For Apartment Landlords, May Will Be the Real Test

Despite reports of solid rent collection this month, apartment landlords are bracing for big headaches come May.

Many renters got creative to pay April’s rent. They dipped into savings, used credit cards and took government assistance. Landlords, meanwhile, offered deferments and payment plans while waiving fees. That’s the word from top apartment experts in a webinar this week hosted by the National Multifamily Housing Council, the nonprofit industry trade organization.

Those moves helped boost rent collections, either full or partial payments, to 89% through April 19, according to NMHC. But they will leave many tapped out come May 1. Or, tenants will effectively be falling into debt, owing part of April’s rent and May’s as unemployment continues to soar during the economic shutdown prompted by the coronavirus pandemic. Jobless claims hit 4.4 million last week for a total of nearly 26 million since the crisis began in March.

“I think May is going to be a tougher month,” said Robert Hart, president and CEO of TruAmerica Multifamily, the Los Angeles investment and management shop with about 38,000 apartments across the country. “I think people were paying April’s rent with March earnings.”

Lilli Dunn, president of Bell Partners of Greensboro, North Carolina, said her company is seeing a collection rate in April above 95% in its 60,000-unit national portfolio. And unlike some managers who are reporting up to 30% of residents asking for payment plans, few of her tenants are showing distress.

“But I think May will be much more revealing, as the hardships become more apparent,” she said. “There’s another shoe to drop. I hope I’m wrong, but I think it’s coming.”

Both Hart and Dunn point out that tourism-heavy cities such as Las Vegas, New Orleans and Orlando, Florida, have seen the lowest collection rates.

The extraordinary number of Americans thrown out of work in the past six weeks has included an outsize number of renters: service and construction workers and those unable to work remotely, as many office professionals do.

NMHC President Doug Bibby said his group is lobbying in Washington for more direct relief aid for renters. He thinks only about 5% to 10% of tenants nationwide are looking for deferred rent or payment plans, but he expects that number to rise.

“That $1,200 stimulus check isn’t going to take you very far in a high-cost market like Boston,” said Bibby in an interview with CoStar News. Unemployment checks and other benefits have been spotty in arriving in many states too. “Another layer of relief is going to be needed for the renter.”

But NMHC is also lobbying for aid to landlords, asking that apartment owners and management companies be included in the federal Paycheck Protection Plan that is designed to loan billions to businesses that keep their employees on the payroll.

As rent collections slide and delinquencies mount, cash flow will become a problem even for big national firms. Payments to staff, maintenance costs, taxes and other expenses can become a problem.

“Apartment operators will not be able to meet their financial obligations,” said Bibby. “It puts stress on the whole housing ecosystem.”

NMHC expects to have May rent collection data for the first few days of the month out on May 8.

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