The US had a severe housing affordability crisis long before coronavirus hit. In 2018, close to half of all renters spent more than a third of their income on rent. Home prices are rising faster than wages in roughly 80 percent of American metro regions. Rural America has seen steep increases in housing costs — as well as in the number of households spending at least half of their income on housing. And all this was before we began seeing record numbers of businesses shuttering and workers being laid off in the wake of Covid-19.

The combination of coronavirus and America’s unaffordable housing system has resulted in a disquieting paradox: At the same time that public health officials are warning that staying at home, away from others, is essential to preventing the rapid transmission of coronavirus, huge swaths of Americans are finding it harder and harder to come up with the money needed to keep a roof over their heads.

“For far too long, policymakers at all levels of government have failed to provide decent-quality, stable, and affordable housing to millions of Americans,” writes Jenny Schuetz, a fellow at the Brooking Institution’s Metropolitan Policy Program. “In COVID-19, we’re only starting to see the devastating consequences of that failure.” A few weeks ago, Schuetz wrote a prescient piece outlining how unprepared America’s housing system was to handle the economic fallout of coronavirus. The way events have unfolded over the last few weeks have proved her diagnosis correct.

I spoke to Schuetz to better understand why America’s housing system was so radically unprepared for coronavirus, how the situation today could end up far worse than 2008, what a comprehensive policy response would look like, and more.

A lightly edited transcript of our conversation follows.

Roge Karma

I want to start with where the US housing system was before the coronavirus hit. Over a week ago, you wrote a piece called “America’s inequitable housing system is completely unprepared for coronavirus.” Could you just lay out that argument: In what sense was our system unprepared?

Jenny Schuetz

The issue is that we’ve got a couple of groups of people who were unstably housed or unhoused even before the crisis hit. There’s been a fair amount of attention to the homeless population because that’s a very visible group of people who obviously are not going to be able to shelter in place because they literally don’t have a place to live. In the last five years or so as housing costs have gone up, especially in places like California and Seattle, we’ve seen an increase in the number of homeless people. Currently, we have more than 500,000 people who don’t have a place to live. For them, “shelter in place” is just impossible.

But even beyond that visible population, about 20 percent of households all over the US were paying more than half of their income on rent before the crisis hit. These are both people in big cities and in rural areas whose income is just too low to afford the cost of market-rate apartments. They are stretched beyond their budget to pay for even minimum quality housing — and that was before the current virus hit and potentially took away their jobs or cut their hours.

Those are the two most vulnerable groups. Then we have some particular kinds of housing situations that become difficult in a public health crisis. For instance, people who are living in group quarters. Nursing homes obviously are very vulnerable because the residents are elderly. But also kids who are living in foster homes or any kind of institutional housing like dormitories or prisons. Those are places that aren’t really set up for a public health crisis.

So before the crisis, we had a fair number of people who are sort of in either a precarious housing situation or something that really doesn’t work when social distancing is essential.

Roge Karma

Something you alluded to there is the idea that the public health crisis posed by the coronavirus and housing affordability crisis that existed before coronavirus aren’t actually separate crises at all — they are inextricably linked to one another. What does that connection look like?

Jenny Schuetz

The way we are recommending people deal with the public health crisis and stop the spread of the virus is to stay inside your house, avoid close contact with other people, and be constantly sterilizing your personal space. Those are really difficult conditions for people who are in poor quality housing and small spaces. In a lot of high-cost neighborhoods, particularly in immigrant neighborhoods, people are living in tight quarters with a bunch of roommates or extended family. So, for a lot of people the public health recommendations are going to be impossible because of their housing conditions.

And as people have more pressure on their budget and are unable to afford housing, they are at risk of having to move into different kinds of living situations which will also put them at greater risk of public health. The best thing we can do from a public health perspective is to ensure that everybody who’s in a house can stay there and not have to downgrade to a worse quality housing or tighter quarters.

Roge Karma

Let’s talk about housing affordability. What does it mean to be “cost burdened” or “severely cost burdened” in terms of your housing situation?

Jenny Schuetz

The US Department of Housing and Urban Development’s (HUD) have put out guidelines that say people should not in general spend more than 30 percent of their income on housing costs [defined as rent/mortgage plus utilities]. If you are spending more than 30 percent of your income on housing, you’re considered “cost burdened” and if you’re spending more than half of your income on housing you are considered “severely cost burdened.” Most people can intuitively understand why: If half of your paycheck goes to pay the rent and your utility bills, you don’t have that much money left over to pay for food and transportation and healthcare and clothing and all of the other things you need to live.

This is an issue because people who are overspending on housing either have to cut back on other things — for instance, they may be skipping doctor’s appointments or not eating nutritious food — or they fall behind on their rent. And that puts people in danger of being evicted and becoming homeless.

Roge Karma

Often the issue of housing costs is discussed like it’s a problem only of major coastal cities. But I’ve heard you talk about the fact that this isn’t necessarily true. Could you talk about the geographical dimension of the housing affordability issue?

Jenny Schuetz

It’s universal. We don’t usually think of places like Cleveland and Detroit as being expensive cities, but those cities have very high poverty rates. So, Detroit and Cleveland have basically the same proportion of people who are cost burdened as New York and San Francisco. And those are places where it’s not just a problem for renters; it’s often a problem for homeowners too because they have old housing that’s not in very good condition and requires expensive maintenance.

The reasons why people are cost-burdened are a little bit different everywhere. But, in all of these situations across the country, the poorest 20 percent are stretching beyond their means.

Roge Karma

Up until now, we’ve been discussing the housing situation before coronavirus hit. But the story has only gotten much worse over the past few weeks and will only continue to get worse. Unemployment applications are soaring through the roof, restaurants and workplaces are shuttering by the day, and the markets are tumbling. How would you describe the housing affordability crisis as it stands today, in the midst of a coronavirus recession?

Jenny Schuetz

I think we’re really in uncharted territory. During the Great Recession unemployment didn’t hit the entire country immediately — it rose slowly over time, so people had more time to adapt to it. One of the problems we’re seeing now is that tons of workers simultaneously are seeing their incomes go to zero essentially overnight. And we just don’t know how the housing market is going to react to that because we haven’t seen something like it before.

Many households really rely on the paycheck coming in to cover their daily expenses because they have essentially no savings to fall back. That leaves them without many options if their income goes away. They can try to negotiate with their landlord or with their mortgage lender to delay making payments. And that has actually been one of the most common policy responses we’ve seen: just allow people to rack up bills for unpaid housing costs that they don’t have to pay back until some point in the future. If the recession and public health crisis only last for a month or two, then maybe that’s feasible. But beyond that, people start getting into levels of debt that they’re just not going to catch up from.

Roge Karma

Let’s talk about some of those policy responses you mentioned. Over the last two weeks or so, a whole host of state and local governments like Miami, Los Angeles, San Francisco, New York state and others have placed short-term moratoriums on evictions (although other cities have been less forgiving). And last Wednesday HUD even announced a 60-day moratorium on evictions and foreclosures that would apply to about 8 million households with federally backed mortgages. What problems do those moratoriums solve and, more importantly, what problems do they not solve?

Jenny Schuetz

It’s a really complicated situation because there is a huge network of economic activity tied up in rent payments. Think about what happens when renters pay a check to their landlord. If it were the case that that entire check went towards landlord profits, then landlords could just forego profits for some period of time and we would be fine.

But the truth is that most landlords have to spend most of the rent that comes in to pay for the direct costs of running the building and pay their own mortgage. Landlords also spend part of their money on local property taxes and local property taxes paid to go for things like nurses and teachers and running city buses, all of which we need now more than ever. Utilities like water and sewer get paid by the landlord and these are essential during a public health crisis. The landlord pays the maintenance staff who are essential to keep down the spread of diseases.

If we shrink up the rent checks, then either landlords have to provide this stuff without paying their workers, or they’re going to cut back on providing essential services. So, part of what we worry about is that as income dries up at the household level, that’s going to cascade upwards and the other people who are relying on those payments to cover the cost of things are also not going to be able to pay their bills. We’ve only got so much time before the lack of cash flowing through the economy is going to bite lots of people in unexpected places.

Roge Karma

If I’m understanding correctly, it seems like there are two main issues with trying to solve this problem only by halting evictions. First, once this crisis ends, households will still be in huge amounts of debt and won’t be able to continue paying. And second, denying landlords much-needed income for an extended time period will have cascading effects throughout the economy. I think this is where the idea of cash stimulus becomes especially relevant. What role do you think a sustained cash stimulus plan can play in filling some of the gaps that we’ve been talking about?

Jenny Schuetz

Getting people money is the best way that we can stop the economy from spiraling into recession. What we’re worried about is that renters don’t have money so they can’t pay their landlords so the landlords can’t pay the salary of the maintenance guy and property taxes and so on and so forth. But, if we could just replace the income that people were losing from having their hours cut or their jobs taken away, then you can prevent that whole process.

If you don’t replace that income, then you’re right, the eviction moratorium will allow them to rack up one, two, three months of unpaid rent. But then what happens when they get their job back? They’re not going to be able to pay all of that off at once. Landlords aren’t eager to evict people right now because it’s not like they’re going to get new tenants. But you can only defer this stuff for so long before everybody’s really squeezed.

Roge Karma

Luckily, there is a Senate stimulus bill being debated right now and that will probably be passed by the time this interview is posted. [A framework deal was announced early on March 25.] There are a few points of disagreement between Democratic and Republican lawmakers here, but everyone seems to agree on the individual cash stimulus component.

Currently, the plan would give $1,200 checks for every adult and $500 for a child who makes less than $75,000. But the payment would begin to diminish at an income level of $75,000 [for single earners] and phase out completely at an income level of $99,000 [check out this piece for a more expansive breakdown of the policy’s cash transfers]. Does the design of this package seem adequate for addressing the scale of the housing affordability crisis we face?

Jenny Schuetz

It’s complicated because housing costs are so different across the country. A family making $75,000 a year in the Bay Area is already having trouble paying for rent for a decent quality place that’s close to their job. So, $1200 for somebody living in a really expensive area isn’t going to cover all of their costs. It’s certainly better than nothing. It allows them at least to make some partial payments. A better way to do this is to give more generous checks that would be adequate for even the worst of situations. You can always tax back the excess later. But it’s better to front the money now and tax it later than to be stingy about giving out money now when we’re really facing an untold crisis.

Roge Karma

Going forward, what would it take to solve some of those underlying issues such that we don’t find ourselves in such desperate conditions the next time the economy takes an unexpected hit?

Jenny Schuetz

When we have a natural disaster or a public health epidemic, that’s not the time to solve the big structural problems. We need to try to solve them before we get to this point. The fact that we’ve got a bunch of people who were already spending half their income on rent could be solved by just giving people extra money to spend on housing costs even in good times. Expanding rental assistance to everybody who qualifies for it would keep people from being so unstably housed and some people from becoming homeless in the first place.

And our housing production system has been broken for a long time. Places like California just aren’t building enough housing. That causes this overcrowding and poor quality housing and high rates of homelessness. All of the expensive coastal cities need just to start building more housing on a regular basis, particularly lower-cost housing and things like shelters for the homeless people and supportive housing. We’ve failed pretty miserably at that since the Great Recession. There’s been increasing demand for housing and we just haven’t met it. We’ve allowed more and more people to be in a precarious, unstable position and now we’re seeing the consequences.

The potential silver lining in all of this is that we will come to realize that it’s not just bad for poor people that they don’t have decent quality housing or are overspending [on housing]. And it’s not just bad for the homeless that they’re homeless. It’s bad for all of society — and coronavirus has shown exactly why.

Related listening

Matt Yglesias and Jenny Schuetz discussed how to solve America’s housing affordability crisis on The Weeds back in May 2019. You can listen to the podcast by streaming it below or subscribing to The Weeds wherever you get your podcasts.