The rental housing industry often feels the ripples of economic change in a direct way. Move outs, unpaid rent, late notices, subletters or roommates, and even evictions can have unintended consequences to long-term unemployment. With most businesses shuttered, many renters are facing financial insecurity due to the coronavirus pandemic.
As of this writing, over 36 million Americans have filed for unemployment benefits since mid-March, and Goldman Sachs predicts the unemployment rate could sour to 25% this year. While many are hoping to recover faster, letting mom and pops finally open for business, we should do what we in the industry do best – prepare for the long-term effects and hope for the best.
Now and within the next year, it’s likely that you’ll see more rental applicants collecting unemployment benefits, and it’s important to know what to do next.
Does unemployment count as income when verifying housing income requirements?
This is a tricky question. Technically, if your state and local laws do not prohibit discrimination based on source of income, it can be up to you to decide policy-wise if you accept unemployment funds when verifying if the applicant meets your income requirements. However, we highly recommend you treat unemployment benefits as income. This is because state, city, and even county laws change frequently. With the rising unemployment rate, applicants on unemployment will not be uncommon – and turning away applicants on unemployment during this time might not be the best P.R.
Currently, these are some of the states with source of income protections. Keep in mind this list does not account for city or county source of income protections, which are plentiful across the U.S.
How much does unemployment usually get?
Benefits vary widely by state. According to SavingtoInvest.com, the highest maximum weekly benefit amount is in Massachusetts at $823 for individuals to $1,234 for families. On the low end, Puerto Rico’s maximum weekly amount is $190, with Mississippi a close second at $235. Most states administer benefits for a maximum of 26 weeks (a little more than 6 months). Whether or not your applicant meets your property’s income requirements depends on what state you live in, the applicant’s unemployment allowance, and your vacancy’s rent price.
The CARES Act passed on March 27, 2020, expanded on unemployment by extending compensation to independent contractors and other workers priorly ineligible. It gives an additional $600 a week of aid for up to four months. Since then, additional relief bills have been proposed and some cities and states are considering rent relief programs. While it’s uncertain if unemployment benefits will be expanded upon, if the pandemic continues and the unemployment rate continues to rise, it’s highly likely more legislation will be passed.
Does accepting applicants on unemployment change the leasing process?
No. Just like with any applicant, your leasing process likely requests proof of income. For some applicants this can be a few months of bank statements or paystubs, for others, it can be unemployment documentation. To avoid Fair Housing complaints, you want your leasing process to stay as consistent and equal as possible.
As you’re navigating leasing decisions in the future, keep in mind being on unemployment doesn’t mean your applicant is a bad renter. With unemployment claims rising weekly, it’s incredibly likely your rental applicants and tenants will be affected. Make sure to stay ahead of the times by hammering out your new leasing plan and procedures now.