How Late Rent Payments and the Eviction Moratorium Impact Multifamily

September 14, 2020

How Late Rent Payments and the Eviction Moratorium Impact Multifamily

September 14, 2020

Virus-related recession woes have created significant hurdles for renters to make their payments on time. According to recent data collected by Apartment List, 32% of renters nationwide entered August with unpaid housing bills. One month later, the country remains in a state of partial lockdown; retailers and renters remain under pressure.

As we noted earlier this month, investors are paying close attention to how trends in rent payments are affecting the short- and long-term ROI of multifamily properties. This week’s analysis explores how rent payments are shaping up to start the month of September and how these trends will in turn be affected by the national eviction moratorium recently implemented by the Centers for Disease Control and Prevention (CDC).

NMHC Reports Highest Number of Delayed Rent Payments Since April

Delayed Rent Payments Smaller Issues In Riverside, CA
Riverside, CA is one of the most reliable metros in terms of on-time rent payments during the pandemic.

According to the National Multifamily Housing Council, 76.4% of renters made their August housing payment by September 6. This is the lowest percentage of renters to make payments on time through the first week of the month since April 2020.

Many experts point toward the cessation of federal unemployment assistance and the end of the stimulus check’s impact as key factors contributing toward lagging rent payments. The assessment was shared by Doug Bibby, president of the NMHC.

“The initial rent payment figures from September have begun to demonstrate the increasing challenges apartment residents are facing,” said Bibby. “Falling rent payments mean that apartment owners and operators will increasingly have difficulty meeting their mortgages, paying their taxes and utilities, and meeting payroll.”

The same report did mention a caveat. Holiday weekends, such as Labor Day, often lead to reporting errors in collections data. Next week’s update will provide further clarity as to whether the number of renters able to keep up with their payments is still trending in the wrong direction.

It should also be noted that not all metros have been impacted equally by this trend. In part due to an openness to bringing on remote workers, tech hiring has remained robust in many areas across the country despite the pandemic. As a result, renters in metros like Salt Lake City, Utah, and Riverside, California, have experienced fewer obstacles toward paying their rents.

Conversely, travel and recreational destinations like Las Vegas, Nevada, and New Orleans, Louisiana, continue to rank among cities where the largest percentage of renters are falling behind on their payments.

Eviction Moratorium in Place as Congress Debates Financial Aid

The multifamily industry will undoubtedly be impacted if renters continue to struggle with rent payments throughout the rest of 2020. However, the exact nature of that impact is up in the air thanks to a recent announcement from the CDC.

As of September 2, the Centers for Disease Control and Prevention issued an order under Section 361 of the Public Health Service Act to temporarily halt residential evictions through the end of the year. The justification for this order comes under the authority of federal health officials to limit the spread of COVID-19.

Tenants are not automatically protected from evictions by the order. Instead, they must qualify for protection under the CDC’s guidelines and formally declare an inability to pay their rent in an affidavit to their landlord. The order outlines these five major qualifications for tenants applying for eviction protection:

  • Renters used “best efforts” to find other financial aid
  • Renters do not earn more than $99,000 in annual income
  • Renters were affected by lost income or “extraordinary” medical expenses
  • Renters attempted to pay rent in a timely manner
  • Renters declare that an eviction would lead to homelessness

One question about the plan that remains unanswered, and one that poses a large potential impact on the multifamily industry for the rest of 2020, is what mechanisms will be used by landlords to collect unpaid rent when the national moratorium expires. Many of these concerns could be alleviated if Congress is able to move forward on new plans for financial assistance before the end of the year.

That said, there are other, more optimistic indicators to keep an eye on in the meantime. The Apartment List survey indicated that among renters who were behind on their payments, about half of them had negotiated or were negotiating an agreement with their landlord.

Even better, the deadline for the COVID-19 Rental Assistance Program has been unofficially extended, according to Bisnow. As of September 8, the program website continues to accept applications from landlords and renters who are eligible. The continued availability of these resources will be a vital lifeline not only to renters but to the health of the multifamily industry at large.

Have more questions about the latest apartment rent trends? Reach out to one of our trusted investment sales or mortgage banking advisors in your area or check out one of our latest research reports for metro-level analysis of the biggest apartment markets nationwide.