May 1st Rent: First Day Payments Hold Surprisingly Steady

In April the apartment industry moved quickly in response to COVID-19, as shelter-at-home laws, eviction moratoriums, and rising unemployment rates became a new reality. Although rent payments trended downward in April, rent payment behavior didn’t decline as much as expected. Today, all eyes have turned to May, to determine whether rent payments will be harder hit as the economic effects of the pandemic set in.

Data Indicates Renters Still Prioritizing Rental Housing Payments

Who paid May 1st rent? So far, May seems to be on a similar rent payment trajectory to April, including a slight bump in first-of-the-month payments — roughly 4% more total rent was collected on the first day of May compared to the trailing three month average. This suggests that as federal relief and unemployment checks roll in, Americans are prioritizing rent payments first.

In this analysis we will dive into May payment behavior starting with first day payments, as well as interesting patterns leading up to it. This includes a regional analysis of metros highly affected by the pandemic, as well as differences by asset class.

April Rent Payments Showed Slight Uptick Leading Into May

Although total April rent payments collected were down 7% compared to the trailing three month average, first day April payments actually showed a slight increase. As explored in our April Rent Payment Report, this slight uptick was likely due to a mix of reliable rent payers (many of whom are enrolled in auto-pay programs) and apartment operators incentivizing residents to make rent on time and offering renter relief programs such as payment plans.

At the end of the month of April, we saw another slight bump in rent payments, as renters moved to get rent paid before month’s end. This could be partially attributed to Americans starting to receive their federal relief checks, unemployment benefits, and state-funded rent assistance. But who paid May 1st rent?

Similar to April, May Saw An Uptick in First Day Rent Payments

As seen in April above, we also saw a slight increase in full May 1st rent payments compared to the pre-COVID three month trailing average (January, February and March).

This surge represents reliable first-of-the-month rent payers and is bolstered by efforts of apartment operators to encourage early rent payments. Operators have had a month now to solidify communication with residents, refine their rent relief programs, and incentivize renters to pay on time. Both residents and apartment operators are paying very close attention to rent payments in May – and it appears those who can pay, are doing so on the first of the month.

This slight bump in first-of-the-month payments holds true across select cities in May. However, hard-hit metro areas such as Seattle and Los Angeles also show an ever-increasing move towards partial payments, suggesting acceleration toward resident payment plans and other alternative payment arrangements.

Seattle and Los Angeles Show Accelerated Partial Rent Payment Trend

As the economic impact continues to be felt across the U.S., we’re observing more April partial payments. Overall, major metro areas are seeing a continued move toward partial payments, with the percentage of total rent paid on May 1 declining month-over-month in Seattle, Los Angeles, and Atlanta since March 1.

While 22% of Seattle renters paid rent in full on the first day of May, the total first day collected rents of all partial payments compared to rent owed for that cohort were lower compared to April. Seattle partial rent payers paid only 29% of total rent owed in May compared to 34% in April and 62% back in January.

The percentage of renters who made some form of payment (over $100) on the first day of May has seen an increase month-over-month. Seattle in particular has had a notable increase in renters making partial payments, with Los Angeles and Atlanta holding at similar rates compared to previous months.

This likely means that despite growing financial uncertainty, renters are prioritizing paying their rent through some form of payment, and that property managers are working hard to accommodate residents experiencing financial hardship. The increase in overall payments is a likely indicator that apartment operators are supporting renters whether by devising payment plans, accepting partial payments, or offering other rent relief solutions.

First Day May Rent Payments Remain Strong for Asset Class A and B Properties

As seen nationwide, Class A and B properties saw a slight spike in full rent payments on the first of the month in both April and May compared to previous months.

Meanwhile full rent payments at Class C properties on the first of the month experienced a slight 1% drop in May. This may be because Class C residents are more likely to be financially impacted by the pandemic with a higher proportion of residents employed in service economy jobs that were hardest hit, and therefore less able to make rent payments early in the month. This could also suggest that Class C properties will struggle more in collecting total rent payments owed in May – but this will become clearer as the month goes on.

What does this mean for May rent payments? As we saw in April, first day rent payments had a slight surge thanks to reliable rent payers and ongoing efforts by apartment operators to support residents in making their payments.

However, just as with April, May is likely to see a decline in total collected rent payments as the rent grace period wears on. April showed a 7% decrease in total rent collected overall compared to the trailing average, and May might see a similar decline.

That being said, the data also shows several promising signs:

• After the tally of first day payments, May is not showing an accelerated decline in rent payments compared to April, as some analysts feared.
• The stability of first day payment behavior in May shows residents are locating funding sources and prioritizing paying their housing financial obligations possibly over other bills.
• The increased move towards partial payments in metro areas such as Seattle, Los Angeles, and Atlanta suggest that operators and residents are developing payment plans together, and properties are supporting their residents in paying what they can, when they can.

Stay tuned for our next rent payment analysis coming out on May 6th, after the grace period ends (traditionally the first five days of the month).

Important statistical note: Despite the measured payment fluctuations based on the sample set, the variance is within normal statistical range. In other words, the changes are not necessarily significant enough to attribute specifically to COVID-19 versus normal fluctuations expected across the data set. Please reference full Methodology below.

Methodology

Rent payment data is actual transactional data sourced from integrations with property management systems in the multifamily industry.

Analysis includes a 96,268 unit sample from 1,029,428 live units under management by LeaseLock clients. Data is nationwide, representing over half of the NMHC Top 10 property managers in the country and all asset classes (A, B and C). Asset class composition: class A (36%), class B (55%) class C (9%).

All data has been anonymized to remove personally identifiable information for renters and property managers.