Two Months Without Pay Pushes Many Workers to Spend 40% of Income on Rent

Zillow, Seattle, said renters working in food service and retail could spend 40 percent of their annual income on housing if they cannot work for two months–a nearly 6 percentage point increase from their current rent burden.

Zillow analyzed how a short-term loss of income could affect renters’ finances.

“We’re still in the early stages of understanding exactly what effects the coronavirus will have on the housing market in the long term, but many workers and families are living through an immediate strain as their jobs are cut back and paychecks dry up,” said Zillow Senior Policy Advisor Alexander Casey. “Renters across the country, and in the service industries especially, are already often stretching their budgets.”

If their paychecks disappear due to coronavirus, these renters will have less to pay for other essentials and that can quickly become devastating, Casey noted. “But without drastic measures now to slow the spread of this disease, we risk it worsening, further delaying the economy’s return to business as usual and resuming the livelihoods for these workers,” he said.

Before the recent shutdowns, single earners working in foodservice or retail could expect to spend a median of 33.6 percent of their annual income on rent, Zillow reported. Missing just two weeks’ worth of paychecks would raise that to 35 percent of their annual income. If they are out of work for two months, they could spend 40 percent of their income on housing. As the economic impact of shutting down or severely limiting the operations of restaurants, retail shops and other businesses grows, plans to address the income gap are forming.

Late Wednesday night the Senate passed a nearly $2 trillion stimulus bill that would suspend student loan payments and give single Americans $1200 to pay bills. The House plans to vote on the bill Friday. Zillow noted this legislation would ease some of the financial strain on renters who may be out of work for two months, lowering the share of annual income needed to cover the year’s rent from 40 percent to 35.8 percent.