The current economic landscape and public health crisis born from the coronavirus has spelled uncertainty for real estate investors across all asset classes, however, multifamily investors are strong in their belief that affordable housing will prevail as demonstrated with its performance in the past two recessions, Jonathan Needell, president and chief investment officer of real estate investment company KIMC, tells GlobeSt.com.
As the nation’s current public health crisis shuts down the economy and sends the population into isolation, stakeholders are observing data analytics and federal bills in the pipeline for aid to adjust and apply resources where needed to offset any economic impacts. In this case, loss of income from unemployed renters in the near-term is one, but that’s not where the story ends or begins, according to Needell.
“The current crisis is going to be a little bit interesting [..] cities have put a moratorium on halting evictions,” he said. “We’re thinking about how to work with tenants, so when a bill gets passed, we can identify resources and participate in what the bill provides to them.”
Affordable properties, including those with low-income housing tax credits, already lag behind market-rate properties in terms of rent increases because rents go up in tandem to area income, usually on a three-year trailing average, according to Needell, whose renters earn between 25,000 to 75,000 annually. However, KIMC’s business model isn’t betting on rental increases for cash flow.
The affordable properties in the KIMC portfolio are typically Class B and C and maintain near full-occupancy levels, nearly 3 to 6 percent higher than market-rate housing, have less vacancy, and a quarter-point to .13 percent lower credit loss from delinquent renters. To offset late or delinquent payments from renters, the firm has implemented social programs to help tenants navigate social challenges. “These characteristics have proved favorable during the past two recessions,” Needell said.
With current economic events shutting down small businesses that many affordable tenants depend on for employment, the firm is pulling its confidence from past performance metrics but is also educating tenants about available resources and the importance of maintenance of credit and the allocation of federal aid checks disbursed during the crisis to rent expenses.
According to Needell, the firm has had success in the past working with families dealing with financial pressure during life events, such as those during the holidays and back-to-school season. At the moment the firm has also set up free lunch programs for kids at its properties who are home from school. “As much as we can connect the dots for tenants, that’s what we’ll do,” Needell said.
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