Apartment Renters Continue to Pay Up, and Owners Wonder: How?

Tenants are continuing to make rent payments on their apartments — and that’s confounding industry experts.

The National Multifamily Housing Council, or NMHC, reported that 90.8% of residents made full or partial payments for May through the 20th. That’s actually better than the same time last month, and only 2.2% worse than May 2019, before 38.6 million Americans lost their jobs during the pandemic shutdown.

“Collections overall are better than we expected,” Elizabeth Francisco said during an NMHC webinar Friday. Her firm, Plano, Texas-based ResMan, is one of the five big apartment management software companies that feeds data on 11.5 million apartments to NMHC for its new rent-tracker program. “The question becomes: Are these numbers too good to be true?”

Good April collection rates were seen as the apartment sector living on borrowed time. Unemployed residents dipped into savings to make rent, or used their one-time $1,200 federal assistance check, or their credit cards, industry executives said.

May, many thought, could be when the other shoe would drop and rent defaults would soar.

But now May is almost over, and most residents have come through.

How is that happening?

Jeff Adler, of another property management software firm, Santa Barbara, California-based Yardi, still thinks the sector is hanging by a thread.

The federal relief package has provided an extra $660 a week for many of the unemployed. That’s likely to help buoy the rent collection rate.

But that program ends in July, he said, and is unlikely to be renewed.

“June, July, that’s when this will dry up, until then it will be the same as now,” he said on the webinar. One metric NMHC is not tracking specifically is exactly how many renters are availing themselves of rent deferments and payment plans. But big apartment owners reported those requests are way up, as high as 20% at some properties.

Caroline Vary, managing director for asset management at Jonathan Rose Cos., pointed out that payments didn’t vary too much by region, but more by property type.

Jonathan Rose Cos., of New York City, owns about 68 properties from New England to California, with about 20,000 apartments. Most of those are either workforce housing properties or affordable housing.

Her company sees that the most consistent rent payers it has are those higher-end, market-rate properties where residents can work from home — and lower-end subsidized properties, where rent payments are guaranteed by the government.

Jonathan Rose’s properties in Detroit, where many of the firm’s residents are Section 8 voucher recipients or Social Security beneficiaries, are the best performing.

“They pay their rents on time,” said Vary. “And they are subsidized.”

The vast middle-range renters could be the sector’s soft spot.

In the meantime, many of the country’s big owners and operators are doing all they can to accommodate residents: setting up payment plans, eating credit card fees and costs for closed amenities, and waiving late penalties.

All of this adds up to lost revenue, Francisco reminded the webinar’s participants. At some point, owners too will fall behind on loan payments and other expenses as cash flow from tenants lets up.

“There is a wave of disruption coming for multifamily,” she said. “I believe it will come to shore in the third quarter.”

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