Newly Unemployed Service Workers Owe More Than $1.7 Billion in Monthly Housing Payments

• Service-sector employees who lost their jobs as a result of the coronavirus pandemic owe more than $1.7 billion a month in housing payments, 70% of which is rent.
• More than a quarter of the total housing payments due from U.S. food service workers is owed by those who are newly unemployed during the coronavirus pandemic.
• Some manufacturing-heavy states, including Ohio and Michigan, are feeling the impact of heavy  job loss, and unemployment is even hitting healthcare workers in states such as Georgia, Washington and Oregon. 
• About 20% of renters did not pay any rent in the first week of May. That's higher than last spring, but down from 22% in April, a possible signal that government aid and the reopening of some businesses is easing short-term financial burdens.

U.S. service-sector workers currently receiving unemployment benefits as a result of the coronavirus pandemic owe more than $1.7 billion in rent and mortgage payments each month — payments that could be in jeopardy if expanded local and federal unemployment assistance begins to fade.

As restaurants and bars nationwide shut their doors en masse beginning in late March, workers in the accommodation and food services industries were among the earliest and hardest-hit groups. In 19 states and the U.S. as a whole, these workers represent the largest share of those filing for unemployment protection among unemployed workers overall. 

But bartenders and waiters weren't alone — in 12 more states, workers in the arts, entertainment and recreation industries were the hardest-hit. Combined with workers in the retail trade industries — and together comprising the bulk of the wider "service" sector — these workers owe more than $1.72 billion in monthly housing payments nationwide, according to a Zillow analysis of data from the U.S. Department of Labor and U.S. Census Bureau.

Workers in the service sector face high housing cost-burdens even in relatively good times, and their vulnerability has only been compounded by income shocks due to lost hours and layoffs in the wake of the coronavirus outbreak. Stimulus payments, temporary renter/homeowner protections and expanded unemployment benefits enacted in response to the crisis — including the $2.2 trillion federal CARES Act — have undoubtedly helped many of these households stay afloat and keep a roof over their heads through the worst of the crisis. 

In the first week of April — not long after the country as a whole began shutting down in the last weeks of March — 22% of U.S. renters paid none of their bill, according to the National Multifamily Housing Council, up from 17% in April 2019. But by the same period in May, the share of renters not paying had fallen to 20% — a small change, but a potential signal that federal stimulus funds and unemployment benefits that began to arrive in mid-April may be easing some housing stress for renters, at least marginally and in the short-run.

Disproportionate Impacts

In many states, newly unemployed food service workers are on the hook for huge shares of the total housing costs owed by their peers as a whole. In New York, more than $133.5 million in monthly housing payments are owed by accommodation and food service workers experiencing coronavirus-related job loss, almost half (46.8%) of the total housing payment owed by the entire industry. In neighboring Massachusetts, recently unemployed accommodation and food service workers account for more than 42% of the total housing payments owed by this industry in the Bay State (an estimated $40.7 million per month). In both cases, the share of this bill owed by recently unemployed renters far exceeds that owed by homeowners. 

State	Industry With Largest Share of Unemployment Claims Due to COVID-19	Housing Payments Owed by Newly Unemployed in That Industry	Share of Total Housing Payments in That Industry Owed by Newly Unemployed
United States	Food	$873,312,507	26.3%
Alabama	Food	5,306,803	19.4%
Alaska	Healthcare	$3,551,208	11.9%
Arizona	Food	$14,066,421	17.6%
Arkansas	Food	$3,723,395	23.1%
California	Food	$55,598,927	9.6%
Colorado	Food	$22,275,140	23.2%
Delaware	Other Services	$2,523,222	7.1%
Florida	Food	$52,164,470	16.3%
Georgia	Food	$40,289,407	42.4%
Hawaii	Food	$13,133,052	29.1%
Idaho	Food	$4,019,715	34.8%
Illinois	Food	$29,886,477	23.3%
Indiana	Manufacturing	$32,489,689	12.8%
Iowa	Food	$7,403,674	38.4%
Kansas	Arts	$2,362,306	7.5%
Louisiana	Arts	$4,766,265	29.1%
Maine	Food	$3,716,239	4.6%
Maryland	Transportation	$3,716,239	4.6%
Massachusetts	Food	$40,731,752	42.8%
Michigan	Manufacturing	$113,615,852	26.6%
Minnesota	Arts	$5,814,102	23.7%
Mississippi	Arts	$2,690,432	7.8%
Missouri	Other Services	$3,772,957	9.0%
Montana	Education	$513,334	3.3%
Nebraska	Other Services	$2,197,986	6.3%
Nevada	Food	$44,627,881	48.8%
New Hampshire	Food	$1,345,756	9.0%
New Jersey	Other Services	$21,275,563	18.4%
New Mexico	Food	$5,571,429	32.1%
New York	Other Services	$44,192,653	18.5%
North Carolina	Arts	$4,528,883	15.7%
North Dakota	Healthcare	$1,824,439	6.4%
Ohio	Manufacturing	$184,036,956	53.2%
Oklahoma	Arts	$1,752,271	13.3%
Oregon	Food	$27,252,274	51.0%
Pennsylvania	Food	$24,084,225	30.8%
Rhode Island	Food	$6,504,763	63.2%
South Dakota	Retail	$887,198	6.3%
Tennessee	Food	$16,892,976	29.5%
Texas	Arts	$6,359,505	9.9%
Utah	Arts	$224,405,106	10.2%
Vermont	Healthcare	$1,231,389	3.0%
Virginia	Arts	$1,873,726	6.4%
Washington	Arts	$10,433,457	25.4%
West Virginia	Education	$497,416	2.6%
Wisconsin	Arts	$3,264,992	20.1%
Wyoming	Education	$1,454,020	7.9%

Even in small states, accommodation and food service workers represent an outsized share of owed housing payments among those recently unemployed. In Rhode Island, recently out-of-work accommodation and food service workers owe almost two-thirds (63.2%) of the total monthly housing costs owed by all the state's workers in this industry. In 38 states[1] and the US as a whole, newly unemployed workers in the accommodation and food service industry are responsible for more than 15% of total housing payments owed by all workers in the industry in each state.

But while accommodation and food service workers stand to owe the largest share of housing payments in many areas, vulnerable groups in other industries also contribute mightily to their local housing economies — and their payments may be equally at risk. In manufacturing-heavy Ohio, recently unemployed factory workers owe $184 million in total housing payments, more than half (53.2%) of the total owed by all manufacturing employees statewide. 

Interestingly, far more of these Ohio manufacturing workers set to owe tens of millions of dollars in housing expenses appear to be homeowners than renters — driving home the point that while renters are more vulnerable in general, simply being a homeowner doesn't make one immune to housing insecurity. Almost one-in-10 U.S. mortgages (8.8%) are in a forbearance program as an outcome of COVID, according to data provider Black Knight, up from 5.5% in mid-April and accounting for a total of more than $1 trillion in unpaid principal.

Widespread Impact, Limited Assistance

Between mid-March and the end of May, almost 40 million U.S. workers filed for unemployment protection — and millions were and are protected by umbrella programs like mortgage forbearance and/or eviction moratoriums. These kinds of assistance programs will continue to be enormously helpful in softening the impact of coronavirus-driven economic stresses. But these policies and programs are not created equal — and are not permanent.

The current federal eviction moratorium only applies to a subset of rental properties with federally backed mortgages. Beyond that, states are left to determine their own eviction policies and moratoriums, potentially confusing the situation. For homeowners, the CARES Act did extend relief to many borrowers holding mortgages backed by the government. But again, not all borrowers fit the criteria — and for those that do, forbearance still requires missed payments to be paid back in some form once the forbearance period comes to an end, which may be a struggle for many households currently strapped for savings. Furthermore, the federal foreclosure moratorium put in place March 18 has thus far only been extended to June 30. New unemployment claims are slowing somewhat, but consistent weekly numbers in the millions suggest that this crisis will be far from resolved by then.

Additionally, unemployment benefits in some states only last 12 weeks, so even with a 13-week extension on state benefits and the extra $600 per week provided through the CARES Act, there may be a hole in the safety net leading into the summer as individuals slowly return to work and households struggle to catch up on missed payments.[2] Congress is exploring longer-term solutions, including the HEROES Act, but any additional relief must come quickly — some states are already experiencing a strain on unemployment reserves.

Additionally, some areas seem to be setting up for a next phase in the unemployment crisis, expanding beyond traditionally vulnerable service-sector workers  to generally higher-paid and better-protected workers in even essential industries like healthcare. As states took action to slow the spread of the virus, nonessential medical care including routine dental procedures and medical checkups were paused, pushing thousands of healthcare workers out of a job. In California, 8.9% of the state's April unemployment claims were from workers in the healthcare and social assistance industry. California renters and homeowners in that industry whose employment status has been affected by the pandemic pay an estimated $110.1M in monthly rent and mortgage payments combined.

The Tip of the Iceberg

None of this implies that these at-risk housing payments will go unpaid. Aside from the benefits and protections currently offered to those that qualify,[3] many hardworking households will certainly get creative and maximize every potential avenue they can to keep enough coming in to satisfy their obligations. 

It does, however, illustrate the scope of the housing market economy at risk should assistance fall short, income remain diminished and/or savings run dry. And this analysis is limited only to those currently receiving benefits, and does not account for the millions of jobless Americans without any safety net. Less than a third (29%) of unemployed Americans actually received benefits in March, according to the Pew Research Center, with the numbers varying widely from state-to-state. If anything, the risks outlined in this analysis are a conservative measure of the actual fallout from the pandemic, and very likely represent just the tip of the iceberg of the true effects and potential damage of widespread, sustained unemployment on the housing market.

Without a long-term policy focus on ensuring widespread and lasting access to even existing protections, the risks to the housing market will grow as summer approaches, benefits dry up and jobs are slow to return. 

Methodology

Zillow utilized US Department of Labor data on unemployment claims from April 2020 to get unemployment by each state and NAICS industry. This data represents a survey week of each month, the week containing the 19th. The unemployment shares by industry used in this research reflects data from the week of April 19 –  April 25. This data represents the entire population of unemployment claims in each state except California, Kentucky, Road Island, Utah, and Virginia where the data is pulled from samples of the population. Zillow then took to the US Department of Labor data on weekly continued claims by state, and used the unemployment shares by industry from the survey week to estimate the number of claims in each industry for the final week in April which includes the most up to date count of continued weekly UI claims in each state. 

Zillow analyzed 1-year American Community Survey (ACS) data from 2018 to find employment numbers and rent and mortgage payments for each state and NAICS (North American Industry Classification System) industry. This data includes for each state and industry pair:

• Number of individuals employed
• Median industry income as a share of total HH income
• Median monthly rent 
• Median monthly mortgage payment
• Share of population by tenure (renters/mortgage owners)
• **filtered to sample sizes >= 100

This data was used under the assumptions that:

• Share of renters and mortgage owners is the same for the unemployed population and the total population
• Monthly median rent is the same for the unemployed population and the total population 
• Monthly median rent has been stagnant since 2018 – ACS data
• Employment in the states/industries has been stagnant since 2018 – ACS data
• Housing payments are split evenly by the share of income coming from each individual in each household

Aggregate housing payment metric for each state/industry pair was calculated as follows for renters and mortgage owners: 

• Total housing payment: Median monthly housing payment * Industry population employed * Share of household income coming from individuals employed in the industry

Zillow forecasted unemployment claims to predict what "regular unemployment" would have looked like without COVID-19 using time series data of unemployment claims by state and industry from January 2017 to January 2020 based on a multiplicative model to predict the number of unemployment claims by industry from February to April 2020. Forecasting the regular unemployment claims, then accounting only for claims beyond that is important so as to not attribute typical seasonal unemployment claims to the COVID crisis and instead focus only on the claims that were likely the result of COVID. Zillow then took the difference between forecasted value in April 2020 and actual claims in April 2020 to determine COVIDs true impact on unemployment claims. This number was used to determine that value of housing payments owed by the population of COVID related unemployed in each state/industry pair:

• Newly unemployed housing payment: Median monthly housing payment * Number of unemployment claims resulting from COVID * Share of housing tenure * Share of household income coming from individuals employed in the industry

 

[1] Not including Connecticut, Kentucky, and South Carolina as these states did not have data available for April at the time this was published.
[2] Across the country, there are wide differences in states' abilities to process this unprecedented flood of unemployment claims. The speed at which unemployment offices are able to process claims might be contributing to differences in levels of unemployment between states themselves, at least in the short-term, meaning even the reported numbers of continued claims are a conservative estimate.
[3] The data in this analysis represents unemployment claims, not initial filings, so the population examined does qualify for benefits leading to a conservative estimate on actual job and income loss.

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