Amherst Capital Management estimates that $7 billion to $12 billion in rental payment support is needed for rental households to assist hourly workers for every month of COVID-19 related closures, according to the company’s market insights commentary release.
The economic shock of temporary business closures designed to stop the spread of the virus “will likely outrank all major crises in terms of the potential unemployment spike and how quickly it will come.”
The company said in a commentary that while no economic class will be untouched, “lower-middle-income households, mostly hourly wage workers, are likely to bear the brunt. A disproportionate share of these hourly wage workers are renters who will need support in these trying times.
“We estimate that 15 percent of all rental households will be significantly and directly affected by the pandemic-containment efforts needing $7 billion in payment support to absorb rental burden for every month of COVID-19 closures,” the company said in the release.
In a greater “stress scenario,” Amherst said in the event of more broad-based job losses and furloughs “up to 26 percent of rental households might need temporary payment support totaling $12 billion.”
While leisure, hospitality and transportation industries will be affected most in the short run based on current unemployment filings, construction, retail trade and manufacturing employees are also vulnerable, the report said.
The company cited Census Bureau information from 2018, the American Community Survey, saying there are 43 million renter households in the United States paying a monthly median rent of $1,058. The same data “suggests the average annual median income of a rental household was $40,500” compared to “$78,000 for a median owner-occupied household.”
The company says the data also shows that almost half of the renter households were paying more than 30 percent of their income in rent.
Amherst Capital is a real estate investment specialist offering traditional and alternative strategies to institutional clients in the public and private real estate credit markets. Amherst Capital manages $1.8 billion of assets across private credit and public markets.