To Help Gig Workers Home Ownership, Mortgage Lenders Must Rethink Income Analysis

BLOG VIEW: The share of temporary workers – independent contractors, online platform workers, contract workers, on-call workers and temporary workers – has increased dramatically in recent years – a trend that has been accelerated by the pandemic.

The unemployment rate at the height of the pandemic was 14%. Twelve percent of these unemployed have found a job for the first time. Due to the influx of competition for the same gig jobs, 59% of freelancers saw their earnings drop. Additionally, 17% of concert workers saw no payments from customers or contractors, or significantly delayed payments.

The working style of concerts has many advantages: better quality of life, lower barriers to entry, higher pay and flexible hours, to name a few. Sixty-five percent of concert workers believe that having a diverse clientele offers more job security than a full-time job.

There are, however, many challenges in working together. Workers’ rights, working conditions and pay are among the long list of obstacles in the odd-job economy. Loopholes in outdated labor laws allow gig companies to exploit workers for competitive advantage.

Self-employment does not carry a pension, sick pay, vacation entitlement or parental leave.

And, the daily earnings of most gig workers are directly proportional to their ability to work. Any medical setback (like COVID-19) results in an immediate halt in their income, with no protection in place.

Spain tried to solve these problems but it did not work. According to a article on Wired UK: “The Horse Riders Act is the Spanish government’s response to protests against precarious employment and low wages in the odd-job economy. Designed to improve the working conditions of riders, it entered into force on August 12 without much success. Instead of forcing gig economy companies like Deliveroo and UberEats to provide employee status to their passengers, the law forced them to outsource and tweak their applications to avoid changing their business models. But the most extreme escape tactic came from British unicorn Deliveroo, who revealed his intention to leave Spain entirely.

There are as yet no specialized loan options to help concert workers access homeownership. But banks and startups are aggressively exploring new types of specialty lending products to meet the changing needs and lifestyles of consumers.

So how can the mortgage industry help gig workers access homeownership? Rethinking revenue analysis. Stage work and the growing concert economy are forcing many institutions to rethink the entire subscription process.

If temporary workers can become homeowners, it will help stimulate the overall economy. In order for mortgage lenders to tap into this unserved market, they will need to remove the barriers that make it difficult for gig workers to buy a home.

In addition, lenders must make the effort to build lifelong client relationships with concert workers who have demonstrated their willingness to become homeowners. It’s time to act.

Paresh Deshpande is a main client partner at Tavant with over 20 years of experience in the mortgage industry.

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