The Mayor's Fund to Advance New York City

The Renter’s Guarantee: Ensuring Greater Housing Stability for Renters

Housing development

New York City will design, pilot, and evaluate several programs to improve and extend promising tools that protect vulnerable renters from losing their housing.

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The Mayor's Fund to Advance New York City

New York, New York, United States

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To learn more about – or provide significant funding to – this project, please contact Lever for Change.

Project Summary

Stable housing has been linked to increased potential for academic achievement, increased socioeconomic status, and improved health and well-being. However, skyrocketing housing costs, economic changes that exacerbate income volatility, and lack of financial cushions put renters in an increasingly precarious position. Building upon the success of early experiments with programs that effectively insure renters against short-term income shocks, the Mayor's Fund will design, implement, and evaluate ways to enhance such programs. The pilots will include various versions of renters’ insurance and credit facilities that would cover an enrolled household’s rent in the event of a temporary loss of income or other financial shock in order to both increase housing stability and decrease the stress the 21st century threats of instability and displacement cause households. Programs will be rigorously evaluated for cost-effectiveness, scalability, and generalizability, and the results will be widely shared with other jurisdictions grappling with the precariousness renters feel.

Problem Statement

In 2016, there were over 2.3 million eviction filings in the country; over 40% of Americans report they cannot pay an emergency expense of $400 on their own; and across the country, incomes are becoming more volatile. Today, independent workers make up at least 25% of the US labor force; that share is expected to grow to 33%-50% by 2020. The United Way’s ALICE metric (Asset Limited, Income Constrained, Employed) describes the Americans who are one financial shock away from instability and estimates that 34.7 million American households fell into this group in 2016. In New York City, renters facing housing instability are more likely to be Black or Hispanic and lack a high school degree. For households who are keeping up with the rent but lack any cushion, a financial shock – like the need to pay for a funeral or getting sick– can mean the loss of stable housing. No existing mechanism efficiently prevents or mitigates that insecurity at scale. Security deposits are not structured to be helpful to the tenant and are often misappropriated by landlords. Some property managers accept late payments or agree to payment plans, but at a high cost. Rental assistance programs tend to become available only after a household has suffered significant trauma from the threat or actual disruption of stable housing. Offering cost-effective ways to smooth rent payments in the face of unexpected income and expense shocks could save households from entering the downward spiral losing one’s home triggers.

Solution Overview

When a household is stably housed, kids go to school at a higher rate, adults experience less involvement with the criminal justice system, and everyone in the household is healthier. Working with experts in insurance, economics, housing finance, homelessness, and safety net programs, New York City will build upon existing research to design and test alternative programs to help renters struggling due to financial shock. The programs will each address concerns of moral hazard and adverse selection. The programs might include:•Pooling security deposits, and allowing renters to quickly borrow from the pool to address rent arrears. Such a program would not only address housing instability, but also the inefficient use of security deposits. •Adapting lessons from insurance models to pilot a broad-based housing stability insurance program. •Designing a mechanism to allow renters to borrow funds to avoid losing their homes or to guarantee payments to landlords.We plan to ensure each program addresses concerns of moral hazard and adverse selection, and during implementation, becareful to test in different settings in order to evaluate scalability and generalizability. During and after implementation, we will perform rigorous and uniform cost benefit analyses and work with independent research institutions to determine the effects the programs have on evictions, fear of displacement, low income renter mobility, effects on housing financing, and landlord behavior associated with “riskier” tenants.

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