UT Austin researchers find pandemic relief fraud drove nearly a quarter of US home price gains in 2020 and 2021
COVID-19 pandemic relief fraud was a significant and underexamined driver of US home price inflation during 2020 and 2021, according to new research from the University of Texas at Austin's McCombs School of Business.
The study, led by Samuel Kruger, associate professor of finance; John Griffin, James A. Elkins Centennial Chair in Finance; and doctoral student Prateek Mahajan — all at UT Austin's McCombs School — found that Paycheck Protection Program (PPP) fraud accounted for 22.5% of the average national home price increase across those two years.
The PPP disbursed approximately $798.7 billion to more than 11.7 million businesses, according to Pandemic Oversight data.
Analyzing ZIP code-level data across 18,761 areas, representing 93% of the US populatio, the researchers found that neighborhoods with the highest concentrations of fraudulent PPP lending saw house price growth 5.8% higher than those with the lowest.
Suspected fraudsters were 17% more likely to purchase a home, and the distorting effect was more than 30% greater in supply-constrained markets.
The median US home sales price climbed 35% between the end of 2019 and the end of 2022, according to the Federal Reserve Bank of St. Louis.
Single-family home prices in the United States rose 1.7% year over year in the first quarter of 2026, according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI).https://t.co/lVjUUbWPyI
— Mortgage Professional America Magazine (@MPAMagazineUS) May 26, 2026
Fraud that rippled beyond the balance sheet
The impact extended beyond real estate. The researchers also tied fraudulent PPP activity to a 2.8% increase in auto title registrations and heightened spending at grocery stores, furniture retailers, and financial institutions.
An earlier study by the same team had flagged at least $117 billion in suspicious PPP lending, work cited by a congressional committee.
The SBA referred 562,000 suspected fraudulent PPP and COVID-EIDL loans to the Department of Treasury for collection in April 2026, totaling $22.2 billion.
Read more: Former NJ mayor sentenced to prison for short sale mortgage fraud
Griffin described the damage as reaching well beyond the public ledger.
"It hurt individuals who bought houses at inflated prices," he said. "Fraud can have large unintended consequences."
A warning for future crises
Griffin cautioned that macroeconomic aftershocks may not yet be fully realized, pointing to the 2008-09 financial crisis, when inflated home values fueled mortgage defaults and banking instability, as a cautionary parallel.
Samuel Kruger put the human cost plainly. "That's where real people get hurt by this," he said.
"If you're just a regular homeowner, and you happen to purchase in one of those areas in 2021 or 2022, you probably purchased at an inflated price. As that excess demand comes off the market, you're going to expect to lose money on the house."
Originators encouraged by signs of gradual improvement in housing affordability should note the study's policy conclusion.
"Our findings show fraudulent transfers can be wealth shocks that generate economic distortions not created by normal transfers," Kruger said.
"Future government program designs should take more proactive steps to prevent fraud on the front end."
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