October 1st rent payments slipped the same day as the passage of a new $2.2 trillion package, a reduced version of the HEROES Act that passed by the House in May. The bill includes emergency rental assistance—a win for apartment operators and renters alike—and extends the CARES Act eviction moratorium.
The multifamily industry has advocated non-stop for emergency rent relief due to a lack of comprehensive rent assistance to support both renters and operators. Just a short month ago, September 1st rent payments had slightly weakened while Americans awaited to receive (reduced) unemployment benefits and held out for a stimulus package.
In response to H.R. 925, Robert Pinnegar, President and CEO of the National Apartment Association (NAA), issued a statement:
“We need comprehensive, balanced solutions, not destructive policy that will inflict long-term damage on the nation’s rental housing stock to the detriment of housing providers and the residents they serve.”
In light of the news, it’s time to evaluate how October 1st rent payments have responded.
On the same day the House passed a revised HEROES Act, the percentage of October 1st rent collected dipped 5 percentage points since September, but remains 2 points above the pre-COVID average.
It’s important to consider the trend we’ve observed for first-of-month rent payments. Considered a reliable cohort of renters who typically pay on the first of each month, first-day rent payers have held stronger than throughout the grace period. Although it remained higher than the pre-COVID average, the percentage of rent collected on October 1st sank to the lowest level since COVID struck.
The slimmed-down version of the HEROES Act luckily includes $50 billion in rental assistance, but with the eviction ban extending for another year, the effects would be uncertain for the rental housing industry.
On top of this, millions of renters were set to receive reduced and extended unemployment benefits in August, but some may not receive their bonus until this month. The patchwork of both eviction legislation and emergency rent assistance programs across the nation also further complicates matters. After several rental assistance quickly dried up in states across the country, it remains to be seen whether this rent relief package would be enough.
Class C properties have been of utmost concern due to declining rent payments, yet, all asset classes have experienced month-over-month drops on October 1st.
The percent of total rent collected on the first of the month fell 4 points since September for both Class A and Class B. Despite remaining slightly above the pre-COVID average, the month-over-month decline indicates some level of financial stress among all renters.
When it comes to Class C rent payments, the percent of total rent collected on October 1st decreased 6 points since last month, holding just below the pre-pandemic 3-month trailing average. With strain across all asset classes, it compounds a rife affordable housing crisis.
California renters have been hit hard, and this month has been no different. Compared to September, the percent of rent collected on the first of October dipped 4 points. The Tenant Relief Act without emergency rent relief has been unsuccessful in fully propping up struggling renters.
In Texas, the percent of rent collected on October 1st also fell 4 points month-over-month, but this should hopefully be minimized throughout the remainder of October with Governor Abbott’s allocation of over $171 million in funding from the CARES Act primarily for rental assistance.
Drilling down to major metro areas, the percent of Los Angeles renters who paid full rent on October 1st dropped 2 percentage points since September after its $100M relief fund became overwhelmed with demand. Similarly, the percent of Dallas renters who paid full rent declined 6 points month-over-month with little news on the front of a local rent relief fund.
The news of emergency rent assistance being a part of the new stimulus package is certainly positive, however, it fails to address all measures needed to protect the rental housing industry. The National Multifamily Housing Council (NMHC) is encouraging leaders and lawmakers to take further action:
“Congress needs to hear from our industry about the new federal eviction moratorium and the need for direct rental assistance and stable funding for enhanced unemployment assistance.”
Even though legislators have committed to continue deliberating, it’s unlikely an agreement will be reached before election day. In the meantime, we will monitor rent payment behavior throughout the October grace period along with any new developments in the fight to establish sustainable solutions for America’s apartment housing.
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.
Rent payment data is actual transactional data sourced from integrations with property management systems in the multifamily industry.
Analysis includes a 105,070 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 (39%), class B (43%) class C (18%).
All data has been anonymized to remove personally identifiable information for renters and property managers.