Los Angeles-area renters who work in food and retail industries could find themselves spending more than 53% of their annual income on housing costs if they are unable to work for two months due to the COVID-19 pandemic, a Zillow study released Thursday found.
That figure represents an increase of 8.5% from their current rent burden, the study showed. According to the U.S. Department of Housing and Urban Development, paying more than 30% of yearly income on rent is considered a rent burden, while more than 50% is considered a severe burden.
“We’re still in the early stages of understanding exactly what effects the coronavirus will have on the housing market in the long term, but many workers and families are living through an immediate strain as their jobs are cut back and paychecks dry up,” said Zillow Senior Policy Advisor Alexander Casey.
“Renters across the country, and in the service industries especially, are already often stretching their budgets,” he said. `They are likely to see their rent burden increase if paychecks disappear, which also means they’ll have less funds left after paying housing costs for other essentials, which can quickly become devastating. But without drastic measures now to slow the spread of this disease, we risk it worsening, further delaying the economy’s return to business as usual and resuming the livelihoods for these workers.”
The current rent burden for Los Angeles area food and retail workers is 44.8%, leaving $18,000 of their income after paying the rent. If those workers aren’t able to draw an income for two months, that would go up to 53.3% of their annual income spent on rent, and their money left after paying the rent would decrease to $12,772, the Zillow analysis found.
If they are out of work for two months but also get a one-time payment of $1,200 per adult and $500 per child under the federal stimulus package, they would have to spend 45.5% of their annual income on rent. They would have $16,800 of their annual income left after doing so, according to the analysis.
As local governments limit or close businesses to stop the spread of coronavirus, different measures have been proposed to alleviate the financial hardships facing employees. Zillow analyzed how a short-term loss of income could affect renters’ finances, and what effect those proposals could have on housing affordability for workers in some hard-hit industries if they are out of work for two months.
According to previous Zillow research, just 51% of renters say they can afford an unexpected $1,000 expense, and 66% of renters already make at least one sacrifice to afford their rent. The first sacrifice renters make is cutting back on entertainment, followed by picking up additional work — which may not be an option right now.
Two months with no income would push food and retail workers to spend more than half of their annual income on rent in Los Angeles and four other California cities: San Diego, San Jose, Sacramento and Riverside, as well as Denver and Miami, Zillow found. A one-time payment under a $2 trillion federal relief package would keep the rent burden under 50% in each of those markets except San Jose.
Zillow, a Seattle-based real estate site, provides data on housing markets across the country.
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