Renters take bigger hit from the pandemic than homeowners
Renters, when compared to homeowners, are likely to be more vulnerable in the wake of a financial crisis, according to a new report by the Consumer Financial Protection Bureau.
The report revealed the effects of COVID-19 on renters’ credit scores. Before the pandemic, average credit scores among renters were 86 points lower than those of homeowners with a mortgage and 106 points lower than those without a mortgage. Moreover, renters’ financial well-being scores were nearly eight points lower than those of homeowners with a mortgage, and more than 13 points lower than homeowners with no mortgage.
Read next: Homeowner survey’s shock findings
The CFPB noted that renters are more likely to be women, Black or Hispanic, are younger, and have lower incomes.
“They are also at particular risk of falling further behind as the nation recovers from the economic impacts of COVID,” CFPB acting director Dave Uejio added. “Past recessions and depressions have seen communities of color and low-income communities of all races and ethnicities left behind when the broader economy recovers. We cannot repeat that history.”
The report also found that renters’ financial conditions throughout the global crisis have been more responsive to policy changes in pandemic relief – more than those of homeowners. For example, delinquency rates among renters with children fell from 42.1% to 34.1% following stimulus payments during the pandemic.
The CFPB said that this suggests that renters, representing over 30% of US households, are in danger of falling further behind the broader national recovery as government financial supports end.
On the bright side, renters’ financial conditions showed improvement as much as or more than those of homeowners. Renters’ credit scores increased by 16 points during the pandemic, compared to 10 points for mortgagors and seven points for other homeowners. However, renters’ credit scores, though improved, remained substantially below those of the other groups.
“The CFPB is committed to helping renters, and their families thrive. We must amplify and protect the modest gains renters made during the pandemic to ensure this nation’s full and equitable recovery from COVID-19,” Uejio said.