Reviewing rent collection data has become a pandemic pastime for apartment investors, but these reports have varied significantly between outlets.
These days, rent collection data is among the most highly reviewed monthly reports. However, the strength of rent payments during the pandemic really depends on what outlet you’re reading. For June, Lease Lock has reported rents are down 6% compared to pre-COVID levels; the National Multifamily Housing Council is reporting that June rents are on par with 2019 collections to date; and Apartment List reports that 30% of tenants are not able to make a complete rent payment.
The inconsistencies come down to two factors: First, some outlets are counting only full rent payments, not partial payments. Second, each research outlet is looking at a different segment of the market. “The goal of our survey is to get as broad and representative of a sample as possible. By just looking at collections data, you might focus on larger, professionally managed buildings that skew more expensive and tend to have higher-income residents that may find it easier to pay rent,” Rob Warnock of Apartment List tells GlobeSt.com.
Apartment List uses data from smaller mom-and-pop landlords in addition to some larger landlords, giving a different market perspective. “Our survey captures some of those residents, but should also capture renters in a broader set of housing situations, like those renting from mom-and-pop landlords,” says Warnock. “We suspect that’s part of the reason why our missed payment rate tends to be higher than what’s reported by other sources.”
Like other outlets, Apartment List has shown consistent rental payments during the pandemic, although lower total collections than some other outlets. June was no different. Rent payments were similar to May with a slight decrease in full payments and an increase in partial payments. “We’re happy that the situation did not get worse, and that the missed payment rate stabilized from 31% in May to 30% in June,” says Warnock. “The pessimistic reaction is: these rates remain historically and unsustainably high, and with many eviction bans soon expiring, we fear that an eviction crisis could be looming in the latter half of the year.”
The consistence in rent payments—for both large and small properties—however, could change in August when the additional unemployment assistance expires. However, Warnock doesn’t necessarily expect the end of pandemic unemployment assistance to disrupt rent collection. “It’s really difficult to say, because there are a lot of factors at play,” he says. “On the one hand PUA is expiring, which could lead to a drop in payments. On the other hand, economies are reopening which should put some people back to work and hopefully increase payments.”
Regulation, including eviction moratoriums, could also be contributing to an increase in missed payments, which has increased steadily, according to Apartment List data. “The eviction/foreclosure bans are also an interesting factor,” says Warnock. “Part of me wonders if these bans have actually encouraged missed payments by allowing people to prioritize other forms of essential spending, knowing that they won’t be kicked out of their homes. As the bans expire, some may re-prioritize housing payments knowing that there is no longer a safety net.”
In fact, Warnock makes the case that overall rents could increase for the affordable housing segment later this year as more people chose to downgrade their homes. “I suspect most of the rent decline is coming from the more expensive end of the market, since many more people are looking to downgrade, rather than upgrade, their homes,” he explains. “That’s increasing demand for affordable homes, which are already in such short supply. So I think rental breaks will be there for people looking to move into class-A properties; those looking for class-B and C rentals might have to deal with even tighter competition.”