What If $500 Could Prevent Eviction?

This article is part of The Rooftop, a blog and multimedia series from New America’s Future of Land and Housing program. Featuring insights from experts across diverse fields, the series is a home for bold ideas to improve housing in the United States and globally. ______________________________________________________________________________________________

In our current world of rising costs and shrinking government assistance, more and more American renters find themselves at risk of eviction.

22.6 million U.S. households are rent burdened, spending 30 percent or more of their income on housing, and two-thirds of working-age renters struggle to afford basic needs. These renters live paycheck-to-paycheck, and many struggle while earning as much as 120 percent of their area’s median income.

These families risk losing their home each time there’s a financial bump in the road. When the car breaks down or when they miss work to care for a sick child, bills start piling up, which can be the beginning of a downward economic spiral. Once people fall too far behind on rent, there’s very little help available, and eviction becomes inevitable.

During the COVID-19 pandemic, federal emergency rental assistance funds were allocated, helping people stay housed during a national economic emergency. Even though funding to keep people housed was profoundly successful, and the level of need is still high, funds like this are no longer widely available.

Without adequate federal, state, or local funding for eviction prevention, we need to be creative about how we improve housing stability. Supportive services post-eviction like homeless shelters and rapid rehousing will always be needed, but they’re too late to help people retain their homes. However, if we provide help to people upstream from their crises, we can reduce the number of renters who need more costly downstream services.

Upstream prevention—helping out before a crisis—is a cost-effective way to keep people stably housed.

The Flagstone Initiative is a nonprofit built on the idea of using upstream prevention to improve housing stability for renters. By acting early, we keep small problems from turning into big ones, so people can stay current on rent and remain in their homes. At present, we reach over 7,000 renters with our no-fee, no-interest $500 “Rent Loan.”

The Rent Loan goes directly towards rent, and renters pay Flagstone back at $20 a week for 25 weeks—exactly $500. Rent Loans are available to financially-challenged renters, who are often experiencing an additional economic shock. Most of our borrowers have poor credit, and have past experiences with predatory lenders like payday loans. We strike a balance between making our loans available to those who need them and the sustainability of our fund, approving 70 percent of applications while maintaining a 70 percent repayment rate.

The remaining 30 percent not repaid by our renter borrowers is a cost shared by their housing providers and community partners like local governments and foundations. These contributions are commensurate with the social and economic benefits received when renters are more financially stable—they’re less likely to be late on rent, less likely to be evicted, and less likely to need higher-cost public services like shelters.

The data we’ve collected shows that even with a seemingly small solution like a $500 loan, upstream prevention improves housing stability. Ninety days after the initial Rent Loan, we see 98 percent of folks still in their homes with no past due balance. After 6 months, which is the duration of the loan payment plan, 93 percent of people remain housed.

Not only are there significant improvements in housing stability from the data, but we also hear powerful stories from loan recipients:

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Kendall is a single mother in Louisville who works multiple jobs to provide for her four-year-old son on the Autism spectrum.

They’ve lived in their 1-bedroom apartment for about two years, and it’s a struggle to make ends meet. Kendall isn’t able to work full time as a phlebotomist because her son’s daycare requires pick-up during the work day, so she has to take on late shifts as a server when she can. Even with both jobs, Kendall is still rent burdened, putting about half her income towards housing.

When she pays their entire rent on the 1st of the month, only about $200 is left. That needs to last the next two weeks, until the next paycheck. Between food, daycare, and all other bills, it’s not much.

“Food alone, you go to the grocery store, that's $100 right there. And that’s just the stuff he eats in one week,” reflects Kendall.

On top of her tight cash flow, life happens. In April, Kendall had surgery that cost $1,500 out of pocket, causing an unexpected expense and missed work without the savings to cover. Absent her typical paycheck, she was going to be short on rent.

“Any difference in my paycheck I’m gonna notice…. It was an unexpected thing that happened, so I was able to pay the first half [of rent]. But the second half… no way I was going to.”

Kendall took out a Rent Loan so her medical needs didn't come at the cost of her home. “A lot of people are one paycheck away from being homeless. It sucks.”

Her story may sound familiar, as it’s unfortunately common for single parents in our country to find themselves in similar situations.

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Sidjea is an immigrant from Jamaica now living in Woodbridge, Virginia. She needed help to bring her husband to the States while also putting her two children through college back home.

Sidjea immigrated to the U.S. last July to become a teacher, and she quickly realized that housing was going to be a larger expense than originally expected.

After paying rent, her priority is sending money home so that her children could continue attending college.

“After buying food, buying gas, sending money back home…there’s not much.”

Sidjea also needed to support her husband’s immigration to the United States. The documentation he needed was over $500. Combined with travel costs, Sidjea had to work and save for months before she could get enough money together.

“I wanted to apply for a work visa for my husband… I’ve been trying every month and I just couldn’t do it…. So I realized that I have this option for the Rent Loan. I finally got through to send the visa to my husband. He is here.”

Now that Sidjea and her husband are both in the U.S., they hope to bring home enough combined income to pay for their apartment, send money to their children in Jamaica, and worry less about affording the essentials.

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In serving financially-vulnerable, paycheck-to-paycheck renters, we know how effective early help can be to keep people stably housed. We advocate for simple, preventative measures across the spectrum of support, policy, and practice that further what we’ve learned:

1. Housing policy and best practices in both government and business need a shift in focus from downstream treatments to upstream prevention. Similar to how we treat healthcare, America tends to be reactive, not proactive, when it comes to housing. We need to change our perspective as a country to intervene early when possible.
   
2. Cost-effective solutions allow us to help more people with less funding. Going upstream means problems are still relatively inexpensive to solve and funding goes further to limit the number of renters who experience the trauma of eviction and homelessness.

Without an upstream option for help, Kendall and Sidjea could have lost their homes. Upstream prevention helped keep them stable, and we hope that the millions of renters like them won’t have to keep waiting for a crisis to get the housing support they need.

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Editor’s note: The views expressed in the articles on The Rooftop are those of the authors alone and do not necessarily reflect the opinions or policy positions of New America.