'There will be a crisis we can't even imagine': Why activists are pushing for rent forgiveness during the coronavirus pandemic

In just two and a half months, over 40 million people have filed for unemployment in the U.S., a surge in joblessness not seen in the U.S. since the Great Depression. At the same time, it is unclear if the federal government will provide additional stimulus to the record number of people who are currently unemployed and struggling to pay their bills because of the coronavirus pandemic.

Unable to return to work and weeks away from losing enhanced unemployment benefits meant to tide over workers during coronavirus lockdowns, many are concerned about paying their rent, which is the largest monthly expense for most of the country. In fact, 31% of renters did not pay in the first week of April, according to the National Multifamily Housing Council, an increase of about 11% from a normal month.

Now, as the country enters the third full month since the deadly coronavirus first began closing down much of the U.S. economy, calls to #CancelRent have proliferated on social media and at demonstrations across the country.

Some politicians, including Democratic presidential candidate Joe Biden and Reps. Ilhan Omar (D-MN) and Alexandria Ocasio-Cortez (D-NY), are joining progressive activists and calling for rent cancellation for those unable to pay during the pandemic.

"There should be rent forgiveness and there should be mortgage forgiveness now in the middle of this crisis," Biden said earlier in the month on the Snapchat show "Good Luck America." "Not paid later — forgiveness. It's critically important to people who are in the lower-income strata."

This is what rent forgiveness would mean, according to housing experts.

The fallout from the coronavirus pandemic has hit renters especially hard, Tara Raghuveer, director of KC Tenants, a tenants rights group in Kansas City, tells CNBC Make It. Relative to homeowners, tenants typically have lower incomes and savings and less job stability, according to the Urban Institute, making them "more vulnerable than homeowners during this unstable time." 

Even before Covid-19 spread through the U.S., a full quarter of renters were considered extremely low income, according to the National Low Income Housing Coalition, and 71% of those households were severely cost-burdened, spending more than 50% of their incomes on rent and utilities. Coronavirus has only exacerbated that: Shutdowns and job losses have hit hospitality and service industries particularly hard, and renters make up a disproportionate share of those work forces, according to the Urban Institute.

So far, federal relief has focused primarily on homeowners, says Raghuveer. While the CARES Act — one of the stimulus bills passed in the wake of the pandemic — provided relief options for homeowners, including the ability to defer mortgage payments, renters did not benefit in the same way. The legislation enacted a 120-day moratorium on evictions for some tenants and provided funding for housing assistance for the homeless and subsidized housing, but 72% of renters are not covered by the legislation, per the Urban Institute.

"Homeowners are being taken care of, property owners are being taken care of, banks are being taken care of many times over," says Raghuveer. "We should be asking ourselves why tenants and poor folks and working class people have been left behind."

Housing rights groups in cities across the country — including New York, Los Angeles and Kansas City — want the government to go farther and are pushing for rent cancellation. 

However, tens of millions of tenants not paying rent all at once would have disastrous financial consequences that would cascade throughout the economy, Jay Martin, executive director of the Community Housing Improvement Program (CHIP), a New York City-organization that represents small landlords, tells CNBC Make It.

Without rent, landlords — many of whom are individuals operating between one and 10 buildings and already working on small margins — can't pay their mortgages, property taxes and other bills. Without those property taxes, state governments would also lose a huge source of income, says Martin.

"We can't pay property taxes without rent, we can't pay water and sewer without rent," says Martin. 

The best way to help the housing market is to keep "money flowing" to renters, he says. Ideally, there will be a "large injection of money into the housing market" via the federal government in the form of rental assistance, which renters would then pay forward to their landlords. "What we've been advocating for is a bailout of renters," he says. 

Some sort of additional federal aid could be on the way. The HEROES Act, recently passed by the House, includes a national rental assistance fund and a 12-month eviction moratorium for non-payment. Although those provisions would be helpful for renters, tenants don't have time to wait while the Senate crafts and passes its own version of a relief bill, which may or may not include aid for renters, says Raghuveer.

Some eviction moratoriums put in place at the beginning of the coronavirus pandemic will begin lifting come June 1, she adds.

"If rental assistance comes in three months, it's too late," says Raghuveer. "You'll see thousands of families displaced with nowhere to go."

Rep. Omar introduced the Rent and Mortgage Cancellation Act in Congress, which would cancel rent and mortgage payments for the duration of the crisis and create a fund that landlords and lenders would apply to to recoup their lost funds.

Raghuveer and other activists prefer this approach because it puts the onus on landlords to recoup their money, not on tenants, who are typically more financially vulnerable. Additionally, under Omar's rent cancellation bill — which People's Action, another organization Raghuveer works with, helped write — in order to receive the funds that tenants could not pay, landlords would have to agree to certain practices, such as a rent freeze and just cause eviction, that housing activists have long desired.

Opponents of the bill, including the National Apartment Association (NAA), say rather than canceling rent, measures should be more specific, like the direct rental assistance supported by Martin and CHIP. 

"Resident relief is critical because apartment owners and operators cannot be made to bear the burden of delinquent rental payments," Robert Pinnegar, president and CEO of NAA, says in a statement to CNBC Make It. "Doing so will destroy the rental housing industry and place the 40 million residents who live in apartments at risk."

Without broader relief, though, the current situation could play out like 2008, with landlords losing their properties and tenants facing eviction across the country, says Raghuveer.

"We favor cancellation, but we gotta do what we gotta do right now," says Raghuveer. "Otherwise there will be a crisis we can't even imagine."

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