Cracks are beginning to show in apartment rent payments, despite pretty good overall numbers.
While about 80.8% of renters made full or partial payments for June, in line with the first three months of the pandemic, in certain markets such as Southern California rent deferment requests and nonpayments are rising, according to the National Multifamily Housing Council trade group.
“In properties that are not affordable units, year over year, we’re seeing a decline” in payments, said Julie Brawn-Whitesides, the executive vice president of ConAm Property management, on a NMHC webinar Tuesday. That San Diego-based firm owns and manages about 50,000 units, some affordable, some market-rate.
“Over the summer, I think, we’ll see if that decline continues. But I think we’re all expecting it.”
Greg Willett, the chief economist at RealPage, one of the five big software firms contributing data to NMHC’s rent tracker in the past three months, has the whole state of California on his watch list for potential defaults on rents that could send owners and operators into the red.
“You see some cracks beginning to emerge,” he said on the webinar. “Especially in Class C” properties. He says the default rate in Class C properties, which are often home to more blue-collar and service workers, is 10%, double the rate at Class A properties, home to the those who can work from home and may be struggling less financially.
NMHC has joined with five big apartment property management software companies Entrata, ResMan, Yardi, RealPage and MRI to track payments at over 11.5 million apartments.
The past three months, the pattern has been the same: About 80% of residents pay something in the first week rent is due. By month’s end more than 95% have paid.
But questions remain. No one is keeping track of how many residents have only made partial payments, or have requested payment plans. Some apartment executives have told NMHC that payment plans are in the 20% range at some properties. And a full 17% of renters have paid the last couple months with credit cards, an unsustainable amount of renters straining their credit. That’s double the historical average.
Affordable units, where the government can pay all or some of the monthly rent through subsidies, have been performing well as far as collections go, according to NMHC and their recent guest speakers. And so have higher-end apartments, though demand there is down and concessions are up.
But the middle section of the market is showing strain.
Elizabeth Francisco, the president of ResMan, noted this week that leasing season is the spring. This is the high time for landlords signing new tenants up for leases, hopefully at higher rents than the year before.
But applications for apartments dropped 5% between April and March, and have never really recovered.
“We want to be pleasantly surprised by the rent numbers,” she said. “But there’s still a lot of cautiousness that we need to have.”
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