Rental payment data doesn’t tell the whole story
The National Multifamily Housing Council (NMHC)’s rent payment tracker found just under 80% of apartment households made a full or partial rent payment by October 6 in its survey of 11.4 million professionally-managed units across the country. This is compared to 76.4% that paid by September 6.
“Our initial findings for October show that despite ongoing efforts by apartment community owners and operators to help residents facing financial distress through creative and nuanced payment plans, rent relief and other approaches, renters and the broader multifamily industry are confronting growing challenges,” said Doug Bibby, NMHC president.
When comparing rental payments in September compared to the year before, NMHC found there is just over 100,000 fewer rent payments out of those surveyed. While these number sound like renters are holding steady, and perhaps less affected than we thought, multifamily operators are saying these numbers aren’t telling the full story. Building managers continue to do what they can to be flexible and help renters make their rent payments, but other data is showing stress in a variety of ways.
“If we look at the revenue per unit, we’re looking at 7% down from pre-COVID numbers. That’s a real impactful number to an operator. Units with uncollected rents have been hovering around 7% delinquency and typically, you want to see that at 3% or below,” said Elizabeth Francisco, president and founder at ResMan at the latest NMHC webinar.
Francisco also noted a small increase in multifamily renters opting to use payment plans, which is a change from previous months. Another concern was the fact that the renters who opted to go month to month in the first and second quarter still haven’t decided to secure their rental rates under a 12-month lease, but rather choose to keep paying month to month.
“When you look at all these data points, we’re seeing there are renters who are in fact not paying rent, and not entering into a renewal to secure their rates,” she added. “They are struggling, and they are fearful.”
Francisco said in some buildings, vacancy rates are up to 10% which could hugely impact operators heading into their 2021 budget decisions. Jeffrey Adler, vice president at Yardi, agreed that more information is needed to paint a proper picture of the challenges in the multifamily space. Adler says occupancy in some of the major international gateway cities are seeing significant stress.
“Class A lease ups are stalling,” he said. “Absorption of brand-new units are stalling, and the effective price that those could have rented at is dramatically reduced.”
In Manhattan, Adler says class A and B occupancy is at 85%, which shows a decline of 11% since March when the pandemic first hit. Occupancy in downtown Boston is reported to be down 5%, new rents are down 6%, and renewals are down from 68% to 44%. Class C occupancies are showing declines as well, but not as severely, he added.
“People value their personal credit scores, they value meeting their obligations, so they are meeting them to the extent that they can, but they are also taking actions to align their living arrangements with their means, and that is creating household destruction in downtown Chicago, San Francisco, LA and Seattle,” said Adler.
Other areas are less impacted as populations move, and job and economies open in different regions. The most severe impact is witnessed in high density areas, as well as the areas where economic activity have been most restricted.
NMHC has been calling for the Feds to provide much-needed assistance and support to apartment-dwelling Americans.
“In light of the CDC’s nationwide eviction moratorium – a policy which will do nothing to deal with the long-term economic pain residents and housing providers are facing - policymakers need to act now to forestall the health and financial crises we are already grappling with from evolving into a housing crisis which would undermine the economic recovery and destabilize the country’s housing market,” said Bibby in a statement.
