Apartment operators are preparing for a month of uncertainty as business closures due to coronavirus take a growing toll on the American workforce. This morning, the U.S. Department of Labor reported that a total of 6.6 million people filed for unemployment during the week ending March 28, the highest level in history, after the previous week’s record-breaking figure of 3.3 million.
The wave of jobless claims, driven by government-mandated economic shutdowns, is likely to have a significant impact on the multifamily sector as many renters will face financial stress and may be unable to pay rent. But it’s still too early to gauge the extent of the problem.
“Since we are really just now facing the first month of rent being due since the COVID-19 outbreak, it is hard to estimate how the unemployment claims will be affecting our residents and apartments,” Dana Caudell, president of property management at The Bainbridge Cos., told Multi-Housing News.
Nevertheless, the leading luxury multifamily firm, which has a portfolio of more than 20,000 apartments owned and managed, is among the industry players that are adapting to the turmoil by offering more rent flexibility for residents. “We are working with our residents by providing them with a thoughtful rent deferment plan that will assist them during this very difficult time while also retaining some cash flow on the property to pay the on-site teams, utilities, mortgages, taxes and insurance,” Caudell said. “The main goal is to ensure we are still providing a clean and enjoyable home environment for our residents,” she added.
Bainbridge is joined by other top apartment owners and operators, including Sam Zell’s Equity Residential, that are taking steps to address coronavirus-related hardship. Equity Residential announced last week that it was halting evictions for the next 90 days for those who can document that they have been financially harmed by the COVID-19 situation.
The landlord is also offering lease renewals with no rent increases over the next three months as well as payment plans to help those of its 150,000 residents that need assistance. The policies are in line with a set of recommendations to the nation’s apartment firms by the National Multifamily Housing Council (NMHC).
Waterton, which manages roughly 12,800 multifamily units, is also looking to help renters through a rough patch. Residents of a Waterton-managed community in Stamford, Conn., for instance, received an email on Wednesday with the subject line: “Help Paying Your Rent – COVID-19”. The message offers details on government financial relief, including state unemployment benefits and one-time cash payments that are expected to be issued by the federal government in April. “We understand there may be a delay in your ability to access these benefits,” the email adds. “If that’s the case, please talk to us. We are offering a number of rent flexibility options—payment plans, waived late fees and other options.”
Still Early Days
New York City-based Michael Tortorici, executive vice president of investment sales at Ariel Property Advisors, has spoken with a number of owners and property managers that are working with residents who have already been affected by job losses.
“A lot of it comes down to communication and every side being pragmatic,” he said. “Landlords in this market are going to be looking to keep tenants more or less in place, hopefully at the rent that they’re paying right now, or as close to that as possible. They are hoping for as much stability as possible.”
“Usually landlords provide their tenants with a grace period of a few days anyway,” Tortorici added. “I think we’ll have a better sense of the impact of this probably in the middle to the end of the month.”
Data and analytics firm Amherst estimates that renters across the U.S. may need $7 billion to $12 billion each month in temporary assistance over the next three to six months. The financial impact of the crisis is likely to vary by geography and income bracket, with hourly wage workers in industries such as leisure, hospitality and transportation affected by closure the most.
Beyond the looming rent challenges, coronavirus itself continues to throw a wrench in multifamily operations. “As the pandemic spreads, building operations are beginning to come to a halt,” said Cody Masino, vice president of David Associates, a real estate management firm in New York City. “Individual workers are faced with traveling to work to service a building where residents, visitors, and delivery personnel are all potential carriers of the virus.”
Masino noted that residents are being asked to be more cautious in their daily lives given the public health warnings about the pathogen’s ability to live on various materials and surfaces. “Every day another case is reported as confirmed among the resident population,” he said. “The reactions of the neighbors vary from overly concerned and looking to the building for answers, to self-reliant and proactive neighbors looking to lend a hand.”