Episode 11: COVID-19 and Renter Distress with Mike Manville and Paavo Monkkonen

Paavo Monkkonen 0:00
Am I recording something? I am?

Shane Phillips 0:16
Hello, this is Shane Phillips and today we've got a special episode of the Housing Voice podcast. This interview features work from some of our very own UCLA urban planning faculty, including our guests, professors Paavo Monkkonen and Mike Manville. As those of you up to date on your housing Twitter may have already guessed, Mike and Paavo are also the inspiration for this special musical introduction from Phoenix Wright, Ace Attorney. If that makes no sense to you, I don't blame you. You can follow the Twitter link in our show notes to get up to speed but it will probably raise more questions than it answers. What we're talking about today is primarily two surveys of LA County renters that took place over the past year, asking about job losses, late partial or non payment of rent, eviction threats and filings and other challenges that tenants have endured during the pandemic. While the surveys and this conversation focused on Los Angeles, I want to be clear that I think almost everything we discuss applies to the rest of the country as well. The positive impact of the eviction moratorium for tenants, the scattershot response of rent relief, and just the overwhelming weight of uncertainty, especially for lower-income households and households of color is certainly not unique to LA or California. As the expiration of the eviction moratoriums have been up in the air, and states have struggled to distribute rent relief to those who really need it, this was a timely conversation, and it was great to have the foundation of real tenant survey data, not just speculation to work with the housing voice podcast, as always, is a production of the UCLA Lewis Center for Regional Policy Studies. Be sure to subscribe to the show if you haven't already, and never stop telling your friends about us. We really appreciate it.

Mike Manville and Paavo Monkkonen are with us this week to talk about some research they've been working on. Mike and Paavo have co-hosted the show before but today they are my guests. So along with their co-authors Mike Lens, also from UCLA and Richard Green from USC, they published two reports over the past year or so, each of which surveys 1000 renter households in the county to understand how they've been weathering the pandemic and its economic shocks. Before we get into the results of these studies, we do want to thank the groups who have provided financial support to make this research possible. That's the California Community Foundation, the UCLA Luskin Institute on Inequality and Democracy, the Luskin School of Public Affairs, the Ziman Center for Real Estate, and the USC Lusk Center for Real Estate. We're just going to take credit for that one, too. Mike, I think you can get started here. And I'll ask you a simple question and a more complicated one. So just to start off, why are we specifically interested in renters? Why is that the interest here? And then the more complicated one, what do we not already know from other surveys, other data that's been collected over the past year and a half on renters and how they've been dealing with a pandemic?

Mike Manville 3:28
Yeah, those are great questions. I think the one reason we think about renters when, you know, when the pandemic got started, there was a lot of concern about renters. And one reason for that is just that there was a concern in general about low-income people, and how they would weather the economic hardship of the pandemic. And one of the biggest, usually the biggest expense that low-income people face is their rent, right? So part of it is just the composition of renters, strongly overlaps with poverty, low income, income, precarity, and so forth. And so, you know, one way to think about it is that, it's not the case that most renters are poor. But it is the case that most poor people rent. And so if you're worried about low-income people, because of an economic shock, you're worried about the situations they face. One way to examine that is that their biggest expense usually is the rent they have to pay. On top of that, is that there's something about renting that lends itself to a little bit more instability, which is that we have in the United States a few more protections for homeowners who get in trouble

Shane Phillips 4:43
right.

Mike Manville 4:43
The most obvious one and it's not necessarily protection is that there's a there's a fairly large chunk of homeowners at this point in United States who actually own their home, free and clear. And so if they lose their income, that's a struggle but the roof over their head isn't threatened. Obviously by definition, there's no renters who enjoy that particular protection. But on top of that, you can get some, it's easier in general, and this varies ofcourse a little bit from place to place, it's easier in general to get forbearance on your housing payment. If you are a homeowner, it is in general, harder for a bank to come take your home than it is for a landlord to come evict you right? And so you have this aspect of the tenure itself, you know, that made us and makes us still concerned about what was happening to renters particularly when the sort of lock downs and economic contraction started. And so that that was one of the impetus for our first survey. And then, of course, the follow-up survey, too. And the second one was that the US Census survey did something very unusual when the pandemic began, which had abandoned its very long standing pattern of being very slow and deliberative. You know, the census creates a lot of extremely useful data products, and usually does so on a very slow timeline, right, because they put a huge priority, and they do a very good job, they put a huge priority on making sure they have good samples, making sure that they're delivering accurate data, imputing missing data and so forth. But to their great credit, when the pandemic began, they started doing a survey every other week, and sometimes weekly that they called 'the Pulse'. And that was very different, and the pulse did provide... it basically just tried to provide a weekly snapshot of how households were coping with the pandemic, and it's fallout. And one of the most useful things it did was it did ask people how they were doing their housing payments. And so we first sort of looked at that, and the two issues that we confronted with the Pulse where we considered limits were that the initially, and the Pulse has changed its wording a few times over the course of the pandemic, but initially, it asked the sort of ambiguous question about whether household was up to date on its rent. They just said, I forget the exact wording now, but it's sort of like," is this month's rent or housing payment late?" And so late is, of course, a little bit different than you're not going to pay at all, you can't pay and things like that.

Shane Phillips 7:22
And if you had like been late two months ago, but you were caught up, you would be considered up to date and maybe would report that wouldn't come across as ever having paid anything late.

Mike Manville 7:32
Yeah. So there's a few different layers of ambiguity. So one ofcourse, is just like, you know, maybe it's June, you missed May's payment entirely, but you're up to date on the current month. And so you say, "yeah, actually, I paid for this month". The pulse wouldn't pick up that this person was carrying a rent debt. The other issue is just that, if you got called by the census survey, or the second week of the month, and you hadn't paid yet, but you were pretty sure you were going to pay five days later, and you did, well, then you're down is late, which is legitimately that's a sign of renter distress, but it's sort of a different level of distress. And the whole month goes by, and you haven't paid in full, or maybe you haven't paid at all. And so all of that, that nuance sort of got lost. And again, like I do not hold this at all against the Census Bureau, they deployed very quickly a survey to capture a lot of people. The other thing that... a couple of things that they were missing is that if someone did report that they hadn't paid rent, they never asked how much their rent was. So you couldn't really know how much money they owed. You know, they asked people's income, and you can make some inferences based on that. But so we sort of looked over Pulse data, and then decided that we would try to design our own survey for renters in LA County, that would compliment the Pulse and get at some of these questions. And so we were really interested in, you know, nailing down, what kind of building do you live in, who is your landlord, how much rent do you pay? You know, in this month, and in the last month, you know, very specifically, did you pay late? Did you just pay part of your rent? Did you miss your rent entirely? What happened after you didn't pay? That's something that Pulse also wasn't able to get ahold of. So it's really you know, did your landlord offer your repayment plan? Did your landlord threaten you? Things like that, did the landlord say they were going to evict you? And so what we did, just to sum it up, and of course, we can talk about this in more detail is just looking at some of the holes in the housing part of the Pulse. We tried to ask a bunch of questions that would flesh that out. So we would have a better picture of exactly how much renters were struggling in what form they were struggling. And then what was happening as a result of that.

Shane Phillips 9:54
Right. And so Paavo I'll turn this to you. You have two rounds of surveys now. The first two which took place in July 2020. And the second took place in March 2021 more recently, both asked renters roughly 45 questions or so on things like job and income losses, non-payment or late payment of rent eviction threats, or eviction filings, basic demographic questions, things like that, starting with how the pandemic affected renters employment, what did you find? I guess we can start with the March 2021, the more recent survey, and just kind of tell us what was in that, and how it evolved from the July 2020 survey?

Paavo Monkkonen 10:39
Sure. Yeah, I think and broadly speaking, I think I would just add to what Mike was saying about kind of the motivation of this work, especially given that this is a housing research podcast is that, you know, original survey was motivated by effort between USC and UCLA and some foundations to do this kind of report on the pandemic affecting the region and kind of what could be done, it was a more policy directed kind of effort. And then our follow up survey, I mean, in part because we found some interesting results from our first survey, we thought we would continue it, you know, both for this policy, relevant focus, but also kind of, as an area of research, I think, you know, the behavior of landlords and tenants, you know, especially among the most vulnerable tenants and kind of, perhaps what people might dispute being characterized as vulnerable landlords; (this) is an area that has traditionally been understudied, I think, by housing scholars, you know, obviously, Desmond's work on evictions kind of blew up that specific kind of relationship between the landlord and the tenant. But I think there's a lot more there that we don't know about, kind of strategies and how people deal with hardship and what landlords do in response to different tenant behaviors. So I think that kind of from a more basic research perspective, like an explanatory research perspective, this is also kind of relevant work. You know, there's a lot of assumptions out there about different kinds of landlords and different kinds of tenants that we found some of them to be less true. But we did confirm, you know, kind of a lot of expectations, and, you know, things were very bad in our first survey, they were still very bad in our second survey, you know, in the...

Shane Phillips 12:17
Surprise!

Paavo Monkkonen 12:18
I mean, they were bad... I was gonna say they were bad in a different way, right, so bad for maybe different people and kind of raise some questions about how can this progressed, and it's, you know, really unfortunate, this couldn't have been kind of a parallel effort with some long term kind of following of different kinds of people, because these snapshots give us one sense of what's happening, but often raise more questions than answers as we'll get into. But yeah, I mean, you know, so over a third of our respondents lost their job, another 20% ish lost work or income, you know, and of people that are reporting some form of these kind of employment problems, 60% reported some form of problems making rent, be it paying late paying partially or not paying at all, so..

Shane Phillips 13:06
Wow.

Paavo Monkkonen 13:07
Yeah. I mean, it was a tough picture of the condition of renters.

Mike Manville 13:11
And just to put that into some context, you know, one of the things we confronted was that there aren't really good, pre-COVID baseline estimates of how often you know how timely the rent is, you know, and I think the best comparison we found is you can look at the 2017 and 2019, American housing survey, they asked about a couple months of rent payment. And if you look at those for the Los Angeles metropolitan area, everybody's paying their rent. I'm exaggerating a little bit, but you're talking about, well over 95%, upwards 97% of people that are by the end of the month getting their rent in, and very small numbers of people who would report being more than two months behind on rent.

Shane Phillips 13:58
Okay.

Mike Manville 13:58
And in our survey, you know, those numbers are like tripling.

Shane Phillips 14:02
And how about evictions and eviction filings? And I think, you know, important context here that pretty much this whole time, there's been an eviction moratorium. And so I know there were quite a few eviction threats and eviction filings like how, what were those numbers? And why was that even happening? What's going on there?

Paavo Monkkonen 14:19
Yeah, I mean, before that, right with the renter distress numbers, you know, in our first survey, we saw people that were paid rent partially at least once during the three month period, it was 15% of respondents. In our second survey, it was 30% of respondents. Also, people that paid less late, jumped up from 21 to 28. So there's kind of more problems with payment during the second wave, just focused on that. Things are getting worse every month period. Yeah. And so right, threat to eviction went up a lot and eviction filings went up a lot. The numbers are from you know, 15% in the first wave to 25% in the second wave of our respondents experiencing a threat of eviction, you know, of respondents that had problems making rent, and then evictions initiated went up from six-ish percent to about 20%, almost during the second wave.

Mike Manville 15:13
And I think we, you know, the context here, you know, as Shane alludes to is that there wasn't a rent moratorium. There was there's a different times there was the the county moratorium, there's the state's moratorium, and of course, the CDC moratorium. So when when our respondents report a threat or a filing, especially a filing, you know, it's unclear to us exactly what happened right? It's possible that, you know, a landlord could even during the moratorium go down to the courthouse and actually file the eviction. And what the moratorium in general prevented was anyone acting, right. So it's possible that that happened. It's also possible that what's being reported is just an elevated threat.

Shane Phillips 15:51
Hmmm

Mike Manville 15:51
Right, like the landlord says, you know, first they say, "if you don't pay me, I'll evict you", and then you know, they would answer our survey and say, "Okay, well, I've been threatened with eviction". But then they come back a week later, and say, you know, what, like, "I did it, I pulled the papers, I'm gonna evict you", and how's the tenant going to know?

Shane Phillips 16:10
Even courts barely know, because they're not actually processing these things right now.

Mike Manville 16:15
Exactly. And so it's possible that that's being reported as just an escalated level of threat. But certainly, whatever is going on, it's being perceived by the tenant is something more than just, "Hey, you know, if you don't pay, I'm going to take steps to get you out of here"

Shane Phillips 16:30
And then on, because this is a fairly big survey, you know, it's a large enough sample, you can break this down by race and ethnicity, how do things look, you know, for different groups here?

Paavo Monkkonen 16:41
Yeah. So that was one of the things that that changed a bit between the waves, and we'll get into kind of the, the second survey may have some, you know, the component composition of the sample might be a little bit different from the first survey. But yeah, so in the first wave, we saw, you know, kind of Asian and white households with reporting 12% partial payment of rents were Black and Hispanic households reporting 22 and 19% of partial payment are so big difference there, and that the percentage points, and the kind of level of difference changed a lot in the second sample, actually, you know, Black households reported 33%, not partial payment within one of the three previous months, but Asian households reported 37%, white households reported 25%, and Hispanic households reported 30%. So kind of narrowing of the distance between kind of incidents of problems paying rent. And yeah, so that was a surprising result. And also, we'll talk about kind of background owed by race later. And that's also further different results than expected.

Mike Manville 17:49
And as you can imagine, especially in the first survey, that the race and ethnicity breakdowns were highly correlated with income and job loss and in general, yeah, in general the white and the Asian renters were higher income, a little less likely to have lost their job, less likely to have reported lost income. And that of course, so it all becomes sort of over determined and all that adds up to a harder time making rent paying?

Shane Phillips 18:17
Yeah, it is very interesting, though, how, from wave one to wave two, you know, for Black and Hispanic households, there was roughly like a 50% increase. So from 20 to 30 ish percent in both cases, who had, this was for paying rent late, right?

Paavo Monkkonen 18:35
Partial payment.

Shane Phillips 18:36
Yeah, yeah. But for Asian households, it was from 12 to 37. So it was that, you know, 200% increase, and for white, it was 12 to 25. So like a 100% increase. So that was certainly interesting.

Paavo Monkkonen 18:48
Yeah. And that that will correlate with our next surprising finding.

Shane Phillips 18:53
Yeah, so there's a lot of surprising stuff in here. I think one of the ones that stood out to me was the results for what kinds of landlords were more likely to threaten or file evictions. So I think most people would expect that it'd be the bigger corporate landlords, these are the guys who have the worst reputation, that they would be worse that they're less lenient than mom and pops are family and friend type landlords, more likely more quickly to resort to eviction. But that's not what you found here. So can you share those results? And maybe your thoughts on why those don't align with that intuition?

Mike Manville 19:31
Yeah. So I mean, we found essentially the opposite of what you just said, the conventional wisdom might be and I think that is, in fact, the conventional wisdom that the renters who were behind on payments who were most likely to get an eviction threat and most likely to get an eviction filing, were people who rented from families and friends and you know, that was, I forget the exact numbers but they were probably, you know, about 20-25% of our sample and, you know, about 30% of the people who were threatened with eviction, after that you saw and it was a pretty steep drop off into the people who just rented from some mom and pop landlord, and then the least likely to be hit with some sort of eviction threat of filing where people who rented from a big management company and LLC as a corporate landlord. And so, you know why that may be the case, you know, is probably a couple of different reasons. So one and this is this isn't the explanation, but I think it's probably important to point out for one thing is just that, if you think that the corporate landlords are operating bigger buildings that just have higher rents, then they may also just have higher income renters. So the chances of them having a tenant who has trouble paying might be low.

Yeah.

Right, so just from the beginning, there's a big difference between someone working at, you know, a carwash or working at a fast food restaurant and renting from their uncle or renting from some mom and pop landlord, the pandemic comes and they're out of work. Right, as opposed to some recent college graduates, they work for an accounting firm downtown, they pay higher rent, they rent from a corporate landlord, the pandemic comes, and they just go to Zoom. So right off the bat, you might just have less non-payment in these buildings. Now, the thing is, our results are conditional on non-payment

Shane Phillips 21:33
Paavo's making weird faces

Paavo Monkkonen 21:36
I was looking this morning, and I looked at actually in our sample, slightly higher incomes in the friends and family tenants than the individual landlords, and also this is the opposite of like in terms of income breakdown, on average, it's the opposite.

Mike Manville 21:53
Is that right? Okay.

Shane Phillips 21:54
So all all of our intuitions are wrong, you have no idea what what to expect?

Paavo Monkkonen 21:59
I mean, I think you know, there might be some issues with who we're sampling and also who we think of as larger landlords, right? Because if you think of like, fancy companies, you think companies are all luxury, new buildings. But in fact, companies do run a lot of lower-cost rental homes.

Shane Phillips 22:17
And I think Mike is getting at the point that even if we were right about the incomes of these households, this is not the explanatory thing, either.

Mike Manville 22:29
So regardless of whether that intuition is correct, and apparently in our sample, it isn't that which surprises me a little bit. But if it was looked at it more recently than me, the the thing is that this is, you know, even controlling for not paying, what we're seeing is that these bigger buildings are less likely to file an eviction. And and I think that's, it's surprising, but it's also if you look at what we know about who evicts so far, you know, if you look out over the literature, a lot of it relies on eviction data. Right, so you look at studies of what kind of landlords are doing evicting in this metropolitan area, that metropolitan area, this big city and so forth, the data that's drawn from because it's the only data we usually have is the eviction filings themselves. Right, which is that answers the question of who actually, you know, when someone is going to eviction court, what sort of building do they live in? What you don't see, though, is the question that we're sort of able to answer with our survey, at least for Los Angeles County in the last year or so, which is, if you don't pay, you know, what kind of building are you most likely to be evicted from? Right, and if you just have a situation where lots of people happen to live in a particular kind of building, then the rate at which non-payers are evicted can be pretty low. And yet, you can still have most people being evicted being evicted from those building. So what we do you know, and and I don't know...

Paavo Monkkonen 24:01
why, in some cases, the Public Housing Authority is the largest evictor in our region.

Mike Manville 24:05
Yeah, as a huge evictor, right. I mean, there's a lot of people with precarious incomes happening to live in very large buildings. Even though a lot of public housing authorities do take, you know, the eviction is really considered a sort of last step right? Right. They will really work with a lot of people before they have to they feel like they have to evict them. And so I think something like that might be going on here. And then the question, of course, is like, Well, why is it that the big landlords are able to sort of exercise that forbearance and, you know, then you just kind of get into speculation about well, maybe they, it's, they're better able through their reserves to carry a couple of non-paying tenants. It may be that, you know, a really small landlord or especially a family or friend, just feels like they can't, you know, make the mortgage without getting someone out and finding and I think this is, you know, problem I mentioned earlier that we embarked on this very much for the the policy issue, you know, we wanted to see how the renters in LA County were doing it. But if you wanted to look at this from a research perspective, and this is one of the things we know very little about, which is that the, the interaction between landlords and tenants when it becomes obvious that someone isn't going to be able to pay, right that that there has been some stuff written in the housing, the owner occupied housing literature after 2008, about sort of strategic interactions between people who have mortgages and banks and so forth. And it's reasonable to think that some sort of similar game theory plays out between a tenant who realizes they're not going to be able to pay and a landlord, right, which is to say, like, okay, you know, I'm a tenant, I realized I'm gonna come up short. What happens if I don't deliver that chip? And you might reasonably think, if I'm renting from my brother, or my mom, or my cousin, they'll be cool. Right? And then I'm gonna, so I can perhaps bounce some of that. Yeah. And perhaps wrong, perhaps. Yeah, perhaps you're wrong, right? Yeah. And you might think that if it's, you know, a faceless LLC, you really have to get them to check. And so you might see that that person, you know, they, they're more likely to pay the faceless LLC, and maybe skip on some other expenses, whether it's food or what have you. And the reverse might happen with renting with the family members. But you know, what we see in our survey is that the family members are much more likely to pull the trigger and try and get someone out than the LLCs are. I probably should chime in, I don't think we have like a really coherent explanation for why that's the case.

Paavo Monkkonen 26:53
Yeah, I mean, especially the dramatic, I mean, you know, among renters with distress, 38% of those renting from family friends reported being threatened with eviction, and only 9% of those renting from a company, right, so it's like...

Shane Phillips 27:09
Yeah, that's a huge difference

Mike Manville 27:11
Yeah. And, you know, I mean, there might be a sense in which the big companies in addition to feeling like they can do it, you know, that they can carry it, you know, if you've got 40 tenants in your building, and a couple of them not paying, you're like, "Okay, we can get through this", in a way that a small landlord can't. They may also just feel like they're gonna come in for more scrutiny.

Paavo Monkkonen 27:32
I think there's you know, those both point to less of that action on the part of big companies. And, you know, there's the question of kind of rents, like efficiency rents, perhaps being charged in the case of, you know, friends and family might be charging less than market rents to be nice, and then that might lead them to be more likely to want to get some...

Mike Manville 27:56
You know, I was, for unrelated reasons, a couple ofdays ago on Blackstone's homepage, of course, nobody gets worse publicity than Blackstone, and the first thing on their real estate page is just like, since the pandemic began, we have not evicted anyone, and we won't right? So it's a company that is, you know, for the good.

Shane Phillips 28:15
We will not do this thing that is illegal, so commitment.

Mike Manville 28:20
Yes. Right.

Shane Phillips 28:21
I mean, that's something that stood out to me about this is like, you know, you would think that the corporate landlords would probably be most aware that there is a moratorium and what, you know, the rules actually say, and that, you know, filing or threatening an eviction doesn't really have any force behind it. So I guess that could partly explain why they're not bothering with threatening.

Paavo Monkkonen 28:42
And also maybe because the mom and pops don't need good PR, because apparently everybody already loves them.

Shane Phillips 28:48
Yeah. And everyone's top landlord.

Mike Manville 28:52
I think there's a certain amount of, you know, yeah, there's like obviously this cynicism, especially right now in Blackstone saying, like "we haven't evicted anyone". It's like, we haven't been able to, you know, but they were making that claim, even when they weren't covered, right? This is a company that has justifiably gotten a lot of bad press, and so they're sort of pouncing on this. But if you think about a mom and pop or a family and friend, the incentives might be lined up better to actually do this, in the sense that like, you know, whatever your ne'er do, well, nephews like, you know, missing the rent. And he just goes over there and you're like, "you know what, you know, Jimmy?" And he says, there's an eviction moratorium, and he's like, "what yeah, I raise you from a pub just get out!". You can do it a little bit more informally. You can do it under the radar. And if as Paavo is saying, which might be well, the case, if you're that landlord, you're not trying to maximize your rent. You're not hitting the quarterly, you're just trying to get yourself some cash for this extra room to cover the mortgage. You might think you have a better chance of filling that unit.

Paavo Monkkonen 30:01
Right, and then once the talk of rental assistance came into play, I think it was probably even easier for the bigger companies to think, "oh, we're going to be able to get some of that", you know, and so in our data, we saw that looking at kind of back rent owed, there's more of it owed to the company. Like so the ratio of back rent-to-rent for tenants, renting from big companies, is higher than for the other categories of landlords. And so they are owed more money, and they're still, you know, threatening people less, but they probably know that they'll be able to navigate the bureaucracy to get repaid in a way that mom and pops probably maybe won't be able to, and definitely don't want to probably.

Shane Phillips 30:44
Yeah, one last thing I'll say, and you could frame this in a way where it does support these findings is that bigger buildings have the potential for more networks between the tenants themselves, and information sharing where, you know, there might be a bulletin board or something that says, like, you know, "you can't be evicted" that someone puts up. And so the landlords knowing that seeing that, whether they pull it down every time they see it or whatever, they know that the knowledge is out there, and then they might be more wary to try that tactic when they know that, you know, if you try to evict the person in unit 103, they have, you know, four friends in the building, who are gonna say, "Oh, they can't do anything about that". And so, you know, they might not even bother.

Mike Manville 31:29
Yeah. And I think there's a lot to that. And I think then it just, it sort of builds on itself to the point where maybe you were thinking about doing this, maybe not, you realize that it's gonna be a long time, before you can force a non-paying tenant out. And at that point, you might as well just try the repayment plan right? If you say to someone, "Oh, you know what, I just walked down to the courthouse and filed an eviction on you". And so sometime in the next seven months, or whatever, some indeterminate long time horizon, you're going to be evicted. I don't think you as a landlord, and you can be as mercenary and heartless a landlord as you can imagine, there's no upside to that for you, right? You're not going to get any of your money, the person's going to be there for months, they might damage your unit right, as time gets closer to when they're going to leave. You don't have to have a sort of the bleeding heart to say to yourself that, given the circumstances, the much better thing for me to do is try and negotiate some sort of plan to get repayment. And then if you are a mercenary shark, you know, when the eviction moratorium gets lifted, then file for the eviction. So I think in many ways, the moratorium put in place a set of incentives that said, especially for the bigger buildings, they should just wait.

Shane Phillips 32:53
Okay, I want to move on to another surprising result from the second survey in particular, and this is with regard to high income renters and how they responded to the pandemic, especially kind of as it wore on. So in the first round, you found that high-income renters were the least likely, between high, middle and low- income renters, to pay late, pay partial or to not pay rent at all, at least once. But by the second wave, they ended up more likely than both middle and low-income renters to pay only partial rent at least once, and almost as likely as low-income renters to pay late at least once. So what is going on there?

Paavo Monkkonen 33:35
Yeah, no, this is something that really piqued our counterintuitive finding sensors here and, you know, got us thinking about more this kind of idea of strategy on the part of tenants, in terms of, you know, tenants with higher incomes, for whom leaving or having an eviction filed against them, would be less troubling, because they could easily find a new place, you know, they might be more likely to just kind of not pay on purpose. You know, and it got us worried about lower-income households or kind of less-resourced, less social capital, perhaps having households in terms of struggling to pay no matter what, right, so making rent first, kind of forgoing other household expenditures or borrowing money, it's right to pay rent, whereas higher income households kind of maybe were more okay with waiting on rent, because they felt more secure, kind of generally. Yeah, so the the flipping of the correlation between income and problems paying was was really striking. You know, and also with this idea of background, we didn't put it in this report yet, but we're working on kind of a larger paper with this second wave of survey data. You know, we find that the the median household that owes rent, owes kind of 1.2 months of rent, so 120% of a month of rent. The highest income tercel, third of households, owes two months of rent...

Wow,

... and the lowest income, tercile a third of households, only has one month of rent of those that owe. So they're much more likely to be late, pay partially or not pay, but then also they owe more than the low-income households.

Shane Phillips 35:14
Yeah, and I guess we can sort of jump ahead here to policy a little bit, because I think it relates directly to this. Something that I've heard about, you know, listening to other shows and reading things, is how the ways that renters have been coping with the loss of income and how rent relief is actually being delivered aren't always that compatible. And so, you know, what I have in mind here is how, as you said, a lot of tenants, maybe they're taking out a loan, or borrowing money, foregoing other things they need in order to pay rent, and that seems maybe to be disproportionately true for lower-income households. But the rent relief, as I understand it, is really only to relieve your rent, you know, your back rent if you have not paid your rent. So if you made the kind of selfish choice in a way, like it's a smart choice, I don't want to fault anyone for it. But like, if you kind of had a sense for how the rules were set up, you might say, "well, I'm not going to sacrifice anything to pay rent, because maybe that will be covered", versus the person who took out that loan or borrowed money now has a big credit card bill, but their rents paid off, they're not eligible for anything. And so that seems like a really big problem to me.

Mike Manville 36:27
Yeah, I think well, I completely agree. I'm going to answer that, but also double back to something to what Paavo was saying earlier, and just with a caveat, which is that, you know, that this surprising result about the high-income renters it's in the second survey, and we've put out a brief based on the second survey, but we haven't really sort of examined it to the extent we examined our first one. And one of the things that we should observe is that in the first survey, like almost everything, we found that which was very reassuring, it correlated in all the right places with what the Pulse was finding. This one is a little bit of a divergence that the pulse doesn't seem to record quite as big of an increase in being behind. And of course, the question is different.

Shane Phillips 37:10
This is this is the pulse not for national, but for the LA Metro area, which is not exactly the same as LA County but there's a lot of overlap.

Mike Manville 37:18
Yes, there's some good reasons to think there would be some discrepancy, because the Pulse metropolitan area is the Los Angeles and Orange counties. And in addition, it adds 3 million extra people, but most of the renters are in LA County, right? So it can kind of throw proportions off when you... basically, what you're doing is you're kind of changing the denominator. That being said, right so when we look at this result, you can think to yourself, well, there's two plausible things that could be going on. One is just that as time went on even higher income people had some trouble right? And we do know that that happened to some extent. But the other thing is sort of what Paavo might have been alluding to and and what you were alluding to in your question, which is that if he were to start to get strategic, if you were to think that some renters would become strategic, as the moratorium continued. And as it really wasn't clear how we were going to sort out the question about....

Shane Phillips 38:15
The lack of clarity on how or if it was even going to be addressed was really, yeah, I'm sure weighing on a lot of people.

Mike Manville 38:24
Yeah, and so if you had some people who thought, "well, you know what, like, maybe there will be generous assistance for anyone who's behind, or maybe some rent will just be canceled", the people most likely to be able to really capitalize on that, paradoxically, are the higher income tenants, right? If you're a low-income tenant, that uncertainty is just going to...

Paavo Monkkonen 38:46
Especially if you're requiring reams of paperwork as the original plan was

Mike Manville 38:51
Yeah, and you know, because your income is lower, it's precarious, despite what you sometimes hear from sort of like conservative policymakers or things like that, the likelihood that that person's going to engage with the system is quite low. Whereas if you're a high-income tenant, you might have a bunch of money in your savings account, you might have family, you have somebody and so you might say to yourself, "you know what, I'll withhold a little bit of rent, and get away with it. And if I can't, well, then I'll just pull money and pay and no harm no foul". And so some of that might be going on. And I think this now brings back to your question. Yeah, I think that one of the things that that haunted the entire pandemic policy question about renting was, it just was never entirely clear how we were going to help people.

Shane Phillips 39:43
Yeah, right.

Mike Manville 39:44
The moratorium went into place very quickly, and that was the right thing to do. And then for too long, it was kind of all we had. And so in that space, you had both renters and landlords, right? I mean, you know, we worry more about the renters, and I think for good reason, but both renters and landlords saying like, "well, now what?" right? Is someone going to help me pay, is all rent going to be just sort of forgiven? You know, if you listen to some of the more radical voices, is it just going to be canceled or abolished?

Shane Phillips 40:14
Or I think what was kind of on the table for a long time, which is, it's all just gonna kind of accrue, and you have to pay it back within a year or something. So you could have, you know, this would be a rare case, but 10 or $15,000, in rent debt, earning $30,000 a year, and there's no hope for that. But that was sort of the plan at some point, right?

Paavo Monkkonen 40:35
And it gets converted to some other form of debt, and you get a nice repayment plan. But all of those... I mean, if you were following those conversations, which you were probably more likely to do if you were well-off and highly educated, right, and it seemed like something was going to happen. And so like, it might be a better idea to defer some payment.

Mike Manville 40:54
Yeah, and so I think that what happens is, if you're not following it, or if you're following it, and you're at all risk averse, right, and I think someone who has very little money has to be quite risk averse. This comes back to what Shane was mentioning, which is that well, you know, your first dollar goes to rent, right? You know, you because it's very hard to handle anything else, if you don't have a roof over your head, right? It's better to eat a little less, it's better to skip some medicine, it's better to, you know, wear clothes till they're threadbare, than to put yourself in a position where you and your family are out on the street. And so you end up paying the rent, and that you might be doing that by borrowing some money from your family, by taking out a loan, by putting it on a credit card by doing all these other things that can put you in, in all sorts of debt that aren't rent debt. Right. And that's a totally rational thing to do. And then, you know, as we said, what happens is, the state does come through in a manner of speaking. And what it says is, "oh, if you're behind on your rent, we will pay you back for that".

Shane Phillips 42:02
But only that...

Mike Manville 42:03
and only that. And of course, that's super important right? And one could certainly wish that this program was executed better. But it does leave, and our survey suggests a lot of families, a lot of households carrying some other form of high -interest debt that they took on explicitly, so they wouldn't fall behind with their landlords, because they weren't sure what was going to happen. And there is no policy mechanism beyond the normal unemployment and whatever that we have going on to help them get out of that.

Shane Phillips 42:38
As someone who's struggled, pretty heavily, to pay rent from like age 17 to 25 or so, I can say I don't recall, I was certainly late on rent plenty of times, but like, I don't ever recall thinking rent is going to be anything but like the first thing I pay, you know, because you need a place to live. Why would that not come first, and so...

Paavo Monkkonen 43:00
And especially in a place like la where where rents are going up and most people's current rent is probably much lower than a similar unit would rent for on the market right? Yeah, so I think that...

Shane Phillips 43:12
Yeah, to lose a rent-stabilized unit.

Paavo Monkkonen 43:15
Yeah, even even a non-rent stabilized unit is probably, if you've been there for a while, it's a better deal than you'd get not to mention moving. Man, the discussion about this Relief Program really reminds me of the Hamp failure of post-2008 era and like the US being just quite bad at programs directed at people needing assistance quickly. I mean, to some extent like, obviously, it's a challenging endeavor to start up a program anew in the face of crisis and all these things but the kind of complicated structure that that program had leading to it not reaching most people that needed it, is eerily reminiscent of this one.

Shane Phillips 43:58
Yeah, and I think we can blame the state to some extent for this, but probably the bulk of the blame should be laid with the Trump administration to be realistic here, where they just didn't take it seriously. And it was until the very end of that presidency where, you know, things started to move forward. I don't want to lay it all on that because I think a lot of people could have done better. But when you don't have that federal support, which is where a lot of this rent relief money is coming from, and especially, you know, it turned out that the state had this big budget surplus here in California, but we couldn't have foreseen that, really. And so we just didn't know if we would have the resources to...

Paavo Monkkonen 44:39
Yeah, but I mean, we'd failed to start a rental registry to even get good info on this on the people that needed the money...

Mike Manville 44:45
Yeah. Yeah.

Paavo Monkkonen 44:45
And we failed to do a number of, you know, infrastructure changes that would have allowed it to happen quickly.

Shane Phillips 44:51
Let's just talk about that a little bit to close this out. You came into this most interested in the policy questions. So, you know, coming out of it, I guess the the way I'll put this is, what have we mostly done right? And what have we, what did we get wrong?

Mike Manville 45:10
Well, I mean, the moratorium was the right thing to do. And, you know, I think it is still the right thing to do, although as time goes on, right, I understand arguments that we're relying too much on it. Right, that something should have come with it. But the moratorium was absolutely the right thing to do, that there was public health and humanitarian, and just like human decency reasons to make sure nobody just got ejected onto the street, because essentially, the government shutdown the economy. Now after that, started doing...

Everything from then on.

It's like, right, and it's just easy for me, like, you know, Professor Egghead sitting at my table to say this but , you know, and it starts from some of what Paavo alluded to, which is that we have, for too long, too many states, California included although California is probably better than some, we have social welfare programs that are set up, you know, there's sort of grudgingly set up. Like you know, they're not designed to be easy to use. And, you know, California is better than Florida but what we saw is just like, even when money started flowing, it was just hard to get it out. It's hard to get it out, because it's cumbersome, and it's old. And there's a certain amount, I'm sure, of bias built into it, which is that like, this is a minority, numerically, and probably, you know, disproportionately racial minorities who are going to access this system. So we've never really cared that much about how well it works. And then there's, as always, this concern about, "we have to make sure that this doesn't go to the wrong people". You know, we got to triple check, and you got to have this letter and this testament, and so forth. And obviously, fraud is bad...

Paavo Monkkonen 46:51
Unemployment debacle didn't help matters for sure.

Mike Manville 46:54
Yeah. And the unemployment debacle didn't help but this is, I think that our welfare systems in the United States have always erred too much on the side of like, "we don't want a single loose dollar going to someone who may not deserve it", and that's, you know...

Shane Phillips 47:14
It's better for some people to not get money that they need than for others to get money they don't need basically, like, that's the calculus.

Mike Manville 47:24
That's the ethos. And it you I think that's to me, quite arguable, even in normal times. Yeah.

Shane Phillips 47:31
But I think that's wrong even, you know, with food stamps during non-pandemic times. It's important to make sure people have enough to eat, even if there's some waste, you know,

Mike Manville 47:42
Yeah, especially because the government is going to waste some money. And so if we're going to waste some money, I'd like to think we're wasting it just in an effort to be inclusive, where people like having enough to eat, then like, I don't know, the next drone strike or something. And this is especially the case, when you have what's basically a national emergency, where it's already been quite clear that money isn't much of an object, right? Congress is allocating trillions of dollars. And the economy is losing billions of dollars in a day, it's okay if a few people pull in some rental assistance money that maybe didn't strictly relate to a job loss because of COVID-19.

Paavo Monkkonen 48:24
Well, and that's one thing about this, this counterintuitive finding about the you know, higher income renters owing more money and such as like, you know, our discussions about it, you know, the moral hazard is interesting from a kind of academic perspective, but we don't want it to be our frontline kind of policy conclusion, because it could easily mobilize to say, "well, we shouldn't be doing this rental assistance program that's going to help disproportionately higher income renters". I mean, the problem is we're not helping the lower income renters. But like if we're helping a few strategically minded higher-income renters, and on accident, they are getting more than they "deserved", and I think that's something I'm fine with. I mean, it's very much like that debates around the foreclosure crisis, where it was like, we don't want a moral hazardly reward those people that bought too big of a house and said, "well go to the banks".

Mike Manville 49:17
I mean we just want to reward the bank recklessly.

Paavo Monkkonen 49:21
But I mean, that argument about like, individual responsibility was mobilized so much back then that you could imagine it happening now, and...

Mike Manville 49:29
Yeah, I mean, and again, it's not that policy targeting isn't important, right? Like I mean there's legitimate policy reasons for if you say you want to help low-income renters, you know, making sure you get it low-income renters. It's just that sometimes it gets carried to this point where any leakage at all is considered unacceptable. And then because of that concern, you don't get at the population you want to help, and I think when we first started rental assistance, we have this sort of cumbersome process of, you know, you file paperwork and your landlord files paperwork, and then the government pays your landlord for you. And a lot of that was just to do this sort of double verification, like we all agree this person's behind, we all agree that it's because of COVID. On paper, maybe that looks good. But in the real world, that's a lot of transaction costs, especially for a household that's probably in some distress. And it would have been much better to just like, you know, if you figure out there's a tenant who's behind, give them some of that money.

Paavo Monkkonen 50:36
Well, and I'm sure there's.... I don't know that the literature on administrative burden very well, but I'm sure there's a strong correlation between affluence and ability to make sure the paperwork lines up in the right way.

Mike Manville 50:47
Yes

Paavo Monkkonen 50:48
So you would be leaving out the worst off in that case. I mean, I think that even expanding the idea of the accrued rental debt relief to just payments to renters, I don't think it's part of the conversation, but I think it should be.

Mike Manville 51:03
Yeah, and I think, you know, most landlords do want to just be paid. But I do think we should point out that there's been some evidence of landlords turning down the government assistance, and that is plainly unfair, right? If the tenant qualifies for assistance, and wants to pay you as per the contract you've entered into with that tenant, you should have to accept that money. And I would not be surprised if a lot of what's going on there is that some of these tenants are longtime residents and rent-stabilized apartments, and this is a way to decontrol that apartment.

Shane Phillips 51:40
It's basically, you know, like I couldn't get you to sell out for five or $10,000. But I'll just eat this loss of rent, which amounts to the same thing, and kick you out

Mike Manville 51:51
And put this back on the market for 60-70% more than you were paying. And doing that is worth it to me as a landlord. And that is not the purpose of a rent relief right? It's not to decontrol our rent-stabilized housing stock. And so, I know that people have been trying to get a fix on that but that was going on a little too often earlier. And it really goes back to, I mean the standard economist sort of approach to redistribution, which is just like, when you find the person who needs money, give them the money, they'll spend it right? If you just handed some money to a person who is behind on their rent, they would pay their rent. And the added benefit is if that person had stayed up to date on rent, and done so by going into debt to pay their lender or their credit card or whatever, they would pay that person, right? And you wouldn't punish them for doing what was the rational thing to try and protect their household, which is to put the rent first. And it's a hard problem, I don't mean to like throw the state of California under the bus here because...

Shane Phillips 52:54
We are talking, you're probably increasing the cost of this tenfold, to take that approach to just give people all, you know, an equivalent amount of money. So it's not a small thing for sure.

Mike Manville 53:07
It's not a small thing again, you know, I think we certainly could have afforded it. It's not something we were set up to do right? You know, we're very accustomed again to the sort of paternalistic welfare state. So I understand why we didn't. But I also think it's important for everyone to understand that because we didn't, a lot of people who work really hard and did the same sorts of things a lot of us would have done in that situation. And make sure first and foremost that we have a roof over our head, they're in debt, and they're not getting as much help.

Shane Phillips 53:41
Yeah, well, I know we can wrap this up. But I know there are some other resources out there. So of course, the Pulse survey have been going on there anywhere else do you want to point listeners to for other research that's been done on this...

Paavo Monkkonen 53:57
A bunch of good studies out there, we can we can put them in the in the show notes.

Mike Manville 54:01
Okay. Yeah. And I guess the one thing I'd say is that you know, that a lot of the stuff we're trying to get at is a moving target. You know, exactly how much money people owe in rents and things like that. And the estimates really vary. And so I would encourage anyone who reads our stuff to read everyone else's too.

Paavo Monkkonen 54:18
Yeah, we didn't get into the total size of debt estimate.

Mike Manville 54:22
Which is good, because right now we're still tring to work it out...

Paavo Monkkonen 54:25
Yeah, we're still figuring it out. And with a grain of salt on this kind of 'whoa If true' finding about higher income households. I mean, it is one of those things that is quite counterintuitive, and we want to dig in to make sure it's it is what we're saying is

Mike Manville 54:41
Right, and then we can use that grain of salt to work back to the point of our podcast, which is about housing research, which is to say that like renters as a population, we've always known and I think now Paavo, and I and Mike and Richard are learning you know, firsthand, they're hard to study right? And so, you know, we're doing our best and the Pulse is trying and but this is a population and particularly when you're talking about the subsegment of that population that might be having a lot of economic troubles. You know, one of the obstacles to helping them is learning about their condition in a systematic way. So we're trying, but it does introduce a lot of error into the process too.

Shane Phillips 55:23
One more plug for the rental housing registry.

Mike Manville 55:26
Yes.

Shane Phillips 55:26
Although Los Angeles has won the city and did not seem to use it to any good purpose during the pandemic, as far as I could tell, unfortunately.

Mike Manville 55:36
Yeah, that's probably true.

Paavo Monkkonen 55:37
And we'll see. I mean, you know, all eyes on the end of the month, and what's going to happen, and, you know, what the courts are going to do with all the eviction cases. I mean, that's something that we've discussed, but don't really have any good sense of kind of how that's going to work right? This kind of fear of a large number of evictions being filed, and then what the bureaucracy will do with them all.

Shane Phillips 55:59
All right, Mike and Paavo, thanks for coming back as guest today.

Paavo Monkkonen 56:02
Thanks.

Mike Manville 56:03
Thanks.

Shane Phillips 56:09
As promised in our show notes, you can find a few other studies and surveys on these topics of eviction and renter distress during the covid-19 pandemic. And you can learn more about this and all our other episodes on our website@lewis.ucla.edu. The UCLA Lewis center is on Facebook and Twitter. I'm on Twitter at Shane D Phillips. And you can find Mike and pavo there. Thank you for listening. See you next time.

Transcribed by https://otter.ai