In the latest National Multifamily Housing Council’s Rent Payment Tracker, which draws on collection data for 11.5 million professionally managed apartment units, 75.4% of apartment households made a full or partial rent payment by Dec. 6.
This is a 7.8 percentage point drop from the share who paid rent through Dec. 6, 2019, equivalent to 894,864 households, and compares with 80.4% of renters who paid rent by Nov. 6, 2020. The NMHC notes that Dec. 5 and 6 fell on a weekend this year, which may account for some of the difference in rent collection rates. Overall, rent collection was 93.6% for the month of November, or 180,000 fewer households than November 2019.
"While the initial rent collection figures for the first week of December are concerning, only a full month's results will paint a complete picture. However, it should not come as a surprise that a rising number of households are struggling to make ends meet,” says Doug Bibby, NMHC president. “As the nation enters a winter with increasing COVID-19 case levels and even greater economic distress—as indicated by last week’s disquieting employment report—it is only a matter of time before both renters and housing providers reach the end of their resources.”
In this month’s Rent Payment Tracker Webinar, Jeff Adler, vice president of Yardi Matrix, notes that he would not “draw a lot of meaning” out of the initial slowdown at the start of the month, owing to the weekend. Instead, he draws attention to the month-end total rent collection rates, which have been on a trend of “slow erosion" since the summer.
While Fannie Mae reports that 28,000 multifamily properties are in some form of delinquency, Adler notes that only 50 of those properties are within Yardi Matrix’s professionally managed purview. This, plus anecdotal evidence, leads him to conclude that smaller owners are feeling more financial pain than larger companies—given a combination of fewer resources to rely on and also a greater financial impact if a tenant is struggling.
Other burdens on multifamily communities include the increased cost of keeping communities safe, sanitation, and PPE; disruptions in capital expenditures that may extend into 2021; and a greater strain on community resources and utilities associated with residents spending the majority of their time in their units.
Antonio Marquez, principal and managing partner of Comunidad Partners, notes that while his company’s subsidized affordable communities are not seeing much degradation in rent payments, the naturally occurring affordable apartments are not faring as well. He notes that many of his communities’ move-outs are residents in precarious industries or singles without a second income to fall back on. On the opposite end, many of the new move-ins are people moving down from more expensive properties or residents who wish to be closer to family than they were before.
In addition, with the Pfizer-BioNTech vaccine up for approval this week in the U.S., Marquez proposes that property managers could subsidize the cost of vaccinations for multifamily residents who want to receive it.
When asked if they feel like the market has “hit bottom,” the multifamily experts expressed uncertainty about 2021, but cautious optimism for 2022. Adler notes that while rents are falling in “gateway cities,” lower-priced units in smaller markets are going up, while Elizabeth Francisco, president of ResMan, emphasizes the enduring importance of a new stimulus in maintaining the sector’s performance.
The stimulus package in progress could supply the apartment industry with $60 billion in rental relief, if approved, although negotiations in Congress have grown more difficult within the last day.
“It is critical that any package includes meaningful rental assistance and other critical support such as an extension of unemployment benefits and short-term liability protections,” Bibby says. “At the same time, lawmakers should be cautious of extending eviction moratoria—an approach that will only result in untenable amounts of debt for households across the country.”
