Perspective: Renters’ Health Insurance

The heart of the multifamily industry is the renter. After all, it’s those monthly rent checks that make all of this possible. It seems odd, perhaps, to point this out but, for many, the concept seems elusive. The apartment industry is the last bastion of real estate investment where cash flow is fundamentally independent of the customer. Even the hospitality industry talks about their guests more reverently than we do.

Taking the lead from the great champions of retail at Sears and Walmart, I propose we remember that it’s all about customers, employees and social responsibility. Isn’t it time we consider doing something that will help our residents while also building occupancies and making a social statement?

Let’s provide health insurance to renters through a pool, managed by a non-profit organization as a licensee of the Blue Cross/Blue Shield system.

If all the leading companies get behind the idea, the size of the insured pool becomes interesting and beneficial. Think about it this way: the renter pool would be younger, so rates would be very attractive. Belonging to an insurance plan would become a compelling reason to renew the lease rather than moving. And, the public relations benefit to our industry would be a sure hit.

Some proof about the need for this comes from RentGrow: “YTD through Nov 30, 2009, 37.2 percent of the individuals who applied to apartment communities had at least one medical collection item on their credit reports. The majority of management companies choose to exclude medical items from their screening criteria … It’s clear that individuals with medical debt make up a sizable segment of our nation’s renter population.”

Apartment renters are, in many respects, a curious lot. Efforts to segment them in all but a few instances have met with mind-numbing frustration, especially in light of their propensity to leave professionally managed apartments and rent foreclosed homes. Renters, so important to the economic health and future wellbeing of this industry, are leaving professionally managed apartments in record numbers. Greg Willett made an excellent point last year, that in a private compilation of MPF data, there was no evidence that renters were doubling up, indicating they were making other choices. Reports in Pierce-Eislen tell a similar story—that renter weakness cuts across all sectors, especially hard-hit in the discretionary cluster.

There has never been a time in this industry when renters have had so many different housing choices, and that is not likely to change anytime soon. In fact, as the single-family inventory gets absorbed and much of that becomes permanent rental stock, it has never been more urgent to consider what the alternatives are to keep the industry healthy.  The much hoped for Gen Y appearance has either been delayed or—more importantly—misread. I’m finding it humorous that pundits are running around talking about them as the savior of the apartment industry, when in fact, most profess they do not wish to live in apartments, but rather prefer shared group quarters. A genuine advantage such as health insurance for this frequently uninsured or under-insured group can draw them back in.

When I entered the industry well over 30 years ago, a lot of what was in place then had been in practice, in some instances, since the turn of the century. What many in our profession, owing to their young ages and recent employment, don’t realize is that we’re an industry now—not just that Mom and Pop business so prominent in the days before securitization and Wall Street capital.

In a lot of respects, I think the original way of life was better for renters. In the previous incarnation of multifamily ownership and operations, the vast majority of properties provided rental housing at reasonable rents, and often year-to-year apartment renewal rates were based on what the manager knew about the family. Gentle rent increases kept the homeownership rate relatively stable for a long period of time. There was no rush to homeownership to escape the constant line-up of rent increases. Rental properties were, for a time, true local communities on their own, with tenure patterns and the acceptance of shared communal responsibility for maintaining the property.

I’m not suggesting that the apartment experience will ever go back to what it was. With institutional capital, major ownership groups and multifamily as an investment class, it never will. What I am suggesting is this: let’s do something that takes a stand. Offering health insurance plans will greatly improve the lives of our residents, and isn’t that what the renting experience is supposed to be all about?

The apartment industry, hopefully with the leadership of the major trade associations and ownership groups, can make a real difference in people’s lives. Let’s hope that 2010 is the year we do it.