Benefits Helped Rental Market Weather COVID-19: Freddie Mac
- Apr 01, 2021
The multifamily rental market in the U.S. has largely weathered the economic downturn caused by COVID-19 due to the support from state and federal agencies that allowed residents to pay rents, according to a new analysis by Freddie Mac.
The COVID-19 outbreak had a major effect on the U.S. job market, increasing the amount of weekly unemployment claims to seven million in late March 2020 and bringing total employment numbers down to more than 20 million jobs during the middle of 2020. Steve Guggenmos, vice president of Freddie Mac Multifamily Research and Modeling, said in prepared remarks that the COVID-19 pandemic created a lot of uncertainty for working families on how they would pay rent.
To stem the economic damage from the job losses, the federal government stepped in and passed three separate stimulus plans that provided additional weekly unemployment income and stimulus checks. In evaluating the effectiveness of these measures, Freddie Mac’s analysis compared the income gained during unemployment against a hypothetical worker earning $40,000, or $3,333 a month, in pre-pandemic income in Nevada.
According to the analysis, an unemployed worker received more monthly income from benefits than an average $40,000 salary in April, May, June and July 2020. However, the benefits failed to reach the $3,333 monthly salary average in August to December 2020 with a peak of $2,029 in unemployed worker income in December. Later stimulus checks helped unemployed workers surpass the average salary for the month, but even with federal and state benefits, the Nevada worker example did not hit the $3,333 mark.
According to the analysis, the unemployed worker from Nevada would have received roughly 95 percent of their pre-pandemic income through state and federal unemployment benefits and stimulus checks between April 2020 and August 2021, with the stimulus checks counting for 6 percent of this total. Overall, in more than half of the states, a median income worker who lost their job will have received within 10 percent of their lost income in benefits.
Guggenmos added in his prepared statement that the availability of benefits and stimulus will still play a part in how renters continue making rent and how the apartment market overall weathers the pandemic.
Freddie Mac’s analysis also noted that in the National Multifamily Housing Council’s monthly surveys throughout the pandemic, rent collection numbers only dipped slightly from the year prior. The recent March NMHC survey showed that 80.4 percent of rental households surveyed made a full or partial rent payment by March 6, a 4.1 percent decrease from the same time period last year.
However, the analysis noted that there are notable differences when looking at specific states. Those with strong state level unemployment benefits and lower median income saw a higher share of income replaced by benefits. Workers in states like Kentucky and West Virginia would’ve actually seen an increase in income through unemployment benefits and stimulus, 15 and 19 percent respectively, compared to if they continued working through the pandemic. On the other hand, markets with high median income and lower state level unemployment benefits like Arizona and Washington, D.C. saw a 33 percent decrease in income compared to pre-pandemic levels.
Washington, D.C. and Arizona also joined Florida and California in seeing the most rent burden for those unemployed. These states and the capital saw its unemployed renters pay 45 percent or more of their benefits towards rent. The report also pointed out that lower-income workers, who also tend to be renters, faced more challenges, including job losses, reduced hours and pay cuts, compared to their higher-earning counterparts.