Allocating $100 million in CARES Act relief to housing support is good state policy

Hawaiʻi needs a serious investment in housing support to prevent a wave of evictions and foreclosures. According to the U.S. Census Bureau, between 20 and 30 percent of Hawaiʻi households either missed the previous month’s rent or mortgage payment, or have slight or no confidence that their households can pay next month’s housing payment. Things are likely to get much worse come August 1, 2020, when the $600 weekly federal boost to unemployment benefits will expire for the roughly 110,000 unemployed Hawaiʻi workers that receive them.

It appears that help is on the way. Later this week, the legislature is expected to hold a floor vote on Senate Bill 126, which allocates $100 million of the federal CARES Act pandemic relief funds provided to the state towards rental assistance and loan counseling assistance for impacted homeowners.

If passed and then signed by the governor, the “Housing Relief and Resiliency” program will help over 100,000 residents remain in their homes and off the streets, stabilizing the state housing market.  

Mortgage Counseling Is a Smart Use of Funds

Under the plan proposed by the legislature, homeowners are slated to receive financial counseling support to help homeowners secure forbearance of their mortgage payments. This support, rather than mortgage subsidies, makes sense. The federal government has already stepped in with significant relief for homeowners by requiring mandatory forbearance of the  federally-backed loans on an estimated 60 percent of Hawaiʻi homes. The forbearance allows homeowners to miss payments for up to a year without penalty. Homeowners will still be required to pay the mortgage, but the timing and terms can be adjusted so homeowners don’t lose their homes as a result of the crisis. 

For homeowners with non-federally backed loans, many lenders are offering forbearance options as well, recognizing that foreclosing on a mass of households adversely impacted by the pandemic is against the long-term interests of banks and the housing market as a whole. 

Despite the availability of forbearance options, accessing them and getting the most out of them can be complicated. As one housing counselor explained in a recent Washington Post article, “There’s tons of lenders out there, and everybody doesn’t always use the same definition of forbearance either. You might think you are talking about forbearance, and the person on the phone is talking about a modification or repayment plan.” 

For every one counselor trained and hired by the state, hundreds of homeowners can be assisted to prevent missed payments or lower their payments to free up money for other necessities. 

Providing counseling services to assist homeowners in accessing the best possible payment plan is a wise use of limited state resources.  

Renters Need Subsidies to Avoid Mass Evictions

Unlike homeowners who can use forbearance to delay payments until their incomes start flowing again, renters cannot ask their landlords to forgo rent for a year and promise to catch up later. While some landlords will work with renters to create payment plans that will allow them to remain in their homes, ultimately, the outcome of tenants being unable to pay rent will be eviction. According to a recent UHERO estimate, at least 44,000 renters will have a difficult time making rent payments on August 1.  

Without a rent subsidy to help these struggling renters, the already backlogged Hawaiʻi court system is likely to see thousands of evictions. Many renters will want to avoid court so they will leave on their own—crowding into someone else’s home, leaving the state, or becoming unsheltered. Others, recognizing that they have no good options, will stay put as long as they can without paying rent, choosing to save for whatever comes next since eviction is inevitable.  Meanwhile landlords who successfully evict tenants will find it hard to find new tenants during a time when so many people are struggling with unemployment. .  

The good news is that a rental subsidy of just $500 a month is enough for most of the currently unemployed to make up the gap between rent owed and the amount they can afford with reduced unemployment benefits. For most of the 44,000 at-risk renters, this will keep them in their home. That means cost savings for the court system, reduced costs and more revenue for landlords, and reduced costs for already strained social services and homelessness support systems. And, of course, it means avoiding the very real human costs on a family who loses their home. That $500 per month of rental subsidy for every beneficiary in the system is money well spent.

For $100 million, we can help more than 100,000 Hawaiʻi residents who have lost their jobs due to no fault of their own stay in their homes. It’s the right economic, social and ethical thing to do. The alternative would be far more costly.