Fewer U.S. apartment dwellers paid their June rent in the first six days of the month than in May, prompting concerns that hurdles from labor shortages to other difficulties in building more affordable units lie ahead for the industry even as the economy recovers from the pandemic.
The roughly 77% of renters who made full or partial payments toward their rent by June 6 was down 3 percentage points from a rate of 80% in the first six days of May, according to data from apartment advocacy and research group the National Multifamily Housing Council.
“While the long-term view is encouraging, we have significant challenges before us,” said Doug Bibby, the advocacy group’s president, in a statement.
The Washington D.C.-based organization surveys 11.7 million professionally managed rental units throughout the United States for its monthly rental payment tracker. This month’s figure, the second-highest rent collection month of this year after March, comes amid growing general optimism in the overall commercial real estate industry as businesses across the country are beginning to reopen, fueled by increasing vaccination rates and decreasing COVID-19 cases and hospitalizations.
While it was the year’s second-best result, this month’s rent collection rate is nonetheless a 4.6 percentage point decrease from the same time in 2019, before the pandemic, and a 3.8 point drop from the same six-day period in June last year, when the pandemic was acutely affecting almost all economic markets. It also compares with June 2020, the best month for rental payments during the health crisis, which may have been boosted by the federal Coronavirus Aid, Relief, and Economic Security Act, signed into law in March 2020 to trigger stimulus payments as early as April 2020.
While signs point to a multifamily recovery, the market is still dealing with a backlog of issues sparked by the pandemic, said Ryan Patap, senior director of market analytics for CoStar Group in Los Angeles. Some higher-earning renters, who may have more reliably paid rent on time, have moved out of apartments in favor of purchasing a home, while some lower-income renters may still be trying to financially catch up from bouts of unemployment or other hardships that make it harder to make timely rent payments.
“It’ll take time to digest the problems that have built up over the past year,” he said.
In the statement, the National Multifamily Housing Council also noted that June 5-6 this year fell on weekends, and that could have affected rental payment patterns and may not be a direct comparison to 2020 or 2019’s figures.
Affordable Housing Concern
Bibby noted a mounting struggle in the industry to increase the supply of affordable units to help accommodate renters who may need to decrease their rent expenses.
“Construction costs are rising at almost unparalleled rates, making it increasingly difficult to bring affordable apartment homes to market,” Bibby said. “At the same time, more and more firms are reporting significant challenges in finding labor, further delaying construction.”
The United States has a shortage of almost 7 million affordable and available rental homes for extremely low-income renters, which comprise households with income at or below poverty levels or 30% of the area median income, according to a report in March from the affordable housing advocacy and research group National Low Income Housing Coalition in Washington, D.C. Only 37 affordable and available homes exist for every 100 extremely low-income renter households, the report found.
To complicate the matter further, rents are also rising. The average apartment rent in the United States increased to $1,401 per month in the first quarter of 2021 compared to $1,079 in the first quarter of 2011, according to CoStar research.
Bibby said his organization welcomes the recent congressional allocation of $50 billion in rental assistance, noting such funds are a “top industry priority.” However, he warned that the national eviction moratorium may “ultimately only serve to place insurmountable levels of debt on already struggling households.”
“We have much to look forward to, but these challenges are real and need to be dealt with urgently,” he said.
Apartment rent payments have mostly hovered around 75% since March 2020, when the pandemic began, according to previously released rental payment data.
So far, the worst month for rental payments during the crisis was December 2020, when about 75.4% of renters made payments toward their rent by the 6th of the month, the group said.
About Real Estate Intelligent Marketing (REIM):
REI Marketing is an innovative Real Estate Marketing Company that offers distinctive real estate services to developers and multifamily investors. We are a vibrant, dedicated team of industry professionals with international experience in marketing and multifamily investment.