4.1 Million Californians ‘Not at All Confident’ About Next Rent or Mortgage Payment

A man walks along a street in Los Angeles on July 30, 2021. (Frederic J. Brown/AFP via Getty Images)

Commentary

Over 4.1 million Californians live in households where the primary rent-payer or mortgage-payer is “not at all confident” they can pay their next rent or mortgage payment.

This is more than 10 percent of the entire state population living in such households.

The entire city of Los Angeles is only 3.99 million persons.

More Californians than in the entire city of Los Angeles are now in households where the primary rent or mortgage payer are “not at all confident” they can make their next payment.

The number of California households in which the renter is “not at all confident” they can make their next rent payment jumped 200,000 households from 733,000 three weeks ago to 933,000 last week. At an average family size in California of 2.95 persons per household, that increase represents 590,000 persons. The increase in persons in such households is larger than the cities of Fresno, Sacramento, Long Beach, or Oakland.

This dire news about renters’ and mortgage borrowers’ confidence comes as the Supreme Court strikes down the federal CDC ban on evictions and new data showing the US Treasury might take back $1.4 billion to $4 billion it had allocated to the State of California under the Emergency Renters Assistance Program.

It’s not surprising that the Supreme Court struck down the most recent eviction moratorium attempted by the federal Centers for Disease Control & Prevention (the CDC). When the court decided not to strike down the previous moratorium on June 29, the court simultaneously put the administration on notice that the court believed the CDC did not have authority to prevent evictions. It allowed the then-current moratorium to complete on July 31.

In the run-up to that expiration of the previous CDC eviction moratorium, Congress failed to act. There was no new law granting the administration some sort of federal authority to suspend evictions.

However, the administration, knowing it would likely be overturned, created on Aug. 2 a new nationwide moratorium on evictions, which was struck down by the US Supreme Court in an unsigned 6-3 decision.

As for the money the US Treasury may take back from California, the Treasury said in a press release, “If grantees (like the State of California) are unable or unwilling to deliver ERA1 resources (money from part one of the Emergency Rental Assistance program), [the] Treasury is prepared to reallocate funds. Beginning September 30, 2021, the ERA1 statute requires Treasury to recapture excess funds that have not been obligated by a state or other grantee and reallocate those resources to high-performing jurisdictions that have obligated at least 65% of their original allocation.”

The state of California is currently well below that 65 percent threshold, having spent the equivalent of just 22 percent of all ERA moneys allocated to the state, or the equivalent of just 44 percent of the ERA1 moneys. It is not clear from what funds (ERA1 or both ERA 1 and 2) the state is allocating money to renters and landlords.

All this is the context in which California renters are increasingly “not at all confident” they can pay next month’s rent, according to data from the US Census Bureau. The data comes from a survey of Californians taken from the Household Pulse Survey during period August 4 to August 16.

When the previous survey results were published two weeks ago, the data showed only 8.5 percent of Californian renters told the Census Bureau they were “not at all confident” about making their next rent payment.

Similar data for the entire US shows a slight decrease over the two-week interim. Data released on August 11 showed 11.2 percent of American renters were “not at all confident” about their ability to pay the next month’s rent. Data for all of the US released this week showed a slight improvement to only 10.8 percent of American renters so worried.

Likely, the positive trend for the entire US is partially due to the original the CDC eviction moratorium ending on July 31 and then a new moratorium (struck down today) being instituted on Aug. 2. So, during the second survey period, Aug. 4 to Aug. 16, many respondents likely believed there was an eviction moratorium in place. Previous respondents likely were worried about the July 31 end-date of the previous moratorium and all the press attention that end-date was getting.

In California, the state-level eviction moratorium ends on Sept. 30.

So in California, where there was no change in the state-level eviction moratorium from one survey period to the next, it seems highly likely that the key change from one survey period to the next was that the second survey period included when renters were seeing the terrible August 15 images of the Fall of Kabul, the last major city held by the US-backed government of Afghanistan to lose to the Taliban.

Such events can sometimes bring on a “Minsky Moment,” named for famed economist Hyman Minsky. Money manager and economist Paul McCulley coined the term in 2009 to refer to an event so shocking to people’s confidence that it can cause individuals to reduce consumption and businesses to reduce investments.

With the recent news of a fall in consumer confidence nationally and Californian renters’ reduced confidence about their ability to pay rent, policy makers and others may have to work particularly hard to avoid further economic and financial concern.

The 4.1 million Californians in homes where the renter or mortgage-payer is “not at all confident” include 2.75 people in rented homes and 1.35 million in homes with a mortgage. In mid-2019 there were 39.5 million Californians, and the average household size in the state was 2.95 persons.