April turned in surprisingly strong rental payment results for apartments. By April 12, 84 percent of renters had made full or partial payments, just six percentage points down from the same time the previous year, and by April 26, even more had caught up, with the total rising to 91.5 percent of renters.
While that data notably includes partial payments, as many apartment managers worked with their residents to develop flexible solutions, it was better news than expected. Now to see how May and June hold up. While the federal government awarded both stimulus payments and expanded unemployment compensation to consumers, many are still waiting for their checks and for their unemployment claims to be processed. Meanwhile, the unemployment rate has continued to rise, reaching a seasonally adjusted 11 percent for the week of April 11, although some of this may be mitigated as a number of states start to open their economies. Apartment managers should continue to talk with residents to devise optimal payment solutions while also evaluating new operational efficiencies, as Avanath Capital Management chairman & CEO Daryl Carter advised during our recent Snap Session webinar, “Managing Rents and Expenses During COVID-19.”
Student housing operators face some unique challenges. With universities closing campuses beyond their spring breaks, most students have vacated their housing, with a still-unknown number likely to stop paying for beds or units leased through July, as Sibley Fleming notes in our student housing sector insight. Add to that the possibility of universities delaying the start of their fall semester to prolong social distancing and the need to fill beds over the summer, and property operators are faced with a lot of uncertainty.
Yet student housing has become a growth market that performs well even during recessions, when reduced jobs result in increased enrollment, according to a recent National Multifamily Housing Council report. The January study found that 8.6 million students need rental alternatives near their colleges, with demand growing as enrollment in public four-year universities—which comprise 42 percent of undergraduate and 49 percent of graduate rental housing—has continued to increase (albeit at a slow 2.1 percent) in recent years. In fact, some 40,000 to 60,000 beds have been added each year since 2014, with 30 percent to 40 percent concentrated among the top 10 schools. That suggests plenty of opportunity to address demand, especially as this segment is likely to continue growing, even as matriculation in other university segments slows.
This year’s uncertainty will require patience and ingenuity. But demand is waiting in the wings.