Multifamily Executives Worry That Strong Rent Performance Won’t Last
Paul Fiorilla of Yardi Matrix sizes up industry leaders' views on the latest survey of resident payments by NMHC.
Apartment owners were happy with April’s rent payment results—which found that 89 percent of renters made rent payments through the 19th of the month, down only 5 percent compared to the same period a year ago, according to the National Multifamily Housing Council’s latest weekly survey. But industry leaders know that it is too soon to breathe easy.
“We’re all pleasantly surprised with the April numbers, but I think May will be a tougher month,” said Robert Hart, CEO of Los Angeles-based TruAmerica Multifamily, which owns 40,000 units nationally. “Tenants paid April rent with March earnings. I don’t think May will be as robust.”
That pessimism about May stems from the fact that the employment picture deteriorated starting in mid-March. During the past four weeks, 21 million Americans have filed unemployment claims as businesses in most states shut down amid stay-at-home orders.
Speaking at a webinar held yesterday by the NMHC, which will be collecting and reporting weekly on rent payment trends through the COVID-19 crisis, industry leaders provided some details about the most recent national numbers. Some of the trends include:
- Although more than 90 percent of residents made rent payments in April, TruAmerica’s Hart and Elizabeth Francisco, president of software firm ResMan, said that about 30 percent have inquired about setting up payment plans. That indicates that renters expect to have problems making payments in coming months. However, Lili Dunn of Bell Partners, a Raleigh, N.C., firm that manages 60,000 units nationally, said that only about 10 percent of residents at Bell-managed communities have sought payment schedules.
- Greg Willett, chief economist of RealPage, said that New York City, New Orleans and Las Vegas— cities with large tourism industries—stood out as having a larger share of missed payments. Sacramento, San Diego, Raleigh and Virginia Beach, metros whose economies are concentrated in technology or government, were above the national average in rent payments made.
- Other segments with slightly worse-than-average performance were Class C properties and urban high-rises leased by corporate entities, Willett said.
- Hart and Dunn said that renovations on value-add projects will lag due to a slowdown in construction, delays in supplies, worker shortages and tenant demand. “We have some concern about the ability and desire (of residents) to pay for upgrades,” Dunn said.
Industry executives are worried about two types of renters: workers that lose jobs and can’t afford rent payments, and those who can afford to make payments but might withhold because of eviction prohibitions put in place by some states and for properties that are financed with debt from the government-sponsored enterprises.
The consensus among industry pros is that collecting rent payments will grow more difficult the longer businesses are shut down and the employment situation worsens. Residents will be helped by a $600 per week increase in unemployment payments and one-time stimulus checks from the federal government, but that will only go so far, especially in high-cost metros.
Hart said that property owners should be empathetic and helpful to residents that need assistance: “We have to be careful as an industry to put on the right face.”