With the $600 weekly federal unemployment benefits running out this week, just as eviction moratoriums are burning off around the country, millions of renters face the prospect of losing their apartments during the coronavirus pandemic.
And for owners and managers of rentals, a sharp drop-off in rent payments could mean missed tax payments, problems with payroll and ultimately defaults on their loans.
“There is a domino effect, and it starts right now,” said Paula Cino, a vice president with the National Multifamily Housing Council, an industry advocacy group based in Washington, D.C. She is part of a team of seven registered lobbyists and a dozen support staff pressuring Congress to provide more relief for renters and landlords.
“Definitely, if nothing is done to provide funding and support, we face a collapse-level scenario,” she said.
The push for more relief comes as rent collections are sliding.
The latest numbers from NMHC’s rent tracker program show that 91.3% of tenants made some sort of rent payment this month through July 20. That’s down 2.1% from the same period last year, and down from 92.2% through June 20.
NMHC surveys 11.4 million apartments around the country, primarily those of larger owners.
Though slipping, those collection numbers are still stronger than some analysts expected given the tens of millions of Americans who have lost their jobs because of the pandemic. That masks stress on the apartment market that can be seen by NMHC and the property management software companies that provide data for the rent-tracker program: more renters on payment plans or asking for deferrals, and more renters paying by credit card or tapping into savings.
A Census Bureau survey released this month found that 30% of households had little or no confidence they could make next month’s mortgage or rent payments.
There’s no doubt in Cino’s mind that enhanced unemployment and one-time federal stimulus checks have been a “lifeline” for the apartment industry as well as renters.
“All of us that own apartments should have some real concerns" that unemployment aid is ending, said Dean Henry, CEO of Legacy Partners, an apartment developer and operator based in Foster City, California. The firm owns and manages about 20,000 apartments at nearly 100 properties around the country. “I think it’s going to get much more difficult to collect rent.”
Legacy’s collection rate generally mirrors NMHC’s, said Henry. But the firm has properties in some markets, such as the East Bay in California, where delinquencies have hit 15%. His company’s saving grace may be that its properties have low loan-to-value mortgages. If revenue falls, it won’t quickly be drowned by loan payments.
“All of our properties are low leverage,” he said. “So, we can absorb some low rent payments.”
Cino said that the fallout will be gradual. Renters will move out or double up with roommates. Rents will fall with demand, and revenues for owners will get dinged over the next few months.
“Little losses become big losses, and pretty soon, you’re in a situation you can’t recover from,” she said.
She and NMHC are lobbying Congress for a variety of assistance, including forbearance programs for owners that would delay foreclosure proceedings for missed debt payments.
They’re also advising landlords to help tenants take advantage of state and local programs for rent relief.
“We think they should be having those conversations early and often,” she said.
She said the next relief bill passed by Congress will provide some aid to renters, whether it’s an extension of expanded unemployment checks or something else. On Tuesday, the top Democrat and Republican in the House cast doubt on whether a new coronavirus relief package will be passed this month, according to a CNBC report.
“I think there’ll be a layered approach with a variety of programs,” Cino said.
And she’s confident that despite the foot dragging, Congress will pass something.
“I’m not surprised" by the delay, she said. “That’s just the way Washington works.”