The extra $600 in weekly unemployment benefits from the federal government expires in July. … [+]
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As rent comes due in June, the third month since the onset of the pandemic, and as Congress mulls additional aid to inject into the coronavirus-battered U.S. economy, politicians and apartment industry experts are increasingly fixating on the $600 a week in supplemental unemployment benefits.
Established through the CARES Act in March, the $600-a-week payment complements state unemployment benefits, which usually amount to a half of the wages jobless workers had been earning. The money, a means to maintain the income of the typical unemployed American, is set to expire at the end of July.
A working paper released by the Becker Friedman Institute for Economics at the University of Chicago states that with the additional $600 a week, two-thirds of eligible workers receive benefits that surpass their prior earnings. Meanwhile, one-fifth of unemployed Americans can collect benefits that are at least double their lost income, according to the paper’s authors Peter Ganong, Pascal Noel and Joseph S. Vavra.
Because of that, as the economy slowly reopens, businesses across the country have reported that some furloughed employees are reluctant to return to their jobs that pay less than unemployment benefits.
Yet, the supplemental benefit of $600 a week appears to keep renters afloat. According to the Urban Institute, the total unemployment benefit – both state money and the federal $600 – is at least as large as the median monthly household income in most states.
“And the median renter has enough residual income after paying rent to meet other household expenses,” write Urban Institute’s Mary K. Cunningham, Laurie Goodman and Jung Hyun Choi.
“The enhanced unemployment benefits are very important to people, especially those that are in lower paying jobs,” says Bob Pinnegar, president and CEO of the National Apartment Association. “They’re really helping them to make ends meet and to be able to put food on the table, to pay their utilities and to pay their rent. The challenge is going to be going forward.”
Willy Walker, chairman and CEO of commercial real estate finance company Walker & Dunlop, echoes Pinnegar’s assertion, saying that the extra $600 in unemployment payments is “an incredibly important policy measure.”
Walker says, “If the economy is not back up and adding jobs at a pretty significant pace by July, then the $600-a-week supplemental payment from the federal government must stay in place beyond July.”
Thus far, the House of Representatives has approved a $3 trillion stimulus package – the so called HEROES Act – that extends the $600-a-week supplement until next year. Senate Republicans, however, have vowed not to pass the HEROES Act, at least not in its current form, which some have dubbed a Democratic wish list.
Some Republicans want to do away with the extra $600 in order to incentivize Americans to return back to their jobs. Senate Majority Leader Mitch McConnell told the House GOP minority that the monies “will not be in the next bill,” Politico reported.
Nonetheless, it is yet to be seen how many of those going back to work – especially in the hospitality and restaurant industries that rely on tips – would earn the same wages they did before the coronavirus pandemic.
“With over [40] million people now unemployed, the real question is, are these people going back to work,” says Elizabeth Francisco, president of property management software firm ResMan. “Another secondary question is, when and if they do go back to work, are they going to be at the same salary level to meet their financial obligations such as rent.”
Republican Senator Rob Portman, of Ohio, and Representative Kevin Brady (R-Texas), are proposing $450 a week for laid-off Americans who return to their jobs, a “back to work” bonus. Another idea, propagated by Representative Don Beyer (D-Virginia), is to gradually slash the $600 weekly payment until it reaches $300 by the end of 2020.
These proposals may do little, though, for workers who are being furloughed or laid off as the economic effects of the pandemic linger and start to infiltrate white-collar industries that have thus far been somewhat insulated. Just last week, IBM, Marcus & Millichap and American Airlines, among other high-profile companies, announced planned reductions in their workforce.
“[Congress] could come up with some type of rental voucher program that helps people pay their rent,” says Walker.
The HEROES Act includes a rental assistance program that would only cover low-income tenants.
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