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Millions of Apartment Renters Sit at the Brink of Disaster

With unemployment levels still high and extended federal benefits now expired, more renters will have trouble staying current in the months ahead.

Millions of apartment residents have fallen behind on their rent payments, according to data from the U.S. Census—and the damage is likely to spread as the economic crisis caused by the novel coronavirus continues.

Federal assistance that helped millions of renters stay current on their rents even after they lost their jobs has now expired with little clarity from Washington on whether it will be renewed.

Now property managers worry that more Americans will fall behind—even at professionally-managed apartment communities that have largely weathered the crisis so far unscathed.

At smaller, class-B and class-C rental properties, where many renters had already fallen behind even with the aid, even more residents are likely to have trouble paying unless government support programs are renewed in some form. And with eviction bans now expiring in many states, many delinquent tenants could be receiving notices from their landlords.

August may be the last good month for rental income

Millions of people have lost their jobs since the crisis caused by the coronavirus began in March 2020. Overall, 15.5 million Americans filed continuing unemployment claims last week. Meanwhile, the total number of Americans receiving unemployment benefits stood at 28.3 million for the week ended July 25. While off peak levels from earlier in the pandemic, those numbers are vastly higher than pre-pandemic figures.

Despite the high levels of unemployment, many residents were able to keep paying their rent thanks to the extra $600 per week in federal enhanced unemployment benefits on top of normal state payouts. Those benefits expired at the end of July with the expiration of the CARES Act. And although the House of Representatives in May had passed a bill that would have extended those benefits until the end of the year, the Senate has not passed any similar legislation and negotiations between the House and Senate and representatives of the Trump administration have come to a halt.  

That has left many unemployed renters with little certainty as to how they can pay in the future.

“Households are paying this month’s rent with money they accumulated last month, when enhanced unemployment benefits still were in place for those who have lost their jobs,” says Greg Willett, chief economist for RealPage Inc. “Missed payments are likely to be a bigger problem in September.”

By August 13, close to nine-out-of-ten apartment renter households (86.9 percent) had made a full or partial payment for the month, according to the Rent Tracker survey by National Multifamily Housing Council (NMHC), which gathers data on 11.4 million professionally-managed apartments from five leading property management software systems. This is a 2.0-percentage point, or 222,543 -household decrease from the share who paid rent through August 13, 2019 and compares to 87.6 percent that had paid by July 13, 2020. The datea set covers more than a quarter of the 43 million rental apartments in the U.S.

“Rent collections in August are holding at roughly the same levels seen since the pandemic began, off a little from year-ago results but still very solid among those living in professionally-managed properties,” says Willett.

Housing advocates frantically lobbied Congress to extend the benefits, but in early August, legislators left the Capitol for a long recess with no deal. The House is set to return later this week to hold hearings on the situation with the U.S. post office. It’s unclear if the return to Washington will help renew talks on a funding bill.

“There are no signs that any compromise will be reached before September,” says Bob Pinnegar, president and CEO of the National Apartment Association (NAA). “However, our hope is that the two sides can bridge their differences as soon as possible.”

“State-level unemployment benefits alone won’t come close to covering typical monthly rents in parts of the Northeast and all along the West Coast,” adds Willett.

In the meantime, President Donald Trump signed a series of executive orders as the benefits expired, including one meant to extend the enhanced unemployment benefits. Although it requires the states to set up new programs to distribute the additional $300 per check in enhanced benefits and also asks the states to contribute another $100 per check themselves from their own strained budgets. On Saturday, Arizona, Iowa, Louisiana and New Mexico approved the payouts.

“There have been a lot of questions as to how to implement that,” says Paula Cino, vice president of construction, development and land use policy for NMHC. “There are going to be jurisdictions that are not going to be able to get those payments out the door.”

The July 31 expiration of unemployment benefits has already made a difference to the 50,000 households that use Till, Inc., a technology company that provides financial tools to help renters stay in their homes. Because Till is a new company, many of its customers signed on recently, after losing jobs during the COVID-19 pandemic. So these renters provide a useful window into the income levels of vulnerable renters included in NMHC’s Rent Tracker. Their average income went up 15 percent from the normal, baseline levels in May, June and July. But at the end of July, as the enhanced unemployment benefits expired, the average income of Till’s renters dropped 20 percent below the baseline.

“We believe there is going to be a lot of pressure on renters’ ability to pay as the government stimulus ends,” says David Sullivan, founder and CEO of Till, based in Alexandria, Va.

Millions of renters are already in trouble

NMHC’s Rent Tracker also does not include tens of millions of apartments at properties that don’t use one of the top property management software systems used to compile the tracker. That includes many smaller properties with just two-to-four apartments that are not professionally managed and are often home to more vulnerable renters.

“RealPage anticipates a notable increase in missed rent payments at class-C properties in comparatively expensive metros,” says Willett. “The renters at lower-tier properties generally don’t have any financial cushion that allows them to deal with income interruptions.”

Many are already falling behind. Of the 73 million households that live in rental housing units of all types in the U.S., a quarter (13 million) failed to pay their rent last month, according to the Household Pulse Survey from the U.S. Census.

In addition, 13 percent have "no confidence" that they will pay their rent next month. Another 19 percent have “slight confidence.” That's in addition to the 1.1 percent who are already sure that they will defer next month’s rent, according to the Census.

“That’s 24 million people [heads of households] who have little or no confidence that they can pay,” says Cino.

The problems these renters suffer will only increase if the enhanced unemployment benefits are not effectively renewed.

“Renters need help. As the pandemic persists, Americans are digging deeper into limited reserves and many are incurring growing, insurmountable debt just to survive,” says Pinnegar.

TAGS: Leasing News
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