Weekly Review – May 28, 2020

Published on May 28, 2020 / Leer en español

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Weekly Review

Dear Reader:

Welcome to CNE’s Weekly Review. This weekly email offers a close look at the issues CNE is working on or following closely.

The first section, On Our Radar, is a short recap of three or four important stories from the previous week—mostly long-form pieces providing analysis of important issues.

Headlining the Insights + Analysis from CNE section is a deeper look at an issue CNE is currently working on. This week’s piece by CNE’s Research Associate, Raúl Santiago Bartolomei, PhD, focuses on providing assistance to tenants who have been affected by the pandemic.

That is followed by a shorter follow-up on a policy issue that is of high importance to Puerto Rico. In this issue of The Weekly Review, Rosanna Torres, Director of CNE’s office in Washington, D.C., writes about Congressional efforts to provide assistance to tenants.

We close with a brief presentation of indicators or data that highlight an important trend or development. This week Deepak Lamba Nieves, PhD, CNE’s Research Director presents the results of an analysis to determine the risk of re-opening by major industrial sector in Puerto Rico.

In the coming weeks, you will be able to read about energy, housing, the reconstruction of Puerto Rico, fiscal issues, and of course, the continuing pandemic, among other subjects. We are eager to share our analysis with you. In the meantime, keep healthy and thank you for your support.

Sergio M. Marxuach, Editor-in-Chief

On Our Radar...

 Chronicle of a Pandemic Foretold: This pandemic is probably not “the Big One”, write Michael T. Osterholm and Mark Olshaker in Foreign Affairs. “The public health community has for years known with certainty that another major pandemic was on the way, and then another one after that.” And “terrible as it is, COVID-19 should serve as a warning of how much worse a pandemic could be—and spur the necessary action to contain an outbreak before it is again too late.”

Lessons from the 2008 Housing Crisis: “Homewreckers, Aaron Glantz’s recent book about the investors who exploited the 2008 financial crisis, is essential reading as we plunge headlong into a new financial catastrophe. Glantz observes that there are two ways a government can respond to a crisis caused by reckless speculation: by stepping in or by stepping aside. During the Great Depression Roosevelt stepped in; Ronald Reagan, dealing with the savings-and-loan crisis, stepped aside. The George W. Bush and Barack Obama administrations, alas, hewed closer to Reagan’s example.” Read the book review here.

 No One Knows What is Going to Happen: The nature of the current crisis has confounded experts all over the world. In this op-ed for the New York Times, Mark Lilla warns us that “at some level, people must be thinking that the more they learn about what is predetermined, the more control they will have. This is an illusion. Human beings want to feel that they are on a power walk into the future, when in fact we are always just tapping our canes on the pavement in the fog.”

Insights + Analysis from CNE

The Need for Rental Assistance

Low-income tenants are a sector of the population that is particularly vulnerable to losing their home and experiencing displacement. In Puerto Rico, about a third of all families live in rented housing. Of that group, just over half spends more than 30% of their income paying rent. In other words, even before confinement due to the pandemic, there was already an affordability crisis among tenants in the island.

Furthermore, the lockdown has prevented many of these families from generating income in the past two months. Thus, there is a good chance that many will not be able to pay their rent when due. This situation has multiple consequences, since many landlords, when not receiving rent payments, cannot pay their mortgages, loans and other financial obligations, leaving banks, in turn, exposed to significant balance sheet risk. That is why at CNE we join the voices that demand a rental assistance program, although we are committed to a specific proposal.

CNE’s Proposal for a Pandemic Rental Assistance Program

Table-federal assistance

We have conservatively estimated how much it would take to expand the Section 8 voucher program to meet the needs of low-income tenants in Puerto Rico during the pandemic. According to our numbers, almost 74,000 families that rent in Puerto Rico have incomes below 50% of the Area Median Income, so they would be eligible to receive a Section 8 voucher but do not currently receive it. Using HUD data about subsidized housing, we identified that the tenant assistance gap amounts to $37.9 million per month, or about $455 million for one year.

Federal Proposals for Housing Assistance

At a time when government officials and health experts are urging people to stay at home, the aid directed to ensuring safe harbor has been primarily targeted towards homeowners, not renters.

Title II of the HEROES Act, recently introduced by House Democrats, includes provisions to assist tenants with an appropriation of $100 billion in the form of Emergency Solutions Grants (ESG) for rental assistance. Of these, $10 billion are set aside for Housing Choice Vouchers. These funds are distributed under different formulas: the existing ESG formula (of which Puerto Rico already participates in) and through a new formula to be developed by HUD for areas hardest hit by the pandemic.

Puerto Rico’s anticipated rental assistance needs for a year (on the conservative side) are approximately $455 million. As argued by CNE’s housing experts, the most effective way to provide that assistance is by expanding the existing Section 8 voucher program.

Initial conversations with federal lawmakers and government officials in Puerto Rico on expanding Section 8 have been encouraging. However, the Senate is out on recess this week which means that negotiations on any new coronavirus relief package would have to wait until their return in early June. We will keep you apprised as events develop.

Calculating the Risk of Re-opening by Major Industrial Sectors in Puerto Rico

The new executive orders enacted by the Government of Puerto Rico, which have allowed more businesses to begin operating after a long lockdown period, have once again raised concerns about the risks of exposure to the coronavirus. As a follow up to previous analyses we conducted on risk by occupations, we produced a new dashboard focused on Puerto Rico’s industrial sectors.

Source/Fuente: CNE Analysis/Análisis de CNE

The analysis combines health, as measured by the sector’s risk score, and economic indicators, as measured by the sector’s employment and share of GDP (in the chart above, the size of the bubble is proportional to the sector’s share of GDP).

Our results show that the healthcare, education and retail sectors have the highest risk scores, while agriculture, manufacturing and transportation and warehousing have the lowest ones. In terms of economic importance, the manufacturing sector stands out over all others since it employs over 70,000 persons and is the main contributor to our GDP. Despite their relatively low contributions to GDP, the retail trade government sectors each employ over 120,000 persons locally, and fall somewhere in the middle of the range of risk scores.

We hope this tool provides key information for health experts and government advisors as they continue to make decisions regarding our pandemic futures.