April was a pleasant surprise for multifamily owners and operators, but multifamily operators are bracing for May 1
As we approach the start of a new month, many are wondering whether COVID-19 will have a more visible impact on rent payments compared to what we’ve seen in April.
9 out of ten apartment households made a full or partial rent payment by April 19, which is a 5% increase compared to the week before, according to The National Multifamily Housing Corporation (NMHC). The Rent Payment Tracker is a weekly survey of 11.5 million units of professionally managed apartment units across the country.
“It is encouraging that apartment residents continue to meet their rent obligations whether that’s with the support of the federal relief funds, credit cards and alternative, flexible options provided by the industry’s owners and operators,” said NMHC President Doug Bibby.
In a webinar hosted by NMHC, property management software providers and leading multifamily owners and operators discussed what they’ve noticed throughout the first full month of the pandemic, and what they expect in the coming months.
“It will be telling to see if income relief targeted to low wage earners is actually getting to them in time for them to make their May/June payments,” said Jeff Adler, vice president of Yardi.
Many multifamily operators were pleasantly surprised with the national levels, and while collection varied slightly by region, most are considerably close to what is considered a normal level of payment.
TruAmerica Multifamily collected about 60% of rent payments within the first two weeks of the month, and as we near closer to the end of the month, they’ve been able to collect around 93%.
The other 7% makes up approximately $60 million for the month, according to TruAmerica Multifamily CEO Robert Hart, some of which have worked out a documented and approved payment plan. The other 5% are currently delinquent, which Hart says is higher than normal, but expected under the circumstance.
“There is no one-size-fits-all solution,” he said. “Some residents are doing partial payments, which is not normally allowed, others are [deferring for the month] and some are waiting for a stimulus or employment check. Our goal is to keep documenting and communicating, and I think that's the key throughout this.” While the plans vary, Hart said those that need relief are asking for at least 60 to 90 days to catch up.
While these payment plans are a great example of how flexible property management is helping Americans stay in their homes, ResMan CEO Elizabeth Francisco says the impact of these payment plans needs to be cautiously noted, especially when it comes to cash flow for the operation of the buildings.
“Some residents were already going through the eviction process before the country entered the shelter-in-place order. It’s going to be interesting to see what comes of that, because evictions are not possible right now,” she said.
May will be much more revealing as financial hardships will become more prevalent across the country. As a result of the COVID-19 pandemic, more than 24 million people across the country have lost their job in the past month alone. One reason that April was better than expected for the industry could have to do with the state of the multifamily sector pre-pandemic.
“Keep in mind that going into this, the permit industry was well positioned. We were near a 20-year high, so right now, our occupancy is still stable at 95%,” said Lili Dunn, president of Bell Partners Inc. She added that while less than 10% of residents have requested payment plans to help meet their rental obligations, the ancillary retail spaces within the apartment community is a different story.
Varying Markets
New York, New Orleans, and Las Vegas are three markets that are experiencing greater challenges in rent collection. This isn’t surprising considering the health crisis in New York and the heavy reliance on tourism in both New Orleans and Las Vegas.
Renters in Salt Lake City, however, have exceeded the normal level of rent payments, according to RealPage chief economist Greg Willet. There’s also no change in markets like Sacramento, Virginia Beach, San Diego, and Raleigh.
“What I would highlight in those areas is they are heavily in technology and government, so those employment centers are keeping up pretty well,” he said.
Bell Partners manages approximately 60,000 apartment units across the country, and two markets that stand out for challenges in collection are Orlando and Fort Lauderdale, which may be more reliant on tourism, hospitality and ports. Dunn says high tech areas like Seattle are much less affected, especially since they are already used to flexible work arrangements.
Hart says the number one market for TruAmerica Multifamily has been in Utah, followed by Portland and Washington, with Arizona mostly unaffected as well. Areas like Los Angeles and the Valleys is where collection is below 90%.
The next survey data from NMHC Rent Payment Tracker is expected to be released on May 8.
