San Diego-area renters who work in food and retail industries could find themselves spending more than 55% 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 found Thursday.
This figure is an increase of 9% from their current rent burden and represents the largest burden of any major city in the country. 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.”
“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.”
Before the public health crisis, the 21.5% of San Diegans working in food or retail — one of the highest proportions in the country — were already spending 46.6% of their income on rent, leaving just $15,800 for all other expenses.
Only San Jose and Denver come close to that burden, according to Zillow’s data. If — as Gov. Gavin Newsom suggested in recent news conferences — the state is more-or-less shut down for two months and these workers are unable to draw an income, that burden increases to 55.4% of their annual income spent on rent, with just $10,956 left after rent for the average retail or food worker.
If these workers are out of work for two months but also get a one-time payment of $1,200 per adult and $500 per child, similar to proposed legislation, they would have to spend 48.6% of their annual income on rent. They would have $15,731 of their annual income left after paying the rent.
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 these 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.
As the economic impact of shutting down or severely limiting the operations of restaurants, retail shops and other businesses grows, plans to address the gap in income have been proposed, including an item in a bill the Senate passed Wednesday which includes a one-time payment of $1,200 per single adult and $500 per qualified child.
Two months with no income would push food and retail workers to spend more than half of their annual income on rent in five California cities: San Diego, San Jose, Los Angeles, Sacramento and Riverside, as well as Denver and Miami. A one-time payment would keep the rent burden under 50% in each of these markets except San Jose.
Zillow, a Seattle-based real estate site, provides data on housing markets across the country.
>> Want to read more stories like this? Get our Free Daily Newsletters Here!Follow us: