Tens of thousands of Arizonans are still behind on bills that stacked up during the COVID-19 pandemic, from rent to utilities to water.
That debt totals in the hundreds of millions of dollars at least, though exact figures aren’t yet known.
These debts hinder people’s abilities to find safe, stable housing, threaten their access to water and power and could make it difficult to qualify for loans in the future.
As the country continues to reopen, there are many whose financial freedom remains hindered by the events of the last 16 months.
A Phoenix renter who moved to the Valley two weeks before the pandemic took hold of the country in March 2020 lived off a small inheritance left by her recently deceased parents because she was unable to find a job for the first several months.
She eventually ran out of money and used the eviction moratorium to stay in her rental home. She recently found a job, but she’s still struggling to pay off the debt that piled up.
“I’m basically earning my paycheck and handing it all over to my current (landlord) for payment of my current rent and paying towards my past-due rent balance,” she said.
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Diane Brown, executive director of Arizona PIRG, a public-interest advocacy group, said eviction moratoriums and utility shut-offs provided temporary reprieves for many households.
“However, it also means that many households are now facing very large bills that may be challenging to pay for quite some time,” she said.
Some face evictions, and a looming federal eviction moratorium end date of June 30. If evicted, their rental options moving forward will be severely limited.
Some owe many hundreds of dollars to electric utility companies or city water, and could face disconnections.
“The reason people don’t pay their bills is because they can’t afford them. And then if a crisis like the pandemic hits, they’re struggling to catch up. And if they don’t have to pay, they will often use whatever discretionary money they have on other, more pressing needs,” said Cynthia Zwick, executive director of Wildfire, a community action group focused on ending poverty.
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Aid sent to states, counties, cities and nonprofits designed to help people with rent and other bills during the pandemic hasn’t always made it into the hands of those in need. Sometimes, processes were cumbersome and slow. Other times, people didn’t realize help was available or how to access it.
And sometimes, as was the case with Kim McKellar, people knew about pandemic aid, tried to access it and ran into unforeseen roadblocks.
How unpaid rent affects a household
In February 2020, doctors told McKellar she likely had a coronavirus they couldn’t yet test for because it was so rare in the United States. A few weeks later, her husband received a similar diagnosis, she said.
Soon after, that coronavirus was spreading rapidly across the country and shutting down the nation’s economy. Both McKellar and her husband lost their jobs. By the end of the year, McKellar’s elderly father was diagnosed with and succumbed to COVID-19. And to this day, McKellar has been unable to access any unemployment funds, she said.
The pandemic had a severe emotional and financial impact on McKellar and her husband’s lives, she said. Her husband has experienced an array of medical issues since his diagnosis; she is struggling with panic attacks and had to file for bankruptcy late last year.
They’ve been able to stay in their Tempe rental home despite only paying a fraction of their rent each month because they qualified for the Centers for Disease Control and Prevention’s eviction moratorium.
McKellar was granted six months of rental assistance last year and was told she’d receive an additional six months to get her through June. But her landlords won’t accept the funds, she said.
The landlords and the attorney representing them did not respond to requests for comment.
Tempe renter Kim McKellar has been unable to use months of rental assistance she was granted because her landlord refuses to take it. She is behind on rent and has used the Centers for Disease Control and Prevention’s eviction moratorium to protect herself and her husband from multiple eviction attempts.
The eviction moratorium is likely coming to an end, and McKellar and her husband could soon be on the hook for about $20,000 — and without a place to live.
“We are miserable here. Like, we don’t even have a life here anymore,” McKellar said. “But it’s not so easy, because how are you going to move if you’re going to have an eviction on your record? And you’re in bankruptcy? And it’s a tight market?”
McKellar claimed the CDC protection multiple times over the past year, according to court filings. Earlier this year, her landlord told her he planned to sell the house and has since tried to evict her. So far, McKellar has fought off the eviction in court, but a hearing this week could bring a different outcome.
The CDC moratorium is set to expire on June 30, though it has been extended at the last minute before. If it does end as expected, McKellar will have just weeks to move.
McKellar said she’s tried to move for the past few months but has yet to find a place. Rental homes are flying off the market, and prices continue to climb. The rental assistance she was told she’d get in Tempe can’t go directly to her if the landlords won’t accept it, she was told. And it doesn’t transfer to other cities, she said.
If she is evicted, the eviction record will make it even more difficult to find a suitable place to live with her ailing husband and two service dogs.
“This is a shame because it doesn’t look like it’s going to end well,” McKellar said. “It’s going to be bad, a real bad thing, limiting our housing options.”
Eviction moratorium end looms
Tens of thousands of Arizonans have taken advantage of state and federal emergency measures that protected them from eviction if they couldn’t pay their rent during the pandemic.
The CDC moratorium is the only remaining pandemic protection for renters.
It’s unknown just how much debt is owed to landlords across the state.
The eviction moratoriums did not prevent landlords from getting a judgment against tenants who owed rent — they only stopped landlords from physically removing tenants.
In Maricopa County, justices of the peace entered more than 19,000 eviction judgments for landlords totaling more than $65 million between March 24, 2020, the day the first eviction moratorium began, and the end of February 2021.
This does not represent the totality of debt owed, however. For instance, some tenants may have cleared the debt since the judgments were entered. Others’ debts likely have grown.
Additionally, many landlords did not seek eviction during the moratoriums, even if their renters were behind. Eviction filings decreased by more than 50% during the pandemic compared the same months one year prior.
The Arizona Multifamily Association, the industry group representing property owners, estimates tenants across the state owe about $400 million in rental debt.
About 81,000 renters in Arizona are behind on their payments, according to the latest Zillow analysis of Census Pulse data.
About 11% of those renters think they are “very likely” to be evicted during the next two months.
The good news: Arizona has received almost $850 million for emergency rental and utility assistance through two federal stimulus programs passed in December 2020 and March 2021.
The bad news: The state, counties, cities and agencies responsible for deploying these funds are not getting it to renters and landlords quick enough, and it seems unlikely that the aid will get out in time to prevent the expected avalanche of evictions when the CDC moratorium expires June 30.
At the beginning of June, Arizona agencies had disbursed less than $50 million of the $850 million of rental assistance received this year.
Mortgage forbearances flattening
Like renters, some homeowners also struggled to make their housing payments during the pandemic, though recent data indicates most owners recovered more quickly than renters.
The number of U.S. homeowners who have permission to skip mortgage payments has dropped or flattened the past few months, signaling more people can make or afford their monthly loan payments.
Forbearance programs for borrowers with loans backed by Fannie Mae, Freddie Mac and HUD’s Federal Housing Administration, were launched in March 2020 to help homeowners struggling due to the pandemic. The plans allowed borrowers to skip up to 18 months of loan payments.
The latest data shows about 71,000 fewer homeowners across the country needed to defer their home loan payments during the last week of May, according to mortgage analysis firm Black Knight.
Now, about 2.12 million homeowners, or about 4% of people with mortgages, are missing monthly payments through the federally backed programs.
Metro Phoenix’s mortgage delinquency rate — the percentage of mortgages that borrowers missed payments on — has dropped to 3.85%, compared to 6% last summer.
The U.S. mortgage delinquency rate is higher, at 4.6%.
Forbearances aren’t typically tracked as delinquent mortgages, and Arizona-specific forbearance data isn’t available.
Past-due APS bills total tens of millions
Most electric utilities in the state suspended shut-offs for unpaid bills for a period of time during the pandemic. And now, some once again can’t shut off electricity because of a moratorium on disconnections during the hottest months of the year.
That means some utility customers could still be paying down debts from a COVID-19 moratorium while accruing more during the summer moratorium.
Arizona Public Service, the state’s largest electric utility, didn’t disconnect accounts for nonpayment from March 13 through Dec. 31, 2020.
After disconnections resumed, debts remained. The utility company had about $70 million in delinquent residential bills at the end of January, which decreased to about $50 million by the end of March, according to a report filed in April with the Arizona Corporation Commission. The number of delinquent residential accounts went from about 125,000 to 111,000 during that time period. The average delinquent amount fell from $556 to $445 from January to March.
Updated numbers aren’t yet available, but the utility confirmed both individual overdue amounts and overall delinquent totals have continued to decline since the end of March.
A few COVID-19 programs for APS customers remain in place: Customers aren’t disconnected unless their past-due amount is more than $300. They can arrange for payments for past-due amounts for up to 24 months. Late fees are waived.
“We will work with any customer that will work with us in good faith,” APS spokesperson Jill Hanks said. “There is no reason that someone should be in a situation where they might have their service disconnected.”
Unpaid balances on water bills persist
There are millions of dollars in unpaid city utility bills across the Valley, with tens of thousands of customers behind.
Most cities in metro Phoenix resumed utility shut-offs for delinquent accounts earlier this year and have seen the number of delinquent accounts decrease. Phoenix isn’t shutting off water for unpaid accounts, but instead puts the households on low-flow water.
In Glendale, resuming shut-offs brought the number of past-due bills down significantly. The city started shut-offs again in March 2021. The number of delinquent accounts decreased 21% from January to May of this year, according to Lisette Camacho, the city’s budget and finance director.
While the high point for unpaid residential accounts and money owed has passed, most cities still see large numbers of customers behind on bills.
Here’s a sampling of where some local cities stand on unpaid utilities, as of late May 2021:
Phoenix: 4,625 households are behind on city bills, comprising $2,225,971. This is higher than a typical year.
Mesa: 4,354 households are delinquent by one day or more, totaling $2,145,000. The number is now back to the same level as April 2020, when numbers increased as the pandemic began. The city’s unpaid accounts peaked in September 2020, when more than 10,000 accounts were delinquent and debts totaled more than $5 million.
Scottsdale: 1,043 were 31 days or more delinquent, totaling $387,301. This is fewer delinquent accounts than pre-pandemic.
Peoria: 8,434 accounts are behind on their city bills, totaling $1,688,325. The number of delinquent accounts increased 5% during the pandemic, but the total dollars delinquent increased 26%.
Glendale: 1,886 accounts are past due, for a total of $562,236 in unpaid city bills. The number of delinquent accounts increased, but the average amount a customer owed did not increase significantly — the average delinquent bill remained about $300.
Buckeye: 555 customers were late 30 days or more, totaling $279,452. The city suspended disconnections from March 2020 to January 2021, and the number of customers behind on bills rose to more than 10%. It has since fallen to the historical average of about 2% since shut-offs resumed.
How can rental debt be addressed?
The most obvious way to clear rental debt is to provide rental assistance.
The federal government allocated almost $1 billion to the state, counties and some cities earlier this year specifically for rental and utility assistance, but government agencies have disbursed only a tiny fraction of those funds.
Landlords and tenant advocates alike have argued that the stringent application process required by the federal government is to blame. Renters and landlords have to submit financial records and documentation of COVID-19 impact, and administrators have to verify it before releasing any funds, which bogs down the process.
Joan Serviss, the executive director of the Arizona Housing Coalition, suggests state and local governments use some of their COVID-19 relief funds to hire navigators who can help people find rental help and submit their applications correctly, much like the federal government did when it launched the Affordable Care Act.
In Mesa, rental assistance employees are trying to take on such a role, according to Community Services and Housing Authority Deputy Director Mary Brandon.
Brandon said her staff was trained to get creative with documentation requirements. For instance, if an applicant doesn’t have access to typical employment forms because their place of business closed, the staffers ask if they have other forms that would confirm their work history.
“You have to have that heart to be patient with people, and help them, and give them ideas. Every application is different,” Brandon said.
This approach seems to work. Mesa has deployed almost 75% of the funds it received from the federal government earlier this year — more than double the percentage distributed by any other rental assistance program.
How to address mortgage forbearance
A concern among economists is that as forbearances end, foreclosures will climb.
When forbearances end, homeowners typically have the option of repaying missed payments by adding them on to the terms of their mortgage, or just resuming making regular payments.
Borrowers should contact their loan servicer if they can’t start making payments again.
The Arizona Department of Housing expects to launch a $196.9 million program later this summer to help homeowners with mortgage assistance, forbearance payoffs, utility bills, insurance and homeowners association fees.
Also, the Consumer Financial Protection Bureau has proposed a new rule that would prevent lenders from foreclosing on homes until 2022.
What utilities in other states are doing
Most Arizona utilities have put in place measures that allow for consumer flexibility on repayment plans and limit the number of disconnections.
But so far, there are no discussions about ideas that involve forgiving some past-due bills that customers accrued. And there’s no broader push to have these debts written off completely, as discussed in some places.
Some states have programs that allow customers to pay off a certain amount of past-due utility bills each month and get some of the debt forgiven after a series of payments on these debts.
These are called Arrearage Management Programs. States like Maine and Massachusetts used them before the pandemic and have found them to be consumer- and utility-friendly, said Charlie Harak, senior attorney for energy and utilities issues at the National Consumer Law Center.
Harak and a Massachusetts utility executive penned a joint essay touting the use of these programs during COVID-19 as a way for customers to manage unpaid utility bills they accrued during this time.
Most of these programs allow customers to set up a monthly amount that’s within their budget. In exchange for 12 on-time payments of this set amount, the utility will forgive remaining debts.
This often results in better payment behavior by customers, fewer service terminations and fewer expenses on the utility’s side, Harak said.
As moratoriums end, fear begins
As moratoriums lift and people face the debts they owe to maintain their homes and purchase the utilities they need to survive, advocates fear a wave of evictions and utility shut-offs and a rush of applications for aid programs. And, eventually, the money in those aid programs will run out.
Beyond the pandemic, debts accrued can affect people’s future prospects. People may have to pay deposits to get utility services because of past bill behavior. If they have an eviction on their record, that makes renting much more difficult. Their credit worthiness is negatively affected.
Kim McKellar, whose landlord has tried to evict her from her Tempe rental home for months, has been searching to no avail for somewhere to move. If a federal eviction moratorium is lifted as planned on June 30, she is not sure where she, her husband and her two service dogs will go. “We’re just fighting and fighting,” she said.
Some families aren’t yet aware of programs they can use for help, or they think others may need the assistance more than they do, said Zwick, of Wildfire. There’s still a stigma about using these programs as well. And they involve difficult application processes and types of documentation people may not readily have.
“The concern is that some of the programs may become inundated with additional requests, and that the courts will be flooded with eviction actions,” Zwick said.
Zwick has started hearing of people who are behind on bills who’ve started using high-interest consumer loans to make ends meet.
That’s a major concern for anti-poverty groups: that these snowballing loans will ultimately lead families to more, worse debt.
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“There is a growing concern that when a customer falls behind on an electric or water bill, and they are at threat of disconnection, they will turn to a predatory loan, which in Arizona, could mean they’re putting their car title up,” said Brown, of Arizona PIRG. “And in return, being charged with a triple digit interest rate that continues them on a perpetual cycle of debt.”
For McKellar, the stress of a pending eviction has consumed her life. She has struggled to find a new job and spends most of her time on her case. She wakes up at night thinking about it.
“I just don’t know what’s going to happen,” she said. “I have to try to take care of us at the same time that we’re just fighting and fighting.”
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AUTHOR: Rachel Leingang, Jessica Boehm, and Catherine Reagor