm curious, and we don't have a good sense of that, how frequently that happens, again, might be a question in some future survey, "Have you been asked to move out of, or have you been encouraged to move out, not evicted, but encouraged to move out with a financial incentive of some sort in a previous place?" That would be really interesting to know, I think.

- Yeah, and since you brought up "Evicted," I mean, I think Desmond talks a fair amount about how measurement and surveys have been, or surveys tend to mis-measure eviction, and I think our survey was one that asked questions that had learned from Desmond's suggestions, but it's just interesting to me to think about, you got a tenant, you have two tenants, one was offered cash for keys, right? Like just, "Go away" or "We'll forgive your past rent if you leave, because I know you can't pay anymore," and the other tenant had an eviction threatened. Will they answer a question about eviction kind of in the same way, or will they ask a question about being offered cash for keys or whatever in the same way? We think of eviction in a very particular way, do tenants think, do some-

- That's a really great question and this measurement, so one of the reasons that book was so important to me wasn't about, I mean, of course, this talk about eviction was important, but it taught me how badly the census and the American Housing Survey measure the state of our housing in this country because if you look at census data and you look at AHS data, what you would conclude is housing in this country is too expensive for too many people. There's really little dispute about that. And it's not just a coastal problem. There are lots of places between the coasts where the rents aren't so high, but the incomes are so low that people are still spending a very substantial chunk of their income on housing. And if find that you look at CPI rents since the early '80, it's outstripped nationally, CPI overall, dramatically, which explains why it's taking a bigger and bigger share of people's paychecks, but the good news, we would always say, about American housing, it's such good housing. It's such high quality housing because you look at the share of housing that was considered deficient based on a certain set of measurements in either the census or the AHS, and it would come in year after year at about 1%. Okay, well what was the definition of deficient is you don't have indoor plumbing, you don't have electricity. Okay, by world standards we are very good on houses have indoor plumbing and electricity, but it doesn't get at things like say mold or other things that are pretty pervasive and pretty harmful in people's housing. And what the "Eviction" book got across to me was how many more Americans within poor conditions than I had previously internalized. And so that's why this measurement issue is, in fact, so important because it's hard to solve a problem if you don't know what it is.

- Yeah, and how really crappy housing in not so great places is actually pretty expensive, right? Like none of the people in really segregated Milwaukee were paying like a hundred bucks a month. There's still-

- My student, Gene Berinsky, who's on the call right now, that's part of what his dissertation is about, and if you look at the variants of rent in Milwaukee, I don't know why we study Milwaukee, but it does seem to be a ground zero for this stuff. I mean, Milwaukee is, I don't know why in particular, it's been picked as a city to be picked over, but-

- You wouldn't anything bad about Wisconsin, I know that, man.

- Yeah, I'm not gonna happen, although your Vikings did a number on us last weekend. The variants of rents, Gene can weigh in if I'm getting it wrong, but the variance of rents in Milwaukee is way lower than the variance of income in the neighborhood in which those rents are occurring. Another really interesting phenomenon. And so we'll have Jean on "Lusk Perspectives" to explain to us why exactly that happens, so I think that's a good point. So as we think about this stuff right now, I mean, to some extent we've gotten at this, but what do you guys think about what are appropriate policy responses? And you can think about that at any level of government in light of what we have observed in this work.

- I think the most important thing is some form of money assistance to renters. I think that the regression coefficient on our unemployment benefits suggests that, but I think a lot of other things suggest that too, which is to say that if you were to imagine other policies, "We'll give assistance to the landlords" or "We'll have a moratorium," or things like that, that someone's not gonna be made whole, if that happens. And I think that this really is a system where it'll get back to some sane equilibrium or at least what we had before COVID when no one feels like they're left holding the bag. And I think that's especially true given the amount of respondents in our survey who have either paid their rent, but done so by going into some other form of debt, or not paid their rent and got into debt, right? Paid part of their rent with a payday loan, and so if you just said like, "Oh, we're gonna do a direct payment to a landlord or we're gonna do landlord assistance," we have a lot of tenants out there that don't need quote, unquote, "rent assistance," but do need to pay their credit card company or do need to pay their payday loan lender. And so I think that something like the CARES Act or the unemployment that just gets, I mean, the other guys can jump in here, but the evidence from our survey does overwhelmingly suggest that if you have money, you're gonna pay your rent.

- Yeah, we did not see, and I think this is a really important thing to underline, is in spite of the eviction moratorium, we just didn't see shirking in our survey. It's people who fell into one of two categories, excuse me. So three categories of people: people who got sick with COVID, or people who had someone in their family get sick with COVID is one. People lost their job is two, there was some overlap between those two groups. And people who had neither happen to them, that was about 75% of the group, and of that group, the rent payment rate was 95%, which is what rent payments are all the time. So, yeah, people, I think, do want to pay the rent, and this is consistent with, when we go back to the global financial crisis, this is one of the most important things I learned from the GFC is I used to think equity was everything, on the mortgage side of the market, and it was astonishing what share of people, if they could pay their mortgage that they pay their mortgage no matter how upside down they were on their houses. We found that you needed a double trigger, which is you needed to be upside down in your house, and either one, lose your job, two get a divorce, three, get sick, four, have a toxic loan product, which was, by the way, the biggest predictor of default of anything from the GFC. If you didn't have all of those, I mean, if any one of those things combined with being upside down, that would lead you default, but if you were upside down, no matter how far upside down you were, if none of those other things happened to you, you were paying your mortgage. If you were living in Las Vegas in 2009, you had no financial incentive to continue paying your mortgage because you were like 50, 60% underwater. Your hope of coming out a bit was pretty remote. You would have been better off getting a lease before your credit record took a hit with somebody and walking away from your house, but people just didn't do it. So I think that there's this behavioral phenomenon, people's housing is so important to them that they'll pay for it before they pay for pretty much anything else under nearly any circumstance.

- [Michael] Yeah.

- Money, I mean, and I liked this idea of a state, an innovative way at the state level to get money into people's hands. I mean, this tax credits for landlords idea that Caballero had seemed smart.

- Yeah, I liked that a lot.

- Even though we can't print money at the state level, it's the closest thing to it, right? I mean, it's a little complicated, I would like a simpler version of that, but that seemed like a good idea.

- Yeah, I support that idea, too. I just wanna really drive home that if you deepen a payday loan and fulfill on your rent, that tax credit doesn't help you.

- Right, well, I mean, but if it had come earlier, then it would have, and if people knew about it. Like with a lot of conditions, it could have forced all people going into worse forms of debt 'cause if you knew that you could go into this other kind of agreement where the state was gonna pay your rent with a tax credit and you could pay that in 10 years, then that would have been a much better option, but at this point, maybe it's too late, yeah.

- The policy instrument you choose has to reflect the crisis you're in, not what you would have done before the crisis started. And so right now we're in a situation where people owe debt to a lot of different institutions, delivering relief on one axis isn't gonna cut it.

- Oh, so from Carrie, she's a big fan of direct rental assistance and she says, "In the areas where this has been available, it's been very useful and created better interaction between the tenant and landlord." I will say it seems to be a combination of, again, another stimulus check that would allow for the repayment of back rent with a, and you three guys, I think, know this, I've been a big advocate for making Section 8 an entitlement for a very, very long time 'cause I actually think that solves roughly 90% of the housing problems in the US. Pretty much anything between, now for LA it's still problematic for a whole bunch of reasons that we could talk about in a different "Lusk Perspectives." The most important, which LA County is just too big and the fair market area rents are not relevant to too many people, and then there's a waiting list, a whole lot of other things. but it's trying to get between, I'll call it the five on the West and the 95 on the East, which is just called I-95 out there, every place in between, I think if you had Section 8 available to everyone who qualified for it, you would basically eliminate, I don't know, 90% plus of housing problems. And the thing is the cost of that would be about a hundred billion a year, which is expensive, but we're at $20 trillion economy, so that's, what, 50 basis points to the economy to make sure everybody's, well not everybody, but nearly everybody is housed properly. And so I see that crises you shouldn't be wasted. I see this as an opportunity to move forward with wider distribution of vouchers.

- Mike did, secretary Castro mention that yesterday when you were talking to him?

- He sure did, yes. The Biden plan does include universal housing vouchers, so the state of Georgia will determine whether we have the votes in the Senate for that, right?

- Yeah, although the real estate industry should really like this because it makes sure that landlords have a reliable source of income. And I hear tell that there are Republicans who listen to the real estate industry, so I'll just put that out there, as someone who every time he met a certain person in the elevator at HUD would say, "Vouchers, vouchers, vouchers." Okay, well we're at 2:50, so let's come to a wrap up of this. Just final thoughts, and I'll start with Paavo because I think you've actually said the least of anybody here. Takeaways from this for you?

- Yeah, I mean, I think we've covered most of the big picture takeaways. The one thing I had written down as a note to mention was one of the findings that I thought was interesting on the racial disparities in this topic was if you look at late, partial, and non-payment by race, ethnicity, you see higher rates of partial payment by Black and Hispanic households, but basically the same rate of non-payment across black, white, Hispanic households, which I thought was interesting. I mean, kind of speaking to the resilience of renters in terms of making payments at all at all costs. And then the other racial ethnic breakdown that I thought was striking was in the evictions break down. I don't have it here, but how the rate of eviction threats did not vary by race, ethnicity, but the rate of evictions did, and so I think that's something that bears further study kind of how the same share of people are being threatened with eviction, but then in the end white households weren't actually having these evictions initiated against them.

- Yeah, filings, we should make clear.

- [Paavo] Filed, right, yeah, yeah.

- Mike?

- Yeah, I think this audience is very well aware that we had a preexisting housing crisis in California, but wanted to kind of circle back and emphasize that. I think it was Manville's line that we have a income crisis layered on top of a housing crisis. And what I might say is, just an addendum to that, is that we have, of course, a public health crisis pushing people into an income crisis, which is layered on top of housing crisis. So like, obviously we have a very daunting task ahead of us in controlling the pandemic and we're failing pretty hard as a society and our elected officials on that. And hopefully that turns around in the next few months worldwide. But specifically about the existing housing crisis, we have to also continue robust efforts in pushing the City and County to house the unhoused, right? Our housing crisis is also, of course, a homelessness crisis here in Los Angeles, and we have some tools that are being utilized slowly, but we need to push, I think, for more and, frankly, probably for more funding in a very tough budgetary environment. And last thing I wanna do is make sure we thank our funders, the Ziman Center for Real Estate UCLA, the Lusk Center, of course, are our friends on this call, the Luskin School, our Dean Gary Segura supported us, the Institute for Inequality and Democracy, UCLA, and the California Community Foundation, all came together to help us do this work. And we're hopeful that we can get back in the field with another round.

- So Mike Manville, and then I'm actually gonna ask one last question that Michael Banner put 'cause I think it's a really good question, but Mike Manville, your final words before we do our really final words, which are to answer a question from Mike Banner, Michael Banner.

- So yeah, Mike Lens, thank you, we almost got in trouble there and didn't thank our funders, so that was-

- Yes, and thank you, Michael for doing that.

- It's just so easy to forget. I guess, what I would just say is that one thing for me that this whole exercise has driven home is despite how much we have in terms of data in today's world, how little we know about rental housing, and especially about the people in the rental housing who are sort of most vulnerable. And I think it's been really informative to hear as well from a lot of the folks who are on the call talking about their experiences managing these properties. And this is stuff that's, wisdom that's not available in a- Too often, not available in a systematic way, right? And so then we hit a situation like this and we wonder like, "How are these people doing? How are their landlord's doing? How is this translating?" And it would be a better world if we weren't having to draw inferences from a N equals 1000 survey, right? And so right now it's what we have, but I think it really speaks to, down the road, thinking about a better way to keep track of this population that is big and is most prone to trouble.

- So let me finish with a quick question from Mike Banner, and we do, apparently, I've gotten prompted, we must be finished before three o'clock. I'm not exactly sure why, but we must. So Michael asks, "Is there any expectation that the eviction and foreclosure will resemble the 2008 crisis in terms of volume?" Any thoughts on that?

- I bet Richard is best qualified to answer that, but I will say I'm skeptical that that kind of volume is what we're looking at, mainly because demand is gonna bounce back in a lot of sectors, and I don't see this a fundamental problem with the housing market per se, that can't rebound or that people's incomes won't rebound in time next year, but I do think that an eviction wave, I'm not yet gonna go tsunami, but an eviction wave will come in some places on the horizon.

- So, Paavo you had-

- I was just gonna say, I mean, I think an eviction wave will come in some places barring swift aggressive public action. I think that the opportunity to ameliorate the potential problems is much greater than it was. I mean, there are kind of fewer ticking time bombs and the ticking time bombs are less complicated than they were in the last crisis, so I think that the potential to put out the fires before they really get big is greater. I'm trying to be optimistic.

- [Richard] Mike, any thoughts?

- Only that, echoing the other two, and particularly following on Paavo's point, I think that this time we did a little bit more faster, which is not to say that we've done a lot, but what was so startling and heartbreaking about 2008 was how we did almost nothing and just watched this happen, and so we've learned a little bit, and so that should help.

- So I'm gonna agree with all three of you. I think, although Mike, I think I would disagree with your characterization as we haven't done a lot. I actually, I think we've done quite a lot. We need to do more.

- Fair enough.

- We have done quite a lot and it came together very rapidly and it was one of those rare moments when I felt encouraged about our ability to work together as a country. The CARES Act was $3 trillion, that's not nothing. And I think the forbearance policy of Fannie and Freddie is very wise and allows people to postpone paying their mortgages just by saying they need to, without a lot of compliance issues. And then they pay it off at the back end, which should be very doable, so they're not facing that cliff at some point. On the eviction stuff, I mean, I think if, it's a big if, we have another round of stimulus, I don't see why we would have a lot of evictions. I think if we go several more months without anything, then I'm really worried about it, particularly for people who work in sectors like the food and beverage sector, it's gonna be a problem, so we really need to get money out the door. And with that, we have to get out the door, so I wanna thank my partners on this project, Paavo Monkkonen, Michael Lens, Michael Manville, thanks so much for coming virtually down the 10 to be with us today, and we'll see you next week.

- [Paavo] Thanks.

- [Michael] Take care.