For the past two months, rental industry players have been riding a roller coaster. Landlords and property managers have had to shift from business, as usual, one day to invent procedures for no-contact showings the next, and wonder all the while about tenants who may not be able to pay and the prospect of evictions in the months ahead. At 67 days and counting, we’re all eager to compare notes – for instance, if up to 2/3 of tenants are behind on rental payments, per national media reports, how does this play out in individual markets?
Rentometer recently surveyed platform users – landlords, property management companies, and owners – and combined information from surveys by the American Apartment Owner’s Association and the Department of Health in Wisconsin to arrive at a snapshot of rental industry health around the country.
Rentometer’s survey had 40 participants, AAOA had 1024 participants, and the DHS WI had 200.
Is There A Pattern to Vacancies?
There are vacancies across the board for residential rental properties. Many of these vacancies fall into the natural time frame of lease expirations and tenants giving notice, before the wave of “safer at home” orders rolled out across the country. None of the surveys had responses that tied vacancies directly to a loss of income from furloughs or business closures. Still, a large metro area like Manhattan reported a rise in the rental vacancy rate to its highest level in 14 years, with a 71% decline in new leases year-over-year. Other primary markets may yet show a similar decline.
What’s Happening with Showings?
While vacancies so far are not out of line with expectations, “safer at home” orders have reduced property showings by 50%. Landlords had to pause showing activity while they figured out how to show properties with little or no contact. This requirement has pushed property management companies to escalate their use of technology for virtual or video tours to get new leases signed.
Non-Payment of Rent
In the AAOA survey, landlords reported that in April 2020, 54% of their tenants had trouble paying rent; that figure increased to 59% in May, with business closures due to COVID-19 cited as the reason. By contrast, Wisconsin landlords reported income interruption for less than 10% of their properties for the same period. Many initial projections had non-payment levels even higher – numbers for the second half of the year will round out the story. Some major employers have closed their doors permanently, and tenants may need to relocate for better job prospects.
Concessions on Rent Payments
The consensus among real estate industry players is the wise course of action is to work with all affected parties. Landlords are communicating with tenants. Short-term solutions include rental assistance materials, rent deferrals, and payment plans. In some cases, landlords have forgiven a month of rent. Landlords are finding it easier – and often less costly – to accept partial rent rather than deal with a move-out and recruit a new tenant. With state and local governments allowing businesses to open back up and bring people back to work, how long will concessions be necessary?
The Eviction Conundrum
With an eviction moratorium still in place, some landlords have shifted from 12-month leases in favor of month-to-month leases giving landlords the ability to evict when the moratorium is lifted. Many property owners are now starting to lobby for mortgage assistance, utility assistance, and even payment assistance for trash hauling services.
This pandemic has made it clear that landlords and property owners must make new plans going forward to deal more constructively with a tenant’s regular life events as well as broader business disruptions. In the AAOA survey, 36% of landlords said they feel ill-equipped to handle a COVID-19 outbreak in their multi-family rental properties. Across the board, however, the biggest concern is whether or not most tenants will make their next rent payment in full.
What’s not clear is whether this situation sets a new precedent for communication between tenants and landlords, to a point where constructive conversations arise when problems arise, rather than defaulting immediately to the eviction process.
What’s been the situation for your properties? Are you asking these questions or different ones? Share this article with your thoughts or reach out to Rentometer on social media.
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