Post-Pandemic Budgeting Strategies: Housing and Utilities

Key Takeaways
  • Moratoriums on evictions, foreclosures, and utility shut-offs, provide temporary relief from housing and utility expenditures for those financially impacted by COVID-19.
  • Government grants distributed through local relief agencies can help catch up on past due bills.
  • Homeowners can lower housing costs through a loan modification or refinance to reduce the interest rate or increase the loan term.
  • Renters and home buyers both face rising housing costs in 2021.

When the COVID-19 pandemic shut down the economy in March 2020, Congress stepped in to provide an abundance of relief for essential costs like housing and utilities. Families could skip housing and utility payments due to moratoriums on evictions, foreclosures, and utility shut-offs, without any immediate consequences.

By May2020, nearly 4.3 million homeowners were in forbearance.The number edged downward, falling to 2.8 million by December 2020. Parrott and Zandiestimated that 9.4 million households owed back rent in January 2021 based on the Census Pulse Survey data.

Whether you received a forbearance, owe back rent, or continued making payments throughout the pandemic, a review of expenses and having a plan to catch up payments could be a critical part of your post-pandemic budget strategy.

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Housing and Utility Costs During the Pandemic

Congress, the CDC, and other agencies believed families facing eviction or foreclosure could resort to crowded living arrangements that would increase the spread of COVID-19. The moratoriums that followed prevented landlords and financial institutions from taking legal action even if you did not pay the rent or mortgage due to a job loss or reduced income. Many states also added moratoriums on utility shut-offs.

Millions took advantage of the programs and either applied for a mortgage forbearance or stopped paying rent. The challenge going forward is that moratoriums do not settle the bill or forgive the rent. It only delays the payment. Now, a year or more later, you must repay bills for the months you missed.

Housing and Utility Help Offered During the Pandemic

Housing aid was the most abundant in the wake of the pandemic, providing millions of dollars in housing and utility payment assistance for the unemployed. Government grants, administered through state agencies,could pay rent, mortgage, or utility payments for up to 12 months. There was little reason to use stimulus check funds to pay essential bills because of the protection from moratoriums and access to grant money.

In addition to direct assistance, most homeowners can receive a forbearance, which allows up to 18 months of missed payments. At the end of the forbearance, you can bring the account current without immediate repayment. A payment deferral moves the delinquent balance to the end of the loan. Or a streamlined loan modification permanently lowers your payment without any closing costs.

When Will the AidEnd?

Most programs are scheduled to stop in the Summer of 2021, with the forbearance relief set to end on June 30, 2021.

Budgeting Strategies for Post Pandemic Housing Costs

Housing relief could mean you went without a housing payment for over a year. Utility moratoriums were not as long-lasting but could still result in 12 months of expenses in arrears. Whether you rent or own, you must prepare to restart payments, and in some cases, catch up past due balances when the deferments end.

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Utility companies generally allow you to repay delinquent balances over three to 12 months, depending on the company. Relief agencies also have federal grant money to help you catch up on past due accounts.

If you do not receive aid, you might need to budget for higher utility and housing bills until you bring the accounts current. Moving will not discharge the debt and could lead to lawsuits, complicating an already complex problem. Getting help now could help you avoid the higher monthly cost required to catch up with the account.

Rising Housing Costs for 2021

Besides dealing with late payments, renters and home buyers face rapidly rising costs, which you must include in any future budget. Despite the lower rent charged in 2020 in major cities like New York and San Francisco, 2021 is experiencing rising rents across the country. In the first quarter of 2020, rents rose to pre-pandemic levels in many US cities, with others expected to reach that level by summer 2021. Home values also rose between 6.6 to 14.6% between May and November 2020, making it more difficult to afford a home, even with record-low interest rates.

  • When will pandemic relief end for housing and utilities?

    The federal moratorium on evictions and foreclosures will end on June 30, 2021. Forbearance limits delayed payments to 12 to 18 months depending on the loan and when you sought assistance. State-level utility moratoriums began ending in March 2021.

  • What are my options to catchup on late payments for housing and utilities?

    States received federal funding to help with delinquent housing and utility costs. You can receive help for up to 12 missed payments. However, the aid is offered on a first-come, first serve basis, so you must apply now before the money runs out. Homeowners have multiple options at the end of a forbearance, which includes deferring payments to the end of the loan or modifying the loan to permanently lower the monthly payment.