In the wake of state and national stay-at-home orders that spanned weeks and, in some areas of the country, are still ongoing, millions of apartment residents and thousands of multifamily real estate owners are in peril of falling behind on their payments. At the beginning of August, more than 15.5 million Americans filed continuing unemployment claims last week, leaving many analysts concerned that August could be “the last good month for rental income,” as real estate journalist Bendix Anderson described the situation in mid-August . Analysts like Anderson cite the extra $600 per week that came to Americans' bank accounts via the CARES Act over the past few months as one of the only reasons that renters have been able to keep paying rents at all, but is this the whole picture?
What Multifamily Metrics Say About Rent Performance So Far
Anecdotally, a lot of renters are potentially going to fail to pay their rent in September. After all, there are a lot of protests revolving around potential evictions, such as the rally in Brooklyn, New York, that started as a result of governor Andrew Cuomo's executive order that gave the New York Court of Administration leeway to extend the state's eviction moratorium through September 4, 2020, which protestors called a “short-term fix” and a “half measure” that they could not accept. However, 9 in 10 apartment households (those most at risk for delinquency) made full or partial rent payments by August 20.
Doug Bibby, president of the National Multifamily Housing Council, advised against rampant optimism in response to these numbers but did say, “The industry remains encouraged by the degree residents have prioritized their housing obligations so far.”
Although 90 percent full or partial payment is not a perfect number and is down about one percentage point over July's collection rates, it is important for multifamily owners to note that this does not indicate a full 10-percentage-point drop over “normal” collections. In August of 2019, by comparison, 92 percent of renters had made full or partial payments by the 20th of the month. Although multifamily owners certainly need to be running their properties with an eye toward keeping those properties performing and keeping tenants safe, the bigger issue, said Bibby, is the uncertainty tenants and property owners are experiencing when it comes to knowing where fall rents will come from.
“Each passing day means more distress for individuals and families, and greater risk for the nation's housing sector,” Bibby said.
Know Your Rights & Your Renters' Rights
Large protests and confusion among renters and property owners about their rights during the pandemic has resulted in even more uncertainty and fear. For example, the federal government has enacted a number of eviction and foreclosure moratoriums designed to prevent individuals abiding by stay-at-home orders from being evicted if they are unable to work. However, these protections do not apply to all properties. Furthermore, the policies often vary by state. As a property owner, you need access to information directly relevant to you and the financing associated with your multifamily properties or single-family rentals so you can make the best decisions possible for your investments and your tenants and keep your tenants informed of your decisions.
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