Multifamily property teams are often overwhelmed by the growing number of administrative tasks. Technology has proven to be a valuable tool to ensure nothing is overlooked throughout the lease lifecycle, including new solutions that streamline routine processes for residents. But a significant pain point still exists post move-out: claims management.
The Evolution of Claims in Multifamily: Removing Security Deposits to Streamline Operations & Debt Recovery
Between deposit refunds and claims, these time-consuming and contentious tasks can quickly over-burden property teams. Whether managing an eviction or debt recovery, and due to the potential for rent loss (especially during and post COVID-19), site teams can’t afford to commit anything less than their full attention to the issue.
Forward-thinking operators are re-envisioning how they handle claims by moving beyond deposits entirely. As a byproduct, property teams can skip administrative headaches and streamline the debt recovery process. Through lease insurance technology, operators can start the claims process earlier and ease the burden of claims management for overstretched teams. As a bonus, these technology solutions boost onsite team productivity and eliminate long-standing pain points for the industry.
3 Benefits of Optimized Claims
Below are three operational and financial benefits of optimizing the claims process to help properties stay on top of post move-out tasks and prevent revenue from slipping through the cracks:
Lighter Administrative Workload – Modern claims solutions avoid any out-of-workflow operations for property teams by seamlessly deploying through native property management systems, ensuring property managers don’t have to worry about leaking revenue due to overlooked claims.
Faster Claims Returns – With lease insurance, operators no longer have to wait months or years for a collections agency to recover funds from residents, meaning operators won’t incur a substantial reduction in recovered revenue once the collections agency deducts its fee.
Stronger Online Reputation – Replacing deposits with lease insurance not only allows operators to reduce administrative burdens and sidestep collections for quicker payouts but also eliminates a key point of resident contention after move-out, thus helping prevent negative online reviews.
To learn how to achieve maximal bad debt recovery and NOI growth by optimizing claims management, read the full article here.
https://leaselock.com/wp-content/uploads/2024/03/Benefits-of-Optimized-Claims-01.png18292742Paul Cook/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2022-03-21 22:59:002024-03-20 08:15:593 Overlooked Benefits of Optimizing the Claims Management Process
With staff shortages being a top multifamily challenge, property management companies are looking to adopt processes and systems that improve operations—not strain them. This means operators will sometimes forgo financial opportunities if they think those opportunities will only add to property teams’ workloads.
So how can multifamily operators ease the lift for site teams while also improving financial performance?
The Multifamily Case for Total Deposit Replacement
In our newly released white paper, we explore why the industry needs to remove one particular risky financial instrument (security deposits) and replace with an optimally secure solution (lease insurance). We also outline the drawbacks when operators turn to “deposit alternative” products, as these seemingly “easy” fixes often only exacerbate the problem.
Finally, we describe three key benefits for operators when they completely eliminate deposits, including:
Significant bad debt reduction
Drastically less deposit administration and risk
Improved customer experience
Below is a quick preview of the white paper content — to download, click the button below:
While many operators may not think bad debt is a problem for their firm, most have at least some level of bad debt. This means there’s an opportunity to convert that bad debt into dollars that fall directly into the operator’s bottom line.
Multifamily communities have primarily managed bad debt via three levers: screening, deposits, and collections. In particular, security deposits are a crude form of insurance that often leave operators with expenses greater than the deposit after move-out, which is why properties accrue bad debt.
To ensure operators don’t miss out on the opportunity to recover bad debt, properties need to instead insure as many leases as possible with a deposit waiver product. Ultimately, this arrangement achieves a powerful win-win of both affordability for residents and significantly more coverage for the owner.
2. Reduce Administration & Risk
On top of being pesky, security deposits introduce a great deal of risk. Renter’s Choice laws that require apartment operators to offer an alternative to a security deposit are restrictive and create additional administrative burdens for property teams, including more compliance complications. As a result, many operators are considering deposit alternatives without understanding the new risk associated with them.
Deposit alternatives that are marketed as “security deposit insurance” leave operators exposed to substantial risk. In many cases, these “insurance products” are actually surety bonds which can create confusion and frustration when the bond company collects on renters after move-out.
It’s in the best interest of operators to avoid deposit alternatives and replace deposits with a true insurance program that takes the renter out of the equation, thus minimizing the amount of risk and workload.
3. Improve Customer Experience
In addition to creating administrative headaches, security deposits also have the potential to damage the resident experience. Between sticker shock at move-in and disputes at move-out, this creates a poor customer experience which can lead to negative online reviews for apartment communities.
While operators may consider implementing deposit alternatives to solve for this, these partial solutions wind up compounding the problem, as departing residents find out they’re responsible for paying the bond provider and may express their frustration in the form of negative reviews. Further, this method leaves the leasing transaction under the control of a third party, meaning operators are unable to protect the customer experience.
When the operator is insured though, residents don’t have to worry about unforeseen collections. This is another reason why ditching deposits entirely and replacing them with lease insurance is a better, more sustainable solution, as it lets operators control the customer experience.
Free White Paper: 3 Reasons Deposits Need Replacement—Not Alternatives
To learn how to move beyond deposits so your firm can boost financial performance, reduce the workload on your property teams, and improve your customer experience, download the white paper — click here.
A panel of experts recently discussed how to overcome the industry’s most pressing issues in the webinar, “Multifamily Top 3 Challenges: How to Navigate Them in 2022.” Moderated by LeaseLock CRO Ed Wolff, the discussion featured Jennifer Staciokas, Executive Managing Director of Property Management for Western Wealth Capital and Terresa Porizek, Managing Director of Talent Development, Property Management, at Greystar.
Below is a recap of the panel discussion in which top operators share the strategies they’ve employed to combat top industry challenges and the solutions they recommend moving forward.
It’s unsurprising that employment was the problem cited the most — a trend that has plagued nearly every industry. Delinquent rent and bad debt is also top-of-mind for multifamily owners and operators, especially as rent assistance runs out.
“The second [biggest challenge] was delinquent rent and mitigating bad debt,” said Ed Wolff, LeaseLock’s Chief Revenue Officer, who moderated the panel. “No surprise based on the unprecedented time we’ve experienced over the last two years starting with COVID.”
Owners and operators also expressed concern over the ever-changing legislative landscape. Between eviction moratoriums, rent control, emergency rent assistance, and security deposit laws, legislative changes leave operators and their residents exposed to unnecessary headaches and risky financial situations.
New Strategies & Solutions to Combat Age-Old Multifamily Challenges
We know the best way to address persistent issues is letting go of long-held standards, such as a single rent payment at the beginning of the month and security deposits. Only through embracing fresh attitudes and exploring new options can we solve the industry’s problems.
Reducing Delinquent Rent With Flexible Rent Payments
The industry needs tech solutions that protect properties while also reducing the upfront financial burden for residents in order to lower bad debt and reduce delinquency, thus resulting in more revenue for operators. By creating a win-win for both sides of the equation, firms will see healthier financial performance and happier residents in the long-run.
Regarding delinquency, panelists explained the importance of seeking out creative ideas that appeal to residents while still helping operators maximize NOI. For example, a healthy portion of Western Wealth Capital’s portfolio is workforce housing, and Staciokas said their communities found great success in moving residents to flexible rent payments.
“It’s so old-school to think about only paying rent on the first of the month,” Staciokas commented. “We were able to offer a lot of our residents the ability to pay at any point in time throughout the month. It was a win-win. For us, we get the money in the bank on the first of the month. The resident ha[s] the flexibility to pay when it [is] suitable for their schedule, and it [keeps] them there longer.”
Protecting Against Bad Debt With Deposit Replacements
Many communities have changed their perspective on the role and effectiveness of security deposits, which rarely cover the costs of repairs or unpaid rent for which they were created. In fact, of respondents from our survey who reported more expenses tied to unit damage in 2021, 65% said that those expenses exceeded the security deposit amount. This means operators have to spend more money to recover those costs or just eat them if it’s not worth the effort.
As a result, many communities are turning to deposit replacements like lease insurance, which not only eases the administrative and financial hassles of security deposits, but also creates an effective marketing tool for properties to set themselves apart from neighboring communities. Lease insurance reduces bad debt by providing better coverage and drastically reducing the administrative burden and financial risk for apartment communities.
With the economic impact of the pandemic still reverberating across the country, many families may be unable to afford an upfront security deposit. But by eliminating this barrier and replacing it with a small, monthly fee, operators are more likely to attract potential residents, Staciokas said. Further, by combining flexible rent payments and lease insurance, operators can achieve significant reduction in bad debt as well as NOI growth.
Alleviating Administrative Burdens to Tackle Talent Problems
When it comes to hiring and talent retention, operators should prioritize employee appreciation, optimize training methods, and improve hiring protocols to establish a workplace environment that values innovation and creates efficient and consistent processes. This will increase associate satisfaction and engagement, which translates into long-term resident retention.
Solutions like flexible rent payments and deposit replacements are useful in improving resident retention by giving renters more freedom with their money while also protecting a community’s reputation. Staciokas said that some of the biggest complaints she has seen with resident reviews are associated with the return of a security deposit. By eliminating this requirement, communities can reduce the chances of one-star reviews fueled by deposit disputes. This helps alleviate stress in the leasing office, which can in turn relieve the hiring and talent retention issue.
Eliminating Deposits to Mitigate Legislative Headaches
With legislation changing constantly, operators need to invest in strategies and solutions that help their firm maintain compliance, reduce administrative headaches, and mitigate regulatory risk.
For instance, there’s been a major shift away from deposits in which legislators in various states and municipalities have either pledged support, proposed, or passed deposit legislation which seeks to provide residents more options in the form of deposit alternatives. However, these “Renter’s Choice” laws mandate that apartment operators offer an alternative to a security deposit, adding complexity to the deposit administration process as well as risk.
On the other hand, deposit replacement laws like the bill passed in Texas go a step further than Renter’s Choice laws by giving operators a secure way to choose a deposit solution while also creating more affordable move-ins for renters.
Staciokas encouraged operators to look at companies that will handle credit reporting on lease payments. This offers an incentive for residents to make payments, and community managers can market that as a reward for current and future residents, which assists with risk mitigation.
New deposit laws continue to crop up, signaling that the current system of traditional deposits doesn’t work. By rethinking the problem as a way to empower both renters and operators alike, the industry can begin to finally eliminate the growing risk of deposits.
Reframe Today’s Challenges As Tomorrow’s Opportunities
As the industry tackles the top challenges in 2022, it helps to view each one through the lens of opportunity. This attitude, combined with other impactful strategies and technology solutions, has the power to help operators address all three of the top multifamily challenges.
https://leaselock.com/wp-content/uploads/2024/03/top-multifamily-challenges-grace-hill-webinar-recap.png22213334Paul Cook/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2022-01-12 20:14:122024-03-20 08:15:47Top 3 Multifamily Challenges: How to Navigate Them in 2022
In the previous two articles in this series, we outlined two reasons why multifamily operators should consign the use of security deposits to history.
First, we talked about how many operators are missing opportunities to eliminate bad debt and how, even in cases where they don’t have a lot of bad debt, there is usually still free money to be had. By insuring leases instead of burdening operators and renters with security deposits, operators can reduce bad debt risks and eliminate deposit headaches for good.
Next, we looked at the growing risk of deposits and deposit alternatives, explaining how operators get out from under the burden of administrative overhead and risk by replacing deposits completely. In that post, we also highlighted the different risks associated with some popular deposit alternative products.
One impact of security deposits is left for us to talk about, and it may be the most important one. The potential damage that they do to prospect and resident experiences.
Customer Experience at Move-In and Move Out
It is not hard to imagine how security deposits can negatively impact customer satisfaction. In fact, deposit requirements often leave a sour taste in your resident’s mouth, compromising a community’s value proposition and future marketing activities.
The biggest and most obvious issue is affordability. When renting an apartment entails paying a large lump sum upfront (typically equal to one month’s rent), there may be resulting sticker shock for some prospective renters. Deposit requirements shrink the pool of potential renters, and the problem will worsen as more and more competitor properties find ways to reduce deposit-related costs.
The other problem emerges when residents move out. From time to time, residents are surprised when they do not receive some or all of their security deposit refund. These can result in disputes (including legal disputes) when residents disagree with and are unpleasantly surprised by the amount (if any) of their refund.
Surprises like these tend to manifest as negative online reviews left by disgruntled residents. The prominence of online reviews as a data point for renters choosing a place to live has made reputation scores an all-important currency in apartment marketing. Operators need residents to post positive reviews after moving out. To this end, it makes sense to optimize the whole resident experience, not only because it’s the right thing to do but because it’s also in the community’s best interest.
The bottom line is that in a competitive market, no community should want to be more expensive or have lower review scores than its competitors. Security deposits put operators at risk on both fronts.
Why Insurance Is the Better Option
The problems that come with security deposits are exacerbated by some of the “deposit alternatives” that operators are currently considering. As we discussed in our last blog on this topic, most deposit alternatives are based on surety bonds and tend to be positioned as insurance products. Renters who purchase products like surety bonds are therefore led to believe that they are insured against potential damages or losses at the end of their residency, as they would be with a traditional deposit.
Sadly, that isn’t the way these surety bonds work at all: in fact, the bond provider retains the right to pursue the resident for any money that they, the provider, must pay to the multifamily community on behalf of the resident. When a departing resident learns they are responsible for paying the bond provider, it usually comes as a surprise, and is a natural motivation for a negative review, representing an unwelcome and unnecessary risk to the community’s online reputation.
The involvement of third parties in the deposit transaction raises a broader point about the prospect and resident experience. When a third party takes over part of the leasing transaction (which is what happens with most deposit alternatives), they also take a part in controlling the customer experience.
Given the time and effort operators invest in their leasing processes, this is a suboptimal approach and one that can go quite badly for our residents, especially in the case of collections described above.
A much better way of ridding properties of security deposits is to replace them entirely with lease insurance. When the operator is the one who’s insured, there is no need for residents to leave the leasing process (i.e., to go to a third-party site). Operators maintain complete control of the customer experience throughout the entire leasing process. They also enjoy vastly higher adoption rates, with average uptake rates well above 90%*.
The Win-Win
A participation rate over 90%* matters: it means that all but a few leases are ultimately free of deposits. It forms part of the community’s value proposition that all residents can consistently understand. It is a win for the overall customer experience, but above all else, it delivers a powerful win-win.
It’s a win for operators because true lease insurance increases coverage and lowers bad debt while ensuring a consistent and authentic customer experience. It’s a win for residents because it delivers greater housing affordability by removing the burdensome upfront security deposit. It also avoids the risk that a third-party surety bond company will collect on the resident if they (the bond company) has to pay the operator.
Deposit surprises are usually bad, whether it’s sticker shock during the move-in process or a move-out surprise. As we have argued throughout this series, it’s time to replace security deposits altogether. It’s time to embrace true insurance products that can deliver the customer experience and performance improvements that are already benefiting a growing number of multifamily operators.
*Communities adopting LeaseLock’s lease insurance achieve average adoption rates of 92%
https://leaselock.com/wp-content/uploads/2024/03/multifamily-deposits-bad-customer-experience.png22223334Paul Cook/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2021-12-01 00:44:112024-03-20 08:13:43Why Security Deposits & Surety Bonds Are Bad for Customer Experience
After conducting a joint industry study, LeaseLock and Grace Hill are excited to release the official survey analysis. The 2021 Apartment Visionaries Research Report surveys nearly 300 multifamily operators on their primary asset performance issues, as well as the success of the technology solutions they implemented across the five stages of the apartment leasing process.
While rental housing owners have increasingly deployed technology to bolster and streamline operations, the study shows that the solutions which best resolve common pain points haven’t necessarily received the corresponding resources required to realize their full benefit. That said, the industry’s unprecedented embrace of technology solutions should serve it well as it evolves to meet the needs and demands of the modern renter.
Overall, study revealed several under-explored avenues to help drive leads, lead-to-lease conversions, bad debt recovery, resident experience, and renewals, which we highlight below.
Key Findings From the 2021 Apartment Visionaries Survey
With the completion of the data analysis, we’ve highlighted the major findings so that you — an industry visionary — can walk away with actionable insights for your firm heading into 2022.
Biggest Operator Challenges in 2021
Operators cite hiring / retaining talent, delinquent rent / bad debt, and new / changing legislation as the main challenges in 2021.
Top NOI Opportunities in 2022
Corporate level respondents cite ancillary income, technology / automation, and talent retention represent key areas of opportunity for maximizing NOI growth next year. Among those who cited “hiring / talent retention” as a top challenge, a plurality (39%) indicated that technology could be used to address this talent issue. Below is a sampling of the core themes across responses:
Leading Apartment Tour Type
Most apartment tours were conducted in-person with a leasing agent. In fact, 67% of respondents report that in-person agent-guided tours accounted for more than half of total tours in 2021. Nearly 80% say this tour method also produced the best closing ratios.
Most Powerful Leasing Strategies
While free incentives have negative implications for economic occupancy, operators tend to lean on free incentives to drive lease signings. Nearly 60% of property-level respondents said that offering free incentives improved the likelihood of lease signing the most, followed by 41% who cited reducing monthly rent.
Among corporate leadership though, 69% cite this lease concession as hurting economic occupancy the most. On the other hand, only 3% indicated that eliminating deposits hurts economic occupancy.
Rent Loss & Bad Debt Prevention Solutions
Properties need to look into risk mitigation strategies and tech solutions that double as an incentive for renters while also protecting against bad debt. Of those who reported more expenses tied to unit damage, 65% said that those expenses exceeded the security deposit amount.
Of the 58% who said they applied for and received ERAP, 40% said that those funds are not sufficient in covering rent loss. This means operators should continue to support the industry’s efforts to ensure rent assistance is distributed efficiently and effectively, while investing in solutions that protect their organization against rent loss and negative online reviews, all while improving the resident experience.
In our last blog, we discussed how operators are reducing bad debt by insuring leases instead of taking security deposits. The bad debt that we discussed in that post ought to be enough to motivate any operator to rid themselves of deposits for good — but it is not the only reason to do it.
For operators, security deposits are becoming more burdensome and risky. For residents, some of the alternatives to security deposits are introducing new types of risk. Below, we will seek to understand these risks and how to avoid them.
Security Deposits Are Getting Less Secure
An increasing number of state and city legislatures are adopting laws that mandate that apartment operators offer an alternative to a security deposit (nicknamed “Renters Choice” laws). The intent of these laws is to make rental housing more affordable, which is, of course, a good thing. As with most legislation, however, the devil is in the details.
The laws implemented by states and municipalities apply multiple restrictions to security deposits and vary substantially from legislature to legislature. Some limit the maximum size of a deposit or restrict the window in which deposit refunds must be distributed. In some cases, the laws require operators to offer deposit installment plans. We will not go any deeper into individual laws in this post, but visit the deposit laws section of our blog for more details.
It is not hard to imagine how quickly the rules pile up for a multifamily operator with communities in more than one city. Each new law creates a need for a policy change by the operator, and each policy change adds complexity to the process of deposit administration. The added complexity costs time and increases the likelihood that a property may fail to comply with a new law, resulting in potential lawsuits. As one senior leader of a major multifamily operator recently told us, “we are now being sued every week over $500 deposits.”
The growing risk and administrative burden of deposits is a concern already on the radar of most operators. A growing number are looking to find deposit alternatives, often because the laws say that they have to. But what relatively few operators understand is the new risk associated with some popular forms of deposit alternative.
Read the Fine Print!
A recent article in urban development publication Shelterforce summarized the developing story of deposit alternatives. It’s a story that multifamily operators should take the time to understand. “Renters Choice” laws have been becoming more frequent but are still relatively new (Cincinnati’s was the first, dating back to April 2020).
Because the legislation is recent, the level of understanding about how some deposit alternatives work is still relatively low. For example, only the most diligent renters will spot that the products being marketed directly to them as “insurance” actually leave them exposed to substantial risk. The article points out how most security deposit alternatives do not provide renters with protection from claims, adding “tenants using products like Rhino remain fully liable for any claims paid to their landlords.”
Although deposit alternatives are marketed as “insurance products,” in reality, they are “surety bonds,” i.e., they guarantee the bonded party’s contractual obligations (the renter’s financial obligations to their landlord). Unlike insurance products, the premium paid to the provider does not guarantee a level of coverage. Rather, if the landlord files a claim, the bond company pays the landlord but may then seek repayment from the renter. Given that the product is marketed to the resident as an “insurance” product, this comes as an unpleasant surprise, especially since it can impact their credit score.
Why Partial Solutions Don’t Help
The best way for operators to avoid the problems described above is to replace deposits with insurance. Replacing deposits, rather than just offering an alternative, means driving the highest possible participation in a true insurance program. High participation minimizes the number of leases subject to deposits and the associated risk and workload. Deposit alternative products tend to have relatively low, usually less than 50% adoption rates, which leaves most leases unchanged.
Insurance exists to shift risk from the policyholder to the carrier, and this is not how surety bonds work. In considering deposit alternatives, many operators misunderstand that it is their risk that is being covered (not the renter’s). Therefore, the correct way to replace security deposits is for the operator to insure their leases, effectively taking the renter out of the equation.
As we mentioned in our last post, operators can recoup the cost of the insurance from the resident by offering them an insurance waiver product (usually a small monthly fee that covers the cost that the operator is paying to insure the lease). The critical difference with this arrangement is that the fee is a transaction between the renter and the landlord, and does not make the renter liable for claims in the way that surety bonds do.
Through true lease insurance, rather than surety bonds, operators can maximize coverage while removing the possibility of the provider collecting on a resident after move-out. This has important implications for resident experience, which is a topic to which we cover in our next post.
In today’s multifamily market, the issue of bad debt is not always top of mind. Eye-popping year-over-year rent increases and uncomfortably high occupancies create a natural tide of financial optimism. If you asked most operators, they’d tell you, “We don’t have a bad debt problem.”
But consider for a moment what that means. Thinking that you do not have a bad debt problem does not mean that you do not have bad debt; it means that the bad debt is at a level that your organization finds acceptable. It may not be a problem per se, but in the vast majority of cases, bad debt is an opportunity.
Is Bad Debt a Problem or an Opportunity?
The simple example above shows a regular, mid-priced 300 unit multifamily community. A “normal” level of bad debt is typically in the 2% range, or about $80,000 per year for this property. That may be an acceptable level of bad debt, but it’s still a significant amount of money that should be yours, but isn’t realized. It’s a check that an operator could be writing to investors each month but isn’t.
Yet, time and again, operators leave the opportunity untapped because it “Isn’t a big enough problem.” But should that matter if it’s an easy problem to solve?
How Multifamily Manages Bad Debt Today
There are three levers available to multifamily operators to manage bad debt: 1) screening, 2) deposits and bonds, and 3) collections.
Screening – Screening is a vital step in the leasing process, and one that goes some way towards reducing the likelihood of bad debt. But there is a limit to how strict your screening criteria can be. Imagine trying to address the $80k/year of bad debt in the illustration above through tighter screening. The community’s criteria would have to be restrictive to the point of not allowing enough signed leases to fill the community.
Deposits – Inevitably, there will be instances where a resident will leave owing debt or having done costly damage to their unit. It is for cases such as these that operators have collected deposits since time immemorial. But what happens when the deposit amount does not cover the damage or the lost rent? That is how the $80k in our example accumulates. Even when surety bonds are offered as an alternative to deposits, they only cover the total amount of the security deposit. And low resident adoption of a bond program leaves many of the community’s leases “protected” by what was meant to be replaced in the first place (security deposits).
Collections – Collections can sometimes claw back some of the cost of damages and lost rent, but recovery rates greater than 10% are rare in our industry. And when recoveries are made, they have to be shared with the collections agency. So the impact on bad debt is usually minimal.
Replace Security Deposits & Surety Bonds, Recover Bad Debt
Of the three bad debt levers mentioned above, only one offers the opportunity to recover the $80k in our example. It involves a fundamental rethink of the security deposit. The rethink entails seeing deposits (and surety bonds) for what they really are: a crude form of insurance. Operators collect a large and somewhat arbitrary upfront payment from the resident, then must either return the full deposit amount after move-out (oftentimes including accrued interest) or a reduced deposit amount when things go wrong, depending on any outstanding rent or damage against the leased unit. But when they go wrong, they frequently leave the operator with expenses greater than the deposit, which is why properties using deposits still have bad debt.
The deposit is at the same time large enough to be prohibitively expensive for many renters and still insufficient to cover the losses against which it is meant to protect! And even if a bond is raised higher than the deposit amount, it increases the resident’s cost and offsets the affordability intended.
Here is another way to think about it: when you need to insure against a given outcome, you should do so with an insurance product. We all purchase many types of insurance, and they are usually delivered by companies that specialize in quantifying risk, predicting appropriate levels of coverage and making sure that coverage is accessible through competitive premiums. That is how insurance is supposed to work, and that is how operators should handle the problem they are currently using security deposits and surety bonds to address.
The best way to reduce the $80k in bad debt in our example above is to insure as many leases as possible at the time of leasing the apartment. Instead of asking prospects to scrape together a month’s rent upfront to secure the apartment, or selling surety bonds to each prospective resident, the property can instead insure the lease, which greatly increases coverage, which in turn lowers bad debt.
The property can recoup the insurance cost by offering a deposit waiver product for which the resident pays a modest monthly fee. This arrangement achieves the powerful win-win of affordability for the resident and greatly improved coverage for the owner. And when the vast majority of a community’s leases are insured in this way, that bad debt opportunity is converted into dollars that fall straight to the operator’s bottom line.
https://leaselock.com/wp-content/uploads/2024/03/multifamily-bad-debt-opportunity.jpg11121667Paul Cook/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2021-10-12 23:30:492024-03-20 08:13:09The Bad Debt Opportunity Most Operators Are Still Missing
Looking to elevate your firm’s apartment leasing process and resident experience? Doing so requires meeting the modern renter’s demands as well as addressing the major pain points across the entire renter journey 一 from the moment they become a prospect all the way to the move-out experience.
We hosted an educational presentation via the National Apartment Association’s ApartmentVision webinar series to share the preliminary results of our first annual Apartment Visionaries Survey. Conducted in partnership with Grace Hill, we set out to understand the impact of technology-driven leasing on asset performance in a post-pandemic environment.
Our research reveals a number of insights, including:
Industry benchmark performance
Patterns across firms and various role types
Top-cited challenges
Opportunities for forward-looking operations
Below is the initial analysis of our survey as presented during our webinar, “Creating a Renter Journey with Tech-Driven Leasing,” which you can watch on demand here.
You can also access the full research report — secure a copy by clicking the button below!
[cta_button link=”https://info.leaselock.com/apartment-visionaries-2021-survey-report” text=”Download My Copy”]
3 Biggest Multifamily Challenges in 2021
To set the stage, we posed two broader questions before asking more specific leasing funnel questions. First, we asked about the biggest challenges firms face today. The 3 most-cited challenges for the rental housing industry are:
Hiring / retaining talent
Delinquent rent / bad debt
New / changing legislation
Occupancy was the least selected challenge, which makes sense when we consider that eviction moratoriums have greatly reduced vacancy rates across the nation.
Top NOI Opportunities for Multifamily in 2022
Next, we asked, “Considering the challenges listed above, what are the biggest opportunities for maximizing NOI you seek to leverage?” This open-ended question produced a variety of responses, but here’s a sampling of top NOI growth opportunities:
Ancillary income
Technology / automation
Talent retention
Resident experience
Efficiency (talent, tech)
Rent growth
Insurance
Taxes
Fees
Amenity pricing
How to Enhance The 5-Stage Apartment Leasing Process
To better inform your resident experience strategy, we analyzed data around what multifamily property owners and operators are doing across the 5 major stages of the renter’s leasing journey. To that end, survey questions were broken out into 5 sections of the leasing funnel:
Leads & Traffic
Consideration Phase & Lead Follow-up
Leases & Applications
Move-Ins, Occupancy, & Affordability
Move-Outs, Renewals, & Evictions
Below, we walk through some of the major survey findings along with takeaways for operators to apply at each stage of the apartment leasing process.
1. Leads & Traffic
Community Website & ILSs Are Top Lead-Generating Sources
A community’s website and Internet Listing Services (“ILSs”) are cited as the top two sources for leads to properties. It’s important to consider whether website lead source attribution is accurate, as multi-touch attribution can be hard to truly track. In that case, it emphasizes the importance of implementing better lead source tracking solutions. The high percentage that selected ILSs also supports allocating more marketing dollars toward building a presence on top traffic-generating sources.
More Than 70% of Apartment Operators Spend Less Than Half Their Marketing Budget on ILSs
Even though 62% cited ILSs as driving the most leads, 71% spend less than half of their marketing budget on that source.
Key Takeaway for Driving More Leads & Traffic
There could be a slight disconnect between the sources cited as bringing in the most leads (community website and ILSs) and the percentage of marketing budget allocated to those channels. While it’s no surprise digital marketing accounts for a large portion of marketing budgets, there may be a missed opportunity to put more spend behind ILSs.
That said, be cautious about your marketing approach with ILSs to ensure your firm spends efficiently and doesn’t steal traffic away from the digital marketing tactics you’re already investing in. This may be the reason we see ILSs producing the most leads but not comprising a significant portion of marketing budgets.
2. Consideration Phase & Lead Followup
Most Tours Occurred In-Person With Leasing Agent Compared to Self-Guided & Virtual Methods
Interestingly, 70% of respondents report that self-guided tours make up less than a quarter of total tours. Whereas at the beginning of the pandemic there was a massive shift toward offering self-guided tours, 67% of respondents report in-person agent-guided tours accounted for more than half of total tours in 2021.
In-Person Tours With Leasing Agent Produce Highest Closing Ratio
Looking at the effectiveness of different tour methods, 77% of respondents indicated that in-person tours with a leasing agent achieved the best closing ratio, demonstrating that while technology has been critical during the pandemic, in-person tours and building personal connections during the leasing process remains vital. This is especially true as COVID-19 vaccines became available, restrictions loosened, and people grew more comfortable with in-person tours.
Key Takeaway for Increasing Lead-to-Lease Conversion
Data shows that renters prefer in-person, and properties see stronger closing ratios when they use in-person tours. Therefore, self-guided tours are not the technology replacement for a lack of talent and turnover on leasing teams. However, self-guided tours remain an area of opportunity in the age of convenience.
3. Leases & Applications
Offering Free Incentives Best Improves Chances of a Potential Renter Signing a Lease
Nearly 60% of respondents said that offering free incentives (e.g., concessions such as ‘first month’s rent free’) most improved the chances of lease signing, followed by 41% who cited reducing monthly rent. Both of these prove that affordability remains an important factor in determining whether renters sign a lease. It’s a good reminder that financially-savvy renters are looking for a good deal.
Owners & Operators Plan to Ramp Up Electronic Application Processes
Almost half of respondents plan to ramp up electronic application processes in 2021, and 30% plan to ramp up free incentive offerings. Also of interest, 18% indicated they would consider reducing deposits, and 10% suggested they would eliminate them altogether.
Majority of Application-to-Move-In Time Frames Exceed 7 Days
80% of respondents experienced a lease application-to-move-in time frame of one week or longer — within that group, 15+ days was more the norm. This shows a pain point between these two phases of the renter journey, and an opportunity to leverage integrated solutions to improve quality and timeliness of screening processes, potentially shortening the application-to-move-in time frame.
To satisfy renters who demand a fast, simple, safe, and convenient way to apply for an apartment, operators must create a digitally-enabled application process. Therefore, invest in implementing truly integrated solutions to create more native workflows that address both renter and operator pain points during the application process.
4. Move-Ins, Occupancy & Affordability
Free Incentives Lower Economic Occupancy Most
Offering free incentives may be the most popular strategy to improve lease signings among property and regional managers, but among executive leadership, 69% cite this lease concession as hurting economic occupancy the most. Reducing monthly rent is a close second at 67%. Ultimately, neither of these concessions protect NOI.
On the other hand, only 3% indicated that eliminating deposits hurts economic occupancy. This is likely due to the fact that when operators replace deposits with lease insurance, they’re able to protect against bad debt.
Most Operators Don’t Provide Flexible Rent Payment Terms for Residents
At the onset of the pandemic, a common strategy to help residents impacted immediately by the shutdown was to offer flexible payment terms to address residents’ changing financial needs. When we asked about this in July 2021, 85% of respondents said they don’t currently have flexible payment terms as an option for their residents.
Key Takeaway for Improving Move-In Experience & Renter Affordability
Lease concessions alone, without the right solutions in place, can hurt NOI. Considering the importance of addressing renter’s financial needs and protecting your firm’s economic occupancy, operators should consider offering flexible payment options. In addition, it is important to identify efficient sources of NOI to create income with little to no expense to your property, such as deposit replacement solutions.
5. Move-Outs, Renewals & Evictions
Nearly One-Third Notice More Expenses Tied to Unit Damage
Another impact of the pandemic has been that more people are at home more often. That said, 29% said they noticed more expenses tied to unit damage.
Of the 29% who noticed more expenses tied to unit damage, 65% said that those expenses exceed the security deposit amount. This stresses the importance of reducing bad debt and protecting against both rent loss and damage.
Two-Fifths Claim Rent Assistance Funds Are Not Sufficient in Covering Rent Loss
Of the 58% who said they applied for and received Emergency Rent Assistance Program funds, 40% said that those funds are not sufficient in covering rent loss.
Key Takeaway for Improving Move-Out Experience & Preventing Rent Loss
Invest in solutions that protect your organization against rent loss and negative online reputation (e.g., lease insurance). In addition, take advantage of rent assistance and develop rent relief resources. This means continuing to support the industry’s efforts to ensure rent assistance is distributed efficiently and effectively.
The 2021 Apartment Visionaries Survey Research
In the spirit of educating fellow industry visionaries, LeaseLock and Grace Hill will plan to conduct the Apartment Visionaries Survey on an annual basis. You can access the full research report for a more in-depth analysis of the survey results, as well as insights from leading operators on optimizing the apartment leasing process and resident experience. Download your copy of the report to get it straight to your inbox — visit here.
https://leaselock.com/wp-content/uploads/2024/03/apartment-leasing-process-renter-experience.png11111667Paul Cook/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2021-09-22 23:29:182024-03-20 08:11:43Elevating Resident Experience Across the 5 Stages of the Apartment Leasing Process
When former apartment residents look back on their living experiences and assess their satisfaction, their lasting sentiments rest heavily on the final interactions they have with their apartment communities. So, why are so many renter relationships tainted after move-out?
Security Deposit Disputes Create Negative Move-Out Experiences Which Damage Your Online Reputation
Residents’ final impressions are often based on their move-out bills.
Renters who expect their entire security deposit to be refunded, or who incur unanticipated charges upon move-out, are left with a bitter taste in their mouth no matter how legitimate the charges might be. Unfortunately for apartment managers, parting on poor terms often leads to negative reviews from former residents. Even the happiest current renter can become a one-star reviewer after they receive the final billing statement.
In today’s marketplace, online reviews and ratings are an essential component of public relations for apartment managers, and move-out reviews from disgruntled former residents can severely damage a brand’s online reputation. Considering 85% of renters have indicated that online reviews influence their leasing decisions, the impact of negative feedback focused on the move-out experience and disputed charges may be greater than most properties expect.
An Innovative Solution to Prevent Security Deposit Disputes, Boost Renter Satisfaction, & Protect Brand Reputation
To help ensure that happy residents remain satisfied during the move-out process, many operators are removing costly security deposits and surety bonds altogether. After all the hard work that onsite teams put in to meet residents’ needs, those efforts shouldn’t be erased by billing conflicts on the back end. Property managers deserve positive feedback from the residents whose living experiences they cultivated, and renters deserve the opportunity to look back fondly at their leasing experience.
Quite simply, security deposits create an adversarial relationship between managers and residents that culminates at move-out. Residents routinely expect to have their deposits refunded in full at move-out, and they often count on those refund dollars to make the deposit at their next apartment. Management teams rely on those same deposits to cover cleaning costs and damages, and have little other recourse to recoup those costs.
Because a full refund is not always a reality, security deposits and deposit alternatives set managers up for failure from the moment they are collected. When renters are faced with receiving deposit deductions or repaying a bonding company, they take to Yelp, Google, Facebook, ApartmentRatings.com, ILSs, and other sites to vent their grievances.
Thus, in order to avoid move-out disputes and damaged relationships caused by deposits and surety bonds, operators should implement true deposit replacement technology.
Using Deposit Replacements to Eliminate Move-Out Charges
Many operators are turning to an integrated insurtech solution known as Zero Deposit lease insurance that removes security deposits from operating infrastructure. Unlike surety bonds, which merely present deposit alternatives, lease insurance replaces deposits with insurance technology and provides apartment operators enhanced protection on every single lease.
“The multifamily industry is changing,” explains Marcie Williams, president at RKW Residential. “Replacing security deposits with lease insurance enables us to meet the affordability needs of our residents, simplify the leasing process, and protect our assets in an uncertain economy.”
Deposit replacement technology removes a major hurdle in the application process, as well as the inherent conflict at the conclusion of the lease. In addition, lease insurance deploys seamlessly at check-out and provides operators with far more coverage against damage or bad debt than traditional deposits and bonds.
Improve the Move-Out Experience With Zero Deposit
By offering a Zero Deposit move-in, operators avoid administrative and financial hassles related to deposit deductions and move-out charges. In turn, renters are more likely to write positive reviews touting the simplicity and affordability of both the move-in and move-out experience.
Happy residents can become happy reviewers. More importantly, when residents don’t have complaints about move-out fees, damage charges, or cleaning expenses, it means they also don’t have a reason to post negative move-out reviews that can drive down property ratings. Instead, operators can benefit from reviews that positively reflect their apartment communities.
Deposit replacement solutions like lease insurance facilitate a seamless start-to-finish renter experience, which improves resident satisfaction and brand reputation. When prospective residents do their homework on a community, that bolstered brand reputation sets the property apart and ultimately results in more lead-to-lease conversions and increased revenue for your organization.
Instead of continuing to fight the old security deposit battle, operators should look for solutions that empower them to improve renter sentiment at their communities.
Happy budget season! Multifamily communities and corporate teams are starting their annual budgeting and forecasting exercises, but what’s different this year? As we edge out of the pandemic, what budget season best practices can multifamily operators employ to ensure a happier, smoother budget process?
We hosted a webinar panel with industry experts from top operators to get insider tips on how to budget around uncertainty and bad debt — two areas that all owners and operators will need to focus on for the upcoming year. To help fellow budgeters prepare, our panel discussion focuses on:
– Key goals for budget season teams
– Top budgeting challenges and opportunities
– Ways to mitigate risk and maximize asset performance
– How to improve accuracy, reduce expenses, and boost revenue
Below is a recap of the topics and conversations we covered during our panel, featuring Christine Bright – Regional Manager at Topaz Asset Management, Yetta Tropper – Executive Director at PGIM Real Estate, and our very own, Kevin Huss.
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What Are the Major Multifamily Budgeting Challenges?
With all the uncertainty and unknown variables, this year is not a budget-as-usual scenario.
Apartment Demand & Rent Growth
Economic recovery and employment growth have fueled unprecedented demand for apartments as the worst of the pandemic appears to be behind us, leading to rent growth that’s off the charts. Operators are left wondering if this trend will continue, or if regression is expected.
Evolving Legislative Landscape
Legislation has been constantly changing. Between a patchwork of eviction moratoriums, several extensions of the federal moratorium, and various rent assistance programs, it will be interesting to see what happens once eviction filings resume. There’s also been a relatively underwhelming rollout of emergency rent assistance funds — of the roughly $45 billion allotted, only $1.5 billion has been disbursed thus far. Are operators prepared to help residents take advantage of these programs?
Rent Delinquency
Related to the ever-changing legislative landscape is rent delinquency. How many residents are delinquent or will become delinquent? Will residents who are behind on rent be able to catch up? Operators need to focus on strategies to minimize delinquency rates, meaning they’ll need to be diligent in assisting their residents access the funds available to them.
New Renter Profiles
Operators also have to consider new renter behaviors. For example, many residents are signing for longer lease terms, using flexible rent payment solutions, shifting to remote work, and/or relocating to more affordable markets. All these factors contribute to a strong multifamily market.
Lease Concessions
Since the pandemic, operators have leaned heavily into financial concessions and economic incentives. Which lease concessions can operators offer without sacrificing income? It will be extra important this year and next to balance concessions against economic occupancy.
These are just some of the many challenges and questions that operators will need to think about and address this budget season.
What Are the Areas of Opportunity for Multifamily Budgeting Teams?
The multifamily industry has learned many lessons during the pandemic, which now present as unique opportunities in 2022.
Due to healthy economic growth, recovery is well underway. In the first half of 2021, evictions were expected to climb, vacancies to soar, and rental rates to potentially drop. However, the opposite of this happened due to eviction moratoriums being extended. Now we’re seeing incredible rent growth, strong occupancy, and stable vacancy levels. In addition, rising home prices are creating more demand for rentals, properties are selling like hotcakes, cap rates are getting squeezed, and there are bidding wars for apartments.
While the end of this book seems to be nearing, we still don’t know exactly what that will look like. How can apartment owners and operators prepare and capitalize on the positives? Moral of the story — they’ll need to control the controllables. Operators have learned to operate with fewer resources and lower expenses.
If the market is already experiencing healthy rent growth and occupancy, then what’s next? Moving forward, NOI improvement strategies will continue to be a focal point — operators need to double down on reducing bad bad debt and creating new channels of ancillary income.
How to Optimize Your Multifamily Budgeting Process: New Budgeting Priorities
This year, it will be especially important to focus on two new budgeting priorities. First, how can you mitigate risk? Second, how can you maximize asset performance and value? Essentially, operators need to pivot to budget around uncertainty and bad debt.
While the worst of the pandemic seems to be behind us, multifamily budgets should still account for best and worst-case scenarios. We can’t predict the full impact of COVID on 2022 budgets, but we can plan ahead to have a more secure understanding of the year ahead. Knowing the challenges and opportunities will help yield more accurate results, manage uncertainty, control bad debt, and protect NOI.
8 Best Practices For Budgeting Around Uncertainty & Bad Debt
To more effectively control bad debt and boost NOI, operators should dial in on the following budget season best practices:
1. Create New Budget Categories – By creating new budget categories, your team can identify the biggest value drivers. Historically, if you’ve had a catch-all income or expense account, consider creating more accounts to create transparency.
2. Budget With Flexibility in Mind – Being flexible is something we’ve all been forced to do during COVID. By taking a flexible approach to budgeting, your team can deliver more accurate projections.
3. Adapt to Evolving Team Roles – If the pandemic taught us anything, it was that we’re all capable of adapting for success. This means operators should continue to stay agile and proactive as your team’s roles and needs change.
4. Diversify Ancillary Income Streams – Tap into ancillary income channels that create incremental value and reduce bad debt. In other words, identify efficient sources of NOI and create income with little to no expense to your property (e.g., Zero Deposit lease insurance).
5. Invest in AI and Virtual Leasing – We all know that leasing has gone virtual. If you haven’t already adopted virtual leasing (e.g., virtual tour platforms or automated payment solutions), you’re losing out on key ways to optimize leasing and improve your organization’s returns.
6. Take Advantage of Rent Assistance Programs – On top of reducing delinquency, capitalizing on rent relief can help improve renewal rates which has a downstream effect on occupancy and rent growth.
7. Leverage PMS & 3rd-Party Data – Consulting market data will help improve budgeting accuracy and reveal areas that your organization can save on costs and minimize risk.
8. Offer Concessions Responsibly – Draw in residents while protecting economic occupancy. This means finding ways to boost your bottom line without leaving your property exposed. There are also other ways to reduce move-in costs for your residents — it doesn’t need to be a concession.
Future-proof your budgeting strategy to mitigate risk and protect NOI—download the multifamily guide on the 7 Building Blocks for Better Budgets:
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Industry Experts Share Multifamily Budgeting Insights
In our educational webinar “Budgeting Around Uncertainty and Bad Debt,” our expert panel discusses budget season best practices, trends, and strategies, featuring our budgeting pros, ChristineBright, YettaTropper, and KevinHuss. Here is a preview of the panel questions covered:
In what core ways is budget season different this year from last?
Considering how things have changed, what type of budget variances are operators seeing or anticipating?
Based on what we’ve learned in 2020, how have staffing changes evolved?
What steps can operators take to increase occupancy, lower expenses, boost bottom line, and better forecast changes?
How are operators benchmarking revenue growth for next year?
Operators have played it safe this year — how can they be more aggressive in 2022?
To access a recording of the entire panel session, fill out the form below:
https://leaselock.com/wp-content/uploads/2024/03/budget-season-best-practices.png533800Paul Cook/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2021-07-14 19:19:322024-03-20 08:11:19Budget Season Best Practices: How Operators Can Budget Around Uncertainty & Bad Debt
With legislation around the eviction moratorium, rent relief programs, and security deposits constantly evolving, Texas property owners and operators need to stay up-to-date on the latest rental housing laws. What are the biggest challenges facing both operators and their residents, and what do multifamily experts in the region have to say? What does the newest security deposit bill passed in May 2021 mean for the industry?
States continue to roll out rental assistance programs, and a wave of security deposit legislation is sweeping across the nation, so we invited esteemed industry experts from AMLI Residential and Madera Residential to discuss key concerns, including:
How to navigate federal and state eviction moratoriums
Tips for accessing rent assistance
Analysis of state security deposit bill
Options to replace security deposits
What this legislation means for multifamily operators and what’s required to be compliant
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Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this article without seeking legal or other professional advice. The contents of this article contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site. This article contains links to other websites. We are not responsible for the privacy practices or the content of such websites, and we do not endorse such sites.
Texas Eviction Moratoriums & Rent Assistance Program
The CDC eviction moratorium is set to expire June 30, 2021. As of March 31, the Texas Supreme Court’s 34th Emergency Order, which applied the provisions of the CDC moratorium to Texas courts, has expired. This means eviction proceedings can take place, barring where local government protections apply.
To help make sense of the various regulations, we hosted an educational presentation and expert panel to help inform apartment operators in the state of Texas — below is a recap of the webinar.
Federal Rent Assistance
The CAA and ARPA bring a combined total of $45 billion in federal funding to cover rental arrears. Based on population, the program allocates $1.3 billion in funding for Texas.
Note: For the full letter of the law, access CAA here and ARPA here.
CAA & ARPA Funding Eligibility Requirements
The eligibility criteria for both the CAA and ARPA funding programs require that:
Combined household total gross income cannot exceed 80% the area median income for the location where the property is located.
Household must demonstrate a risk of homelessness or instability.
Household has experienced loss of income due to Covid-19.
Texas Tent Relief Program
The 2021 Texas Rent Relief Program (TRRP) — which is intended to distribute the $1.3 billion in federal funding available in Texas — is currently available and being distributed. Those interested in applying should visit texasrentrelief.com.
Applicants are eligible for up to 15 months of assistance, covering past due rent from the previous 12 months and future rental assistance for three months. While there is no maximum grant allowance per household, rent may not exceed $4,600 per month. Units that exceed the limit are not eligible for assistance from the Texas Rent Relief Program.
Operators can begin the process of applying for funds themselves, but renter participation is required in order for an application to be accepted. For a list of program FAQs, visit here.
Texas Eviction Diversion Program
The Texas Eviction Diversion Program (TEDP) is a voluntary program that allows eligible landlords and tenants to mutually agree on a resolution to an eviction case before displacing a resident. The program was created to prevent evictions that are already on court dockets, as a last resort to keep renters in apartments.
TEDP is a program specific to Texas, and is designed to encourage mediation to resolve past-due rent issues between operators and their residents, rather than evict or displace renters. Applicants are given funding priority over those utilizing the Texas Rent Relief Program, making this an attractive option for operators. For a full list of program requirements, visit here.
SB 1783: The New Texas Security Deposit Law
In May 2021, new security deposit legislation was passed in Texas, marking a big win for both operators and renters in the state. Effective September 1, 2021, SB 1783 codifies the current practice of utilizing a small monthly deposit waiver fee instead of a large upfront deposit upon move-in. The bill outlines the following:
If the property requires a security deposit, operators can instead choose to offer the renter an option to pay a fee in lieu of a security deposit, however there is nomandate that operators offer such an option
The fee must be memorialized in an agreement and signed by both the property and renter (this requirement could be covered through a lease addendum)
The fee can either be recurring monthly or payable on any schedule so long as it’s agreed to between the renter and property
The statute also specifically states that an operator may use the fee to purchase insurance covering renter defaults like unpaid rent and physical damage to a unit under the lease (otherwise known as lease insurance)
SB 1783 specifically says that the fee collected under this section is not a security deposit, meaning the fee does not need to comply with the security deposit statute.
What the New Texas Deposit Law Means for Multifamily
A Move Away From Deposits
Considering today’s economic climate, it’s increasingly important for operators to meet the needs of renters who are dealing with financial strain. Most Texas operators understand that renters prefer not to pay large upfront deposits. In the great state of Texas, we’ve seen more and more operators try to address affordability by charging, sometimes, only $100 for deposits.
What’s the issue with this approach? It doesn’t mitigate risk. So, what happens when these security deposits aren’t enough?
Lately, we’ve seen a trend to move away from deposits toward risk fees. But these fees do not always provide sufficient coverage for operators in relation to the risk they’re taking on. Operators need better backend protection, which is why across the country, we’re seeing rapid movement toward deposit replacement solutions, like Zero Deposit lease insurance, to protect against rent loss.
In fact, since the start of 2020, there’s been a 58% increase in Zero Deposit properties across Texas.
How SB 1783 Is Different From Renter’s Choice Laws
Legislation like SB 1783 takes Renter’s Choice laws — which require deposit alternatives like surety bonds be offered — a step further in eliminating the issues associated with deposits and their alternatives. In other words, deposit replacement laws provide apartment operators true deposit replacement solutions while leaving it up to the operator to determine the best deposit replacement option.
Ultimately, deposit replacement laws like SB 1783 enable operators a secure way to choose a deposit solution like lease insurance while also creating more affordable move-ins for renters.
SB 1783 marks an important victory for the multifamily industry. LeaseLock supports legislation that gives operators a true — and secure — choice in selecting deposit solutions that they determine is best for their properties and which, at the same time, can make renting more affordable for their residents.
Top Operator Concerns With Security Deposits & Deposit Alternatives
More operators are seeking out deposit solutions more than ever before. Some key concerns operators are looking to tackle include:
Administrative burdens for both onsite staff and accounting teams
Increased risk exposure if the renter defaults prior to having paid the full deposit amount
Complexitiesthat slow the leasing process due to administrative burdens and compliance issues
Compliance issues for owners with properties across several states and cities — each with its own legal requirements.
The Security Deposit Solutions Market
Operators should understand the key differentiators between the deposit solutions available: deposit replacements and deposit alternatives.
Security Deposit Alternatives
Deposit alternatives (i.e., surety bonds) create operational complexity as they require onsite training, third-party applications, and background checks and/or FICO scores. Because they’re out-of-workflow, deposit alternatives often lead to low adoption.
Security Deposit Replacements
Deposit replacement solutions (i.e., lease insurance) totally eliminate deposits. Lease insurance eases administrative burdens, streamlines back-office workflows, and provides significantly more protection for rent and damages compared to traditional deposits and deposit alternatives.
Texas Rental Housing Laws Expert Panel Discussion
LeaseLock hosted an educational webinar and expert panel session on the many legislative challenges facing owners and operators in Texas. Moderated by our very own Ed Wolff – Chief Revenue Officer, the panel featured industry thought leaders, Jeffery Lowry – Chief Operating Officer at Madera Residential and Traci Hall – President – West Region at AMLI Residential.
Below is a preview of the panel questions covered:
As the pandemic ends and eviction moratoriums are lifted, how can operators properly prepare for eviction filings?
Renters and operators are feeling overwhelmed and confused about applying for rent relief — what can operators do to help direct residents to rental assistance?
How should operators think about risk mitigation in today’s economic climate?
Renter fraud has become a more pressing issue across all asset classes — how are operators addressing this?
What types of tools should operators have in their tech stack that integrate into the workflow to maximize efficiency and reduce disruptions?
To access a recording of the of the rental housing laws presentation and panel, fill out the form below:
https://leaselock.com/wp-content/uploads/2024/03/Texas-Rental-Housing-Laws-Webinar-Panel.png22213334Paul Cook/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2021-06-22 17:49:412024-03-20 08:11:07Texas Security Deposit Law: Why the New Deposit Bill Is a Win for Multifamily
It’s nearly budget season — are you in budgeting shape? As multifamily dives into budgeting and forecasting exercises, apartment operators need to do all they can to make the process as smooth as possible. A pain-free budget season may seem out of reach, but you can make it happen.
How can apartment operators increase income and reduce expenses? And how can they protect against rent loss and maximize asset performance?
To get started, be sure your organization knows these key pointers:
Ditch Budgeting Spreadsheets
Avoid Copying + Pasting Standard Budget Items
Implement “Bring Your Own Device” Team Policies
Assign Roles & Responsibilities Involved in Budgeting
Look at Historical Budget Data
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5 Pointers for a Smoother Multifamily Budget Season
1. Abandon Spreadsheets
Who has the time and patience for spreadsheets? Who wants to write variance explanations to your owners every month? This budget season, ditch redundancy and manual data input to save your organization from costly mistakes and budget variances. Multifamily is in the thick of a technology revolution, so utilize integrated software programs like MRI, RealPage, ResMan, and Yardi that improve accuracy, streamline budgeting, and enable you to more effectively forecast.
2. No More Copy + Paste
When tasked with creating budgets for multiple properties, it might seem like copying and pasting standard budget items from one year to the next would be effective. You already know the expenses fit within budget. But that Control C + Control V might actually lead to missed opportunities to save.
For example, long-term contracts for technologies like printers, mobile-first technologies for maintenance and resident apps are one area where savings can be found. With the influx of more proptech into multifamily comes the influx of options. Today suppliers are becoming more open to extending 12-month contracts instead of 7-years or even month-to-month contracts which over time could positively impact your budget’s bottom line.
3. Engage BYOD
Why pay for mobile devices when your teams already have their own? “Bring your own device” policies are gaining momentum in multifamily as it offers the opportunity to save budget, reduce IT burdens, and offers teams the comfort of using their own tech devices. Stipends for new personal technology are often less costly than purchasing new devices.
4. Designate Roles & Responsibilities
To effectively collaborate with key stakeholders, designate responsibilities from start to finish. This means coordinating across all team members involved in preparation, routing, approvals, and distribution to the right personnel. This will ensure visibility and improve collaboration for a smoother budgeting process.
5. Compile Market Data Research
As with any budgeting and forecasting exercise, look at historical budget data by property and monitor current market and submarket conditions (e.g., marketing, demographic, and economic changes) that impact leasing, retention, and profitability.
Multifamily Survival Guide for Budget Season: Building Blocks for Better Budgets
To help apartment operators optimize their budgeting process, we’ve put together a guide on the 7 Building Blocks for Better Budgets with insights on
While the industry entered 2020 on a high note, COVID presented various challenges for both apartment operators and renters. Unemployment led to missed rent payments, economic interruptions slowed rent growth and halted apartment construction, and general uncertainty upended more than a decade’s worth of strong growth trends.
The 2021 peak leasing season is here and even though data indicates leasing, occupancy and net effective rents are trending up, multifamily is not entirely out of the woods yet.
Get our exclusive leasing KPIs report — click below.
Optimize Leasing With an Automated Technology Toolkit
On a positive note, the pandemic accelerated a trend already taking shape in the industry — automated leasing. In response to the market disruption, forward-thinking apartment operators have implemented new operational strategies and automated leasing technologies to address the needs of today’s renters while maximizing asset performance.
To help optimize peak leasing season — well, really all leasing — rental housing operators should invest in multifamily technology to automate the following leasing tasks:
1. Lead Tracking, Apartment Tours, & CRM
Historically, leasing offices relied on paper guest cards which were riddled with errors, constantly lost among the shuffle, and otherwise required manual work that took time away from customer service. They also forced onsite teams to cobble together lead tracking. This dynamic necessitated the physical presence of both the prospective renter and leasing staff, which slowed lead generation and put unnecessary hurdles in the path of lead-to-lease conversion.
Automation in Action
Self-guided and virtual tour technology, digital leasing platforms, and integrated CRMs have mercifully replaced paper guest cards. Self-guided and virtual tours not only make apartment touring more convenient, they facilitate more secure and efficient leasing experiences.
Lee Bradford, Vice President of Operations and Training for LMC, explains the importance of leveraging leasing technology: “We utilized existing media from our digital platforms, such as Matterport videos, interactive sight maps and self-guided tours, to enhance our virtual-leasing process.” With virtual 3-D tours receiving 49% more inquiries from prospective residents than listings without virtual tours, it makes sense why many operators have adopted this virtual leasing method.
2. Payment Solutions
Managing paper rent checks is a time-consuming process that not only comes with manpower costs, but also lacks convenience, security and NOI, and often contributes to incidental expenses.Meanwhile, online payment solutions provide renters with payment options while allowing leasing teams to focus on generating and closing leads.
Automation in Action
Rent payment technologies automate payment processing and integrate with property management systems, thus optimizing financial performance, reducing risk, and streamlining operations. As more renters faced financial challenges due to the pandemic, automated payment solutions offered greater flexibility for both residents and operators. Onsite teams were able to extend payment options through these integrated systems to ensure rent was paid and residents were comfortable with the payment process and timing.
3. Security Deposits & Deposit Alternatives
Traditional security deposits come with a costly infrastructure and a host of administrative hassles. Unfortunately, lower cost options like surety bonds come with their own set of issues. Often out-of-workflow, alternative choices involve applications to a third-party site that typically requires renters to provide a FICO score.
Automation in Action Automated lease insurance software integrates in the lease checkout, billing, underwriting, and property management systems, without requiring any renter applications or approvals. Onsite teams can effectively manage their time because the implementation isn’t out-of-workflow. Integrated lease insurance facilitates more affordable move-ins, faster leasing checkouts, and ultimately more signed leases.
4. Onsite Training & Customer Service
There is some concern that automation will replace the human but housing will always be a very intimate business with customer service remaining the highest priority. Savvy operators are embracing the personal connection of leasing technologies through automated training practices.
Automation in Action
Integrated talent management solutions that cover policy, training, and assessment drive property and team performance. Companies like Grace Hill help leasing associates optimize the automated leasing process, giving teams access to modules that provide best practices to engage while leasing in an even more technologically-driven environment.
Operators Need Multifamily Technology That Automates Leasing
The pandemic accelerated automations that were already in the works, propelling multifamily into a new era of technology and integration. As operators seek to future-proof their properties based on the lessons learned over the past year, the right tools are essential. Fortunately, multifamily technology has emerged to automate leasing and maximize leasing performance.
To ensure you stay ahead during peak leasing season 2021, click here to download an exclusive report of the most recent leasing data.
https://leaselock.com/wp-content/uploads/2024/03/multifamily-technology-automated-leasing-scaled-7.jpg17052560Paul Cook/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2021-05-11 18:53:522024-03-20 08:10:52Multifamily Technology: 4 Types of Automation to Drive More Leases
Illinois property owners and operators are constantly navigating ever-changing rental housing laws. With new legislation around rental assistance and security deposits, what do these policies mean for multifamily in the Chicago region and Illinois as a whole?
In light of new rental assistance programs, as well as a wave of security deposit legislation sweeping across the nation, we pulled together an expert panel to discuss key concerns and challenges facing Illinois owners and operators, including:
How to navigate federal and state rent assistance
State and local security deposit laws
The right options to replace security deposits for apartment residents
What this legislation means for multifamily operators and what’s required to be compliant
Note: Download the full webinar recording by filling out the form at the end of this post.
Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this article without seeking legal or other professional advice. The contents of this article contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site. This article contains links to other websites. We are not responsible for the privacy practices or the content of such websites, and we do not endorse such sites.
From complicated rental assistance programs to tightening security deposit laws, keeping up with ever-changing legal landscape is no easy task. To help, we hosted an educational presentation and panel to help inform apartment operators in the state of Illinois — below is a recap of the webinar.
The Letter of the Law: Federal Rent Assistance
The federal funding sources include the Consolidated Appropriations Act (CAA) and the American Rescue Plan Act (ARPA). The CAA provides about $25 billion while the ARPA brings roughly $20 billion for a combined total of $45 billion in federal funding to cover rental arrears. Funding is provided to states based on population, meaning Illinois will eventually receive a combined $900 million.
For the full letter of the law, access CAA here and ARPA here.
CAA & ARPA Funding Eligibility Requirements
The eligibility criteria for both the CAA and ARPA funding programs require that:
Combined household income must not exceed 80% the area median income for the location where the property is located.
Household must demonstrate a risk of homelessness or instability.
Household has experienced loss of income due to Covid-19
Illinois Rental Payment Program
So, what are the next steps for operators and residents who need access to rent assistance? The 2021 Illinois Rental Payment Program (which is intended to distribute the ~$900 million in federal funding allocated for Illinois) is not yet available as the state is not currently accepting applications. Those interested in applying should check back here in May for updates.
In the meantime, we know that applicants are eligible for up to 15 months of assistance, covering past due rent from the previous 12 months and future rental assistance for the next three months, with a maximum grant amount of $25,000 per household.
Operators can work together with renters to start the application process, but renter participation is required in order to qualify.
Illinois Security Deposit Law
The Illinois Security Deposit Return Act does not put a limit on the maximum security deposit amount that operators can collect. When making deductions, operators have 30 days from the date of move-out to return it and written notice is required. When returning the full amount, operators have 45 days from the date of move-out to return the funds and no written notice is required.
At the local level, both Cook County and the city of Chicago have restrictive laws on how security deposits can be collected, managed, as well and how and when they must be returned.
Cook County Deposit Law
The Cook County RTLO (Residential Tenant and Landlord Ordinance) caps security deposits at 1.5 month’s rent and reduces the time for returning a deposit from 21 days to 30 days.It also requires operators to give renters the option to pay any portion of the security deposit in excess of one month’s rent, in no more than six equal installments no later than six months after the effective date of the lease.
Chicago Deposit Law
The Chicago RLTO (Residential Landlord & Tenant Ordinance) requires that landlords:
Provide a written receipt for security deposit funds
Disclose where security deposit funds are held
Avoid commingling of deposit funds
Pay annual interest on deposits
Provide appropriate evidence of repairs
Return deposit funds in a timely manner
The Rising Tide of Security Deposit Legislation
Deposit laws started cropping up decades ago, primarily in the form of deposit restrictions, as we see is the case in Illinois. Deposit restriction laws regulate the maximum deposit amount and the number of days to return a deposit. But in the last year, lawmakers have begun to shift away from deposits entirely.
More than one-third of US states have passed, proposed, or pledged support for deposit replacement laws including California, Delaware, Florida, Maryland, Michigan, North Carolina, Ohio, Pennsylvania, and Virginia. This movement is also happening at the local level, including in Atlanta, Baltimore, Cincinnati, Columbus, Philadelphia, New York City, and Santa Cruz.
Deposit replacement laws provide apartment operators true deposit replacement solutions, rather than imposing more restrictive deposit regulations.
To view a full list of state and city deposit laws, click here.
The Drawbacks of Deposit Laws
The ever-changing legal landscape of security deposits is just one of the many challenges that apartment operators face today. In light of this, more operators are seeking deposit solutions in order to address concerns like leasing delays, administrative burdens, increased risk exposure, and compliance issues.
Deposit alternatives (i.e., surety bonds) can address the legal requirements of new deposit laws, but they also create operational complexity. Alternatives usually require onsite training, third-party applications, and background checks and/or FICO scores. They’re also out-of-workflow which leads to low adoption. This means they’re still subject to the legal restrictions, which defeats the reason why operators are moving away from deposits.
Security Deposit Replacements
Deposit replacements (i.e., lease insurance) eliminate deposits completely and replace them with lease insurance. Through deep property management system integrations, lease insurance eases administrative burdens, streamlines back-office workflows, and provides more protection for rent and damages. No deposits means operators are not subject to the legal requirements.
LeaseLock recently hosted an educational webinar and expert panel session on the various legislative challenges facing owners and operators in the state of Illinois. Moderated by our very own Ed Wolff – Chief Revenue Officer, the panel of multifamily experts included Tom Benedetto – Director of Government Affairs at Chicagoland Apartment Association, Kortney Balas – VP of Information Management at JVM Realty, and Delight Merrill – Director of Property Management at Redwood Capital Group.
Here’s a preview of the panel questions covered:
How can the apartment industry support innovation and legislative changes that streamline requirements and lower costs for both owners and renters?
What are owner and operators’ most pressing concerns around the tightening of rental housing restrictions like deposit laws?’
What tools should property owners and operators have in their tech stack that integrate into the workflow, especially to maximize efficiency and reduce disruptions?
The pandemic has brought about economic uncertainty — let’s discuss what operators should do to properly manage risk and protect NOI.
What’s the biggest challenge as an owner/operator today in regards to ensuring your residents get rental assistance?
Access a recording of the of the panel session — fill out the form below:
California lawmakers extended a statewide eviction moratorium through June 2021 and passed an emergency measure to deliver $2.6 billion in rent relief. Local jurisdictions in San Diego and Los Angeles counties have also passed their own eviction moratoriums.
With strict rent control in cities such as Santa Monica, and tightening security deposit legislation across the state, what do these California rental laws mean for property owners and property management companies in the region?
Having trouble keeping up with California’s eviction moratorium, rental assistance, rent control, and security deposit laws? We recently hosted a webinar to educate apartment operators based in California, and below is a recap of what we covered.
Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this article without seeking legal or other professional advice. The contents of this article contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site. This article contains links to other websites. We are not responsible for the privacy practices or the content of such web sites, and we do not endorse such sites.
The Letter of the Law: SB 91 Tenant Relief Act
SB 91 was passed on Jan 31, 2021, and extends the protections under AB 3088 (also known as the Tenant Relief Act). Originally set to expire on Jan 31, 2021, the eviction moratorium now extends through June 30, 2021.
The Southern California Rental Housing Association (SCRHA) has been proactive in educating housing providers on how to navigate the Tenant Relief Act and provides their perspective on SB 91:
“Housing providers should pay careful attention to all the details of the eviction protection law/SB 91. There are many moving parts and potential pitfalls with mandatory notifications, specific language in pay or quit notices, and the immediate application of just cause protections for most California renters. With anti-displacement a top priority for elected leaders, ending a tenancy has become more complicated. Housing providers should rely on professional associations to help guide them and consult with legal counsel prior to taking decisive action.”
What does SB 91 mean for rental housing providers? In effect, the moratorium extension prevents properties from evicting renters for nonpayment of rent through June 30, 2021.
However, it is subject to a few exceptions, including any renter default that occurred prior to March 1, 2020.
Under SB 91, properties can’t evict a renter due to nonpayment of rent if:
The Renter provides a declaration of COVID-19 financial impact; and
The Renter pays at least 25% of rent by June 30th, 2021 (for rent amounts due between September 2020 and June 2021)
$1.4 Billion Rental Assistance Program
SB 91 also allocated $1.4 billion in emergency rental assistance, which provides up to 80% of rental assistance to eligible households. It’s important to note that:
Operators must waive the full balance due
Operators will have to forfeit the 20% of rent
Eligible households must qualify — if they fail to meet eligibility requirements, then the renter must pay 25% of rent by June 30, 2021 in order to avoid eviction. Either the property or renter may apply.
Household Eligibility Requirements
To receive up to 80% of assistance for rent amounts due, a household must qualify, meaning they must meet all 3 of the following criteria:
At least one person in the household must qualify for unemployment or must experience financial hardship, reduced income, or increased costs;
At least one person in the household must show risk of homelessness or instability; This would include past due utility bill, rent demand notice, etc.; and
Household income must be at or below 80% of area median household income (AMI) in the area the property is located.
Operator Participation Requirements
What are operators required to do in order to participate in the California rental assistance program?
1. Properties have a duty to participate, meaning operators must:
Make a good faith effort to investigate
Provide assistance to renters who may qualify
Cooperate with renter’s efforts to obtain rental assistance under SB 91
2. Properties must provide documentation showing compliance with SB 91 when making a debt collection complaint.
3. If a renter owes COVID-related rent debt as of February 1, 2021, an operator must provide a Notice of Tenant Rights no later than February 28, 2021, even if the operator has no intention of pursuing an eviction case at this time.
How Does SB 91 Impact Statewide Rent Control?
SB 91 extends AB 1482 (statewide rent control) by expanding the just-cause eviction requirements and temporarily extending to all types of rental properties. All renters are also covered from their first day of tenancy. Renters who don’t comply with tenant requirements under SB 91 can still be evicted, but operators must adhere to any local government ordinance in place.
The California Tenant Protection Act (AB 1482) went into effect on Jan 1, 2020, putting an annual rent increase cap at 5% plus inflation per year or 10% without inflation, whichever is less — making it one of the strongest rent control statutes in the US.
More recently, California Proposition 21 was defeated during the 2020 November election, thus prohibiting rent control on housing that was first occupied after Feb 1, 1995, and housing units with distinct titles.
In Los Angeles County, the Rent Stabilization Ordinance went into effect on April 1, 2020, which limits rent increases above the allowable limit (3%) within a 12 month period, and provides just cause eviction protections for most residential rental units.
California is one of 5 states that has cities with some form of residential rent control law. Many Southern California communities already have rent control laws in place, including Santa Monica, West Hollywood, Beverly Hills, Glendale, Culver City, Inglewood, Los Angeles, and unincorporated neighborhoods of LA County.
Rent control is top of mind in California, and there are also new laws cropping up that further restrict use of security deposits — SB 91 is an example.
Deposit Laws Are Accelerating Nationwide
Deposit restriction laws regulate the maximum deposit amount and the number of days to return a deposit — something the multifamily industry is no stranger to. In the last year, the industry has begun to shift away from deposits.
About one-third of US states have passed, proposed, or pledged support for deposit replacement laws including California, Delaware, Florida, Michigan, North Carolina, Ohio, Pennsylvania, and Virginia. Cities including Atlanta, Cincinnati, Columbus, Philadelphia, New York City, and Santa Cruz have also taken action.
Deposit replacement laws take deposit legislation a bit farther by giving apartment operators true deposit replacement solutions, as opposed to implementing more restrictive deposit regulations.
View a full list of state and city deposit restrictions and deposit replacement laws here.
3 Challenges Created by Deposit Laws
Multifamily operators and owners have dealt with an array of different challenges over the years, and changing deposit legislation is only one of them. But in the last year, a growing number of operators are seeking deposit solutions in light of these deposit laws. Some of the key concerns operators are looking to address include:
Leasing Delays – Operators must inform residents of the deposit alternatives options, and renters can shop these options before getting the property’s approval. This can slow down leasing activity significantly.
More Work for Onsite Teams – Properties must review and approve multiple insurance policies while still managing security deposit accounting. Onsite teams will also have to track deposit installment payments for renters who choose to go that route.
Increased Risk – Deposit installment plans increase operators’ exposure to financial risk if the renter defaults prior to having paid the full deposit amount.
Deposit alternatives — like surety bonds — can address the legal requirements of new deposit laws, but they also create operational complexity. Deposit alternatives typically require onsite training, third-party applications, background checks and/or FICO scores, and out-of-workflow management. In other words, traditional security deposits are still in place, and therefore still subject to the legal restrictions.
Security Deposit Replacements
Deposit replacements — like lease insurance — replace deposits completely. Lease insurance leverages deep property management system integrations which streamlines back-office workflows and provides increased protection for rent and damages. Operators who replace deposits entirely are therefore not subject to the legal requirement.
What Top Operators Are Saying About Deposit Laws
Several leading operators recognize the need to move away from surety bonds, including Kelli Jo Norris – President of Goodman Real Estate, Michael Roos – Managing Director of Asset Management at ColRich, and Kevin Huss – Vice President of Revenue Management at Harbor Group.
Navigating the Deposit Legislation Landscape
When operators rely on security deposits and deposit alternatives, they’re subject to the inherent variability of deposit legislation. But when they implement lease insurance software that automatically ejects deposits from enterprise operating infrastructure, they can avoid the legal requirements of the various deposit laws, both passed and pending.
California Rental Laws Webinar for Apartment Operators
LeaseLock recently held an educational webinar on California rental laws, led by our very own Reichen Kuhl – President & Chief of Legal, Ed Wolff – Chief Revenue Officer, and Carl Stockholm – VP of Enterprise Sales for the West Region.
Fill out the form below to get view a recording of the webinar:
https://leaselock.com/wp-content/uploads/2024/03/california-rental-laws-webinar-scaled-7.jpg17052560Paul Cook/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2021-03-02 02:07:452024-03-20 08:10:11California Rental Laws: What to Know About SB 91, Rent Control, Deposit Laws & More
Percent of rent collected on January 1st slipped 2 points MoM.
First-day rent payments steady across Class C properties.
Stimulus package includes $25 billion in rental assistance.
At the turn of a new year, the multifamily industry continues to battle economic volatility, increasing unemployment rates, and a pandemic resurgence. While President Trump signed the $900 billion relief package — including $25 billion in rent relief — and despite a rebound last month, first-day rent payments in January have slightly dipped.
In a joint statement, President of NMHC, Doug Bibby, and President and CEO of NAA, Bob Pinnegar, agree that more assistance is necessary to stabilize the apartment rental industry in 2021:
“We are heartened that the legislation includes such critical resources that will allow those impacted by COVID and resulting economic distress to meet their financial obligations, including rent. NMHC and NAA will continue to work with policymakers on future legislation to ensure that residents and housing providers have the support necessary to allow for a sustainable and equitable recovery.”
Both organizations have remained steadfast in their fight to support apartment operators and American renters since the onset of the pandemic. In support of that effort, we’ve evaluated rent payment behavior by region and asset class in the first month of 2021.
January 1st Rent Payments Slightly Dip
The percent of total rent collected on the first of January declined 2 percentage points since December. Despite optimism from the uptick in December 1st rent payments and the passage of a COVID relief package, renters are struggling after several months of financial distress. On the whole though, first-day rent payments in January have held stronger than the most significant dip in November.
Class C Rent Payments Stabilize — Class A & B Properties Slip
The percent of total rent collected on the first-of-the-month at Class A and Class B properties dipped 2 and 3 points, respectively. While Class C properties have struggled historically, first-day rent payments at Class C apartments remained steady in January following a slight drop last month — on par with the pre-COVID average.
Compared to the large drop in November, Class A and Class B properties are now in a stronger position. And while Class C first-day rent payments have not changed since December, they’re still below the previous low in November. This again underscores the dire need for rental assistance as the pandemic continues to wear on America’s most vulnerable renters.
Rent Payments Decrease in California and Texas
In California, renters still face a crippling housing crisis exacerbated by a lack of state rent relief. California Rep. Maxine Waters noted that the $25 billion in emergency rental relief is “a start” which is evidenced by the slight 1-point drop in the percent of rent collected on January 1st.
In Texas, a rent assistance program is set to roll out in the spring. As lawmakers iron out some kinks, the state experienced a 7-point drop in the percent of rent collected on the first-of-the-month.
A major metro drilldown in both states reveals a slight decrease in the percent of rent collected on the first-of-the-month. In Los Angeles, January 1st rent payments slipped 2 points, while Dallas suffered a 6-point drop from last month.
What the $900 Billion Stimulus Package & $25 Billion in Rent Relief Mean for Multifamily
Renter’s financial security appeared to be on the rebound last month. This month, even a small dip in first-day rent payments indicates the deep-rooted financial strife that renter households face, despite an eviction moratorium legislation and various emergency rent assistance funds.
The prospect of federal rent relief is now a reality, however, the apartment industry understands that short-term, fractional funding is insufficient as the pandemic persists through 2021. After months of desperate lobbying efforts by industry groups to gain more comprehensive rent relief measures, apartment housing leaders and legislators can only breathe a temporary sigh of relief.
Looking ahead, multifamily leaders will continue to support the industry. And to that end, we will track rent payment behavior over the course of the new year.
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 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.
Percent of rent collected on December 1st jumped 2 points MoM.
First-day rent payments slipped across Class C properties.
Lawmakers propose new $908 billion stimulus plan.
Last month was marked by uncertainty — a resurgent COVID pandemic, a complicated presidential election outcome, and stalled conversations around a new stimulus package all correlated with a dip in November 1st rent payments.
Following a shaky November though, lawmakers introduced a COVID relief proposal worth about $908 billion on Tuesday, and December 1st rent payments have rebounded. This is positive news for the multifamily industry, which has been under severe pressure to support both themselves and American renters impacted by economic fallout during the pandemic.
As bipartisan lawmakers revisit stimulus package negotiations to hopefully push through Congress, the rental housing industry is watching closely. Bob Pinnegar, president of NAA, expressed urgency, telling GlobeSt.com, “We are pleased that the latest COVID-19 relief proposal acknowledges this need, and look forward to working with our leaders to ensure the unique needs of the industry and our residents are addressed.”
It’s time to investigate how rent payment behavior by region and asset class is shaping up in the final month of 2020.
Strong December 1st Rent Payments Indicate Boosted Renter Morale
The larger part of 2020 has been dominated by declining rent payments, but the percent of total rent collected on the first of December increased 2 percentage points since November.
The uptick is a welcome change among the multifamily community who has grown accustomed to wavering rent payments. And while first-of-the-month payers tend to make timely payments on the first of each month, the small jump indicates a wind of change as far as financial security among renters.
Multifamily Pulling for Rent Relief By End of Year
Even if the election results and the prospect of rental assistance by the year’s end have restored renters’ confidence to pay rent, lawmakers and industry leaders understand the dire need for a stimulus package to pass still.
Since the 2020 election in November, legislative talks were at an impasse until December 1st when the $908 billion relief package was proposed. However, Senate Majority Leader Mitch McConnell has already rejected the measure, instead calling for a “targeted relief bill” that would hopefully be approved by Congress before December 11th.
In the meantime, rental housing providers and renters are hanging on a dangerous financial cliff. If Congress does not pass a new stimulus deal, many renters receiving unemployment benefits will no longer have assistance at the end of the month — the same time the nationwide eviction moratorium is set to terminate — and apartment operators will be forced to continue supporting the nation’s renters alone.
Relying on multiple eviction moratoriums and various rent assistance funds to protect America’s renters is simply inadequate in the face of an economic crisis and global pandemic.
Class C Renters Struggle as Class A & B Properties Recover
The percent of total rent collected on the first-of-the-month has seen a month-over-month bump at both Class A and Class B properties. Class C properties, on the other hand, have experienced a 2-point drop since November.
It’s no surprise that the renter population most vulnerable to economic strife continues to struggle paying rent. Class C properties already registered a large dip in the percent of rent collected last month. The added drop in December further demonstrates the pressing need for rental assistance among this group.
Class B and Class A properties also saw notable falloff in rent payments on November 1st, but both have recovered on December 1st.
California Rent Payments Slip, Texas Rent Payments Pick Up
On the west coast, California renters are feeling the pain of an ongoing housing crisis compounded by a lack of state rent relief. The state logged a 5-point decrease in percent of rent collected on December 1st.
In Texas, rent assistance may be the critical difference between a significant drop last month and an uptick this month. On December 1st, the percent of rent collected climbed 2 points, surpassing the pre-COVID average.
At the local level, Los Angeles rent payments have mirrored the state’s decline, with the percent of rent collected on the first-of-the-month slipping 2 points. Dallas reversed its downward trend from last month, ticking up 2 points in percent of rent collected on December 1st and hovering just above the 3-month pre-COVID trending average.
Amid Worsening Pandemic, Lawmakers & Multifamily Leaders Sound the Alarm for Fiscal Relief
2020 may be winding down, but the focus on rent payment behavior is far from dissipating out of view. Apartment housing leaders will look to usher along legislative talks around emergency rent relief while providing support to renters in need. For now, we will continue monitoring rent payments through the grace period and remainder 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 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.
https://leaselock.com/wp-content/uploads/2024/03/December-1st-Rent-Payments.jpg11111667Paul Cook/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2020-12-03 16:32:462024-03-20 08:09:35December 1st Rent Payments Uptick — Class C Properties Still Struggling
Percent of November 1st rent collected dropped 9 points MoM.
First-day rent payments slipped across properties of all asset classes.
Congress has yet to pass another COVID relief bill.
The US presidential election is today, coronavirus cases are surging globally, and talks of a new stimulus package are at a stalemate, all contributing to large scale uncertainty. But how have these events impacted rent payment behavior in the apartment housing industry?
Our monthly analysis indicates that, similar to previous months, November 1st rent payments dipped. It’s important to note that the first of the month landed on a weekend, meaning some renters may have waited to pay on a weekday. Nonetheless, the trend speaks for itself—apartment operators still need comprehensive rent relief to directly support residents.
Multifamily leaders continue to put up a dedicated fight for rental assistance, and with the added political and economic strains we face today, advocacy for long-term solutions is mission-critical to propping up the rental housing industry.
Now, let’s analyze how November 1st rent payments are holding up across region and asset class compared to previous months.
Lower November 1st Rent Payments Without Pre-Election Deal
The House passed a revised HEROES Act last month, including $50 billion in rental assistance and an eviction ban extension. Despite signs of legislative progress, October 1st rent payments reflected financial insecurity among renters.
This month, November 1st rent payments have declined again, holding one percentage point below the pre-COVID average.
While first-of-the-month payers are normally consistent in paying rent on the first each month, it’s possible that many skipped making payment over the weekend and instead waited until the week. Even so, several other factors may have contributed to the lag in first day rent payments, including heightened political stress.
Pending Election Results, New Stimulus Bill Should Help Strengthen Rent Payments
Of course, the contents of a new relief package hinge on the outcome of the election. If Congress passes the slimmed-down version of the HEROES Act, it should be great news for rental housing providers and renters alike. If Congress fails to pass another COVID stimulus deal though, many of those receiving unemployment benefits will lose assistance at the end of next month, the same time the nationwide eviction moratorium is due to expire.
The timeline for a new relief bill remains uncertain, and the leftover CARES Act benefits will continue to dry up through the end of the year. On top of this, varying eviction laws and spotty rent assistance funds are unlikely to quell the storm of financial unpredictability.
Without knowing what the next rent relief package will include and when it will pass, the rental housing industry can only continue shouldering most of the relief efforts.
All Asset Classes Experienced Dips
Renters at Class C properties have struggled to make rent during the pandemic, but Class B and Class A properties have shown signs of financial stress as well.
On November 1st, rent payments for all asset classes saw month-over-month dips, with Class A and Class B registering the biggest drops. Class C rent payments fell 6 percentage points compared to October 1st. This strain has pushed operators to implement creative solutions to balance lease concessions and financial risk — especially at Class A properties.
California and Texas Rent Payments in a Holding Pattern
Renters in both California and Texas have shown signs of struggle. In the Golden State, the percentage of rent collected for the first-of-the-month declined 4 points since last month. In the Lone Star State, the percent of rent collected fell 6 points, returning to the pre-COVID average.
In the Los Angeles metro, where the housing affordability crisis has been magnified, the percent of rent collected dropped 3 points below the pre-COVID average. Dallas rent payments also dropped from last month, and currently sit 6 points below the average.
Multifamily Awaiting Emergency Rent Relief, Shifts Focus to Sustainable Solutions
No doubt, the election has distracted from rent payment behavior, but several key issues like emergency rental assistance, unemployment benefits, and eviction moratoriums remain center stage as apartment operators and American renters wait for crucial next steps. Throughout the remainder of the November grace period, and as the election results pan out, we will continue to track rent payment behavior to support the multifamily industry.
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 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.
In the multifamily industry, apartment lease insurance is a completely new insurtech product designed to totally eliminate costly security deposits, drawn-out surety bond applications, and confusing guarantee programs, all of which are burdensome for both residents and operators. LeaseLock deploys lease insurance through its Zero Deposit Platform and unlike common “deposit alternatives” in the rental housing market, lease insurance is designed to replace security deposits with seamless insurance technology and provide apartment operators enhanced protection on every single lease.
How Does Apartment Lease Insurance Work?
Instead of paying a costly upfront deposit upon move-in, renters pay a small monthly deposit waiver fee along with their rent. In turn, the property is protected against missed rent and damages with customized coverage.
One of the defining features of lease insurance is that it’s the only product designed to protect the property management company and asset owner — meaning properties gain remarkably more coverage than they would with a traditional deposit, which significantly reduces bad debt.
Top Benefits of Lease Insurance
Lease insurance offers several key benefits, including:
Superior coverage
Renter affordability
Native lease integration
Improved online reputation
1. Stronger Protection Against Unexpected Events and Market Disruptions
The COVID-19 pandemic and subsequent recession have led to industry-wide uncertainty. Luckily, lease insurance has been the answer to many operators’ financial concerns. Built on a sustainable loss ratio model, lease insurance eliminates operational risk and provides customized insurance coverage against rent loss and damage on every lease with the preferred plan.
Compared to security deposits and deposit alternatives like surety bonds, lease insurance offers 3x more protection on average against rent loss and damages. This shields apartment communities from economic uncertainty. As President at RKW Residential Marcie Williams points out, “Replacing security deposits with lease insurance enables us to protect our assets in an uncertain economy.”
2. Affordable Move-Ins Drive More Traffic and Higher Conversion Rates
Renter affordability has been front and center, especially since the pandemic. As more renters search for affordable living options, security deposits are no longer a viable option for many. Lease insurance, however, eliminates security deposits entirely, meaning properties can attract more prospective renters, accelerate move-ins, and increase conversion rates.
For example, CFO and COO at ROCO Real Estate Damon Evert explained the benefits of replacing deposits with lease insurance after the company achieved an increase of 10 to 20 leads per property per week: “It’s something that should give us a strong advantage when it comes to competing for prospects.”
3. Deep Technology Integration Delivers Results Through Automation
The pandemic accelerated technological change, and with that, automation and integration have emerged as top priorities for operators as they hunt for future-proof technology solutions. Leasing operations have shifted online, and in response, operators are looking for ways to streamline their processes, not add additional steps (i.e., surety bonds create administrative burdens for on-site teams).
From move-in to move-out, Zero Deposit lease insurance software is natively embedded in online lease checkout, lease execution, monthly billing and accounting, receivables and automated claims, and property performance metrics. This enables operators to eliminate deposits portfolio-wide and drive net operating income—without any additional work for onsite teams.
Managing director of asset management at Trinsic Sheri Thomas notes, “We pride ourselves on being an innovative apartment company that provides the highest level of convenience for our residents. Replacing the security deposit cost barrier with lease insurance delivers a frictionless and automated leasing process.”
4. More Positive Community Reviews
Another advantage of apartment lease insurance has to do with renter experience and online reputation. COO at Bell Partners Cindy Clare explains, “Considering security deposits can also create upfront affordability issues and disputes at move-out, the benefits just don’t outweigh the challenges.”
When renters don’t have to worry about security deposit deductions or repaying bonding companies (who may run collections on unpaid expenses), they’re more likely to write positive reviews. These reviews often emphasize the affordability of a zero-deposit move-in, as well as the ease of the move-out experience.
All in all, lease insurance helps improve the resident experience which can translate into a more favorable online reputation.
Lease Insurance Vs. Security Deposit Alternatives
Lease insurance is a security deposit replacement that completely eliminates deposits. On the other hand, security deposit alternatives are offered in addition to traditional deposits. Deposit alternatives include surety bonds, rent guarantees, deposit installment solutions, and credit authorization services.
Whereas lease insurance requires no applications or approvals, deposit alternatives such as surety bonds require extensive onsite training on “selling” the solution to renters, which creates friction in the leasing process — and results in low adoption rates. Lease insurance, however, offers native lease checkout integration which creates “zero touch” deployment. Because of this, lease insurance can drive over 90% adoption rates and functions as a true deposit replacement, eliminating the burdens associated with deposit administration and liability.
In addition to workflow differences, lease insurance and deposit alternatives differ in the protection they offer. Lease insurance provides enhanced, customized property protection while leading alternatives are generally designed to cover up to the cost of the deposit. This means operators are able to reduce bad debt significantly at each property with lease insurance.
Why Multifamily Is Replacing Security Deposits With Lease Insurance
Multifamily may be reluctant to embrace change, but the pandemic has shuffled the industry along in adopting new technologies, processes, and priorities to meet the demands of modern renters. Today’s renter experience should be easy, fast, and affordable.
On top of this, security deposit legislation has played a pivotal role in accelerating an industry movement away from security deposits. States have adopted deposit laws that require property managers to offer deposit alternatives in addition to traditional security deposits. In Pennsylvania, a proposed bill goes one step further in providing operators with complete deposit replacement solutions rather than just tightening deposit regulations.
Operators are also realizing that deposit alternatives like surety bonds don’t provide sufficient coverage. While they offer renter affordability, surety bonds may not provide reliable loss protection amid growing economic uncertainty. As Executive Vice President at Avenue5 Mark Stringer says, “Deposits are too expensive and surety bonds provide inadequate coverage, putting property owners at financial risk.”
The multifamily industry needs a sustainable software platform that future-proofs their communities by eliminating deposits for good. Deposit replacement solutions like the Zero Deposit Platform should be automated and deeply integrated within leasing checkout and property management systems, create an affordable leasing experience for renters, and generate NOI lift for the property. Lease insurance was designed from the ground up to accomplish this.
https://leaselock.com/wp-content/uploads/2024/03/what-is-apartment-lease-insurance.jpg544865Paul Cook/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2020-10-20 05:06:582024-03-20 08:08:57What Is Lease Insurance, And Why Do Apartment Operators Need It?
Percent of October 1st rent collected dropped 5 points MoM.
First-day rent payments dipped across all asset classes, each hitting post-COVID lows.
The House of Representatives approves $50 billion in emergency rental assistance.
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.
October 1st Rent Payments Dip—Emergency Rent Assistance Aims to Put Struggling Renters on Road to Recovery
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.
New Federal Stimulus Package Paired With Eviction Moratorium
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.
Slipping Rent Payments Across All Asset Classes Indicates Financial Strain Across Rental Communities
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 and Texas Rent Payments Drag Behind
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.
Multifamily Pleased With Emergency Rent Relief, Now Rallying For Longer-Term Solutions
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.
Methodology
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.
The pandemic has impacted multifamily in a range of ways, and all operators face a unique set of challenges. While the economic effects of the pandemic hit Class C residents notoriously hard, all asset classes have been affected by different market forces.
For example, Class A apartments have been especially hard-hit by renter movement away from dense urban centers, toward more affordable rental options. How are owners and operators adapting to rising vacancies and slumping rents at these Class A properties?
Class A Vacancy Grows as Renters Flee Urban Areas
According to a study by Marcus & Millichap, COVID has increased vacancy levels in Class A properties specifically, as residents flee higher-priced cities for more affordable options.
Vacancy rose to 5.7% amid Class A properties between the first and second quarter of 2020, propelled by renters seeking lower-cost housing. This vacancy comes after a swell of Class A units were recently added to the market in early 2020, which lead to even greater unit availability.
The average Class A rent also fell 1.5% in the second quarter, an even steeper drop than was seen across the average rental market. Dense, gentrified and high-priced areas like San Francisco, New York City, Chicago, Austin, Orlando, and Atlanta suffered the greatest cuts to rent growth.
How Operators are Driving New Leases Despite Class A Apartment Vacancies
In light of these challenges, operators are implementing creative solutions to get more renters in the door. According to a recently published Zillow Report, concessions have nearly doubled to combat a softening rental market.
The most popular concession is free weeks of rent, followed by reducing or eliminating security deposits. Other less popular options include offering gift cards, free parking, and waiving fees.
Balancing Concessions and Risk at Class A Properties
No question, concessions are a popular way to drive leads. Cutting one month’s rent or offering a $99 deposit feels like an enticing way to attract renters in a down economy — so operators are willing to absorb these costly concessions in the hopes they will be worth the boost in occupancy.
However, several owners and operators at Class A properties are also finding creative ways to offer an affordable move-in without exposing themselves to bad debt, or hurting their bottom line.
Prominent Greystar-managed owners eliminated costly security deposits for residents this year — without absorbing additional financial risk— by deploying LeaseLock’s Zero Deposit software platform.
After marketing their communities as Zero Deposit, these Class A properties saw a 5.3% increase in closing ratio, while increasing their protection against missed rent and damage with over $5,000 of coverage on 92% of new leases.
https://leaselock.com/wp-content/uploads/2024/03/Class-A-1.jpg533800Paul Cook/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2020-09-24 23:41:072024-03-20 08:08:45As Vacancies Rise, Class A Properties Seek a Competitive Edge
Percent of September 1st rent collected dropped 2 percentage points MoM.
Percent of renters who paid full rent on first-of-month hit a new post-COVID low.
First-day rent payments dipped across all asset classes.
On the heels of a federal eviction halt issued by the CDC, September 1st rent payments have slightly weakened. While President Trump implemented a reduced round of unemployment benefits in August, there remains no comprehensive rent assistance program to supplement renter and operator protections.
After a decline in August 1st rent payments following the conclusion of the $600 weekly unemployment bonus, the multifamily industry has continued lobbying for emergency rent relief, but to no avail. In response to the Trump Administration’s eviction ban, Robert Pinnegar, President and CEO of the National Apartment Association (NAA), made a pleading statement:
“The National Apartment Association (NAA) is deeply concerned by this action and given that it remains uncoupled with robust emergency rental assistance, we understand the devastating effects a national eviction moratorium will have on the apartment industry, housing affordability and America’s 40 million apartment residents.”
Half a year since the onset of the COVID-19 pandemic, we now assess how America’s renters are making September 1st rent payments.
September 1st Rent Payments Slip More As Jobless Benefits Lag
Signs of financial insecurity have become more prominent since June, and September has continued the downward trend. Overall, first-day September rent payments have dropped 2 percentage points since August, but remain 3 points above the pre-COVID average at 20%.
President Trump reduced and extended the unemployment stimulus in early August. The extension is likely to help prop up renters who have been hardest hit, but unemployed individuals weren’t expected to be cut checks until late August. While retroactive to August 1st, benefits may not be sent in some states until September or October (states have until September 10, 2020 to apply for FEMA approval).
It’s worth noting that first-day rent payers represent a reliable segment of renters who regularly pay on the first of the month. Since we first began tracking rent payment behavior in April, we’ve seen a pattern of first-of-month rent payments coming in at a higher percentage than throughout the grace period. On September 1st, however, the percent of renters who paid full rent has hit an all-time low post-COVID.
This further substantiates the need to implement a federal rent assistance program in order to support financially insecure renters and enable owners to meet financial obligations.
New Eviction Moratorium Comes Without Federal Stimulus Package, Leaving Apartment Industry Hanging
On the night of September 1st, the Trump Administration announced an unexpected eviction moratorium ordered by the CDC which prevents evictions for nonpayment of rent starting Friday, September 4th. With an expiration date of December 31st, the order protects renters with annual income levels at or below $99,000 or $198,00 for dual income households.
The order comes as a surprise to the rental housing industry. As such, the NAA delivered a statement:
“This action risks creating a cascade that will further harm the economy, amplify the housing affordability crisis and destroy the rental housing industry.”
In light of the news, search interest for “eviction moratorium” spiked again. With the rollercoaster of eviction legislation at the local, state, and federal levels, the latest ban adds to the confusion and further burdens the apartment industry.
In late August, 1 million unemployment claims were filed. The pace at which the unemployment picture is improving has slowed slightly, meaning emergency rent assistance programs across that nation have remained critical — although insufficient — to jobless renters.
Rent Payments Dip Across All Asset Classes, Highlighting Housing Affordability Crisis
Class A first-day rent payments experienced a 2 percentage point decrease from August, while Class B fell 1 percentage point — both sit a few points above the pre-COVID average, but indicate financial strain nonetheless.
The most vulnerable renter segment — Class C residents — showed a dip in rent payments, too. First-day rent payments at Class C properties slipped 1 percentage point from August, holding at the pre-COVID average. These numbers are expected to taper off through the grace period due to delayed and reduced weekly unemployment assistance, as well as the absence of comprehensive rent relief. This jeopardizes the affordable housing supply.
California and Texas Rent Payments Weaken
Renters in California continue struggling to make first-day rent payments in September, with the percent of renters who paid full rent falling 7 percentage points since last month. On the same day, Governor Newsom signed the COVID-19 Tenant Relief Act, which prohibits evictions for renters with legitimate pandemic-related hardships. Texas rent payments also dropped 7 percentage points month-over-month, holding only slightly above the average.
Even with a $10 million legal defense fund and a $100 million rent relief program, the percent of Los Angeles renters who paid full rent on September 1st dropped 4 points since August. Dallas also echoed Texas’s weakening rent payment behavior, seeing a 3 point drop after a strong performance last month. A new CARES Act short-term rent assistance program in Dallas is set to “open in the coming weeks,” meaning relief could be delayed.
Multifamily Concerned By Lack of Universal Rent Relief—September Grace Period Likely To Drop
While those unfamiliar with the multifamily industry may assume the eviction ban is good news, the National Multifamily Housing Council has expressed dissent. Doug Bibby, president of the NMHC, explained to the New York Times,
“Not only does an eviction moratorium not address renters’ real financial needs, a protracted eviction moratorium does nothing to address the financial pressures and obligations of rental property owners.”
And as unemployed renters across the nation await reduced benefits to be dispersed, it’s likely rent payment behavior will bear more and more uncertainty in the months to come. That’s why it is crucial that multifamily lobbies for a universal rent assistance package to prevent a rental housing collapse.
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 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.
https://leaselock.com/wp-content/uploads/2024/03/September-1st-Rent-Payments-hero-image.jpg533800Paul Cook/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2020-09-02 23:48:592024-03-20 08:08:36Sept 1st Rent Payments Dip After CDC Announces Eviction Halt — Still No Federal Rent Relief
In the multifamily world, search trends have been useful in understanding what renters want when it comes to amenities, geographical location, pricing, among other factors. As the pandemic reshapes life as we know it, search trends indicate how renters’ expectations are changing. The market is shifting — renters want modern experiences that make life easy, fast, affordable and transparent.
What can operators take away from current search trends, and how can they leverage these learnings to improve their leasing strategy?
Online Search Behavior During COVID Reveals Renter Preferences
Online search behavior has always had the benefit of offering insight into the minds of consumers (think: current events, product interest, lifestyle preferences, etc.), and the pandemic has given rise to entirely new search trends that reveal what people care about most: convenience, affordability, and simplicity.
Exploring search trends through the lens of today’s renters gives operators a unique opportunity to help attract and retain more residents at their apartment communities.
Below is a summary of 5 top search trends during COVID:
Apartment Hunting & Virtual Tours – Leasing season might have hit a lull, but apartment searches resurged in the summer with heightened demand for virtual tours.
Work-From-Home – Remote work operations took over following lockdowns, while recent interest in coworking spaces suggest renters value this amenity.
Rent Payments & Financial Relief – Interest in ability to pay rent and the means by which to pay it has grown more prominent.
Eviction Legislation – Concerns about the patchwork of eviction moratoriums and differing timelines remain high amid uncertainty.
Affordable Housing – Evidence of less financial stability has shown through a variety of searches around more affordable living options.
5 COVID Search Trends: What Search Interest Says About Renter Priorities
1. Apartment Hunting Is on the Rise, With More Demand for Virtual Tours
General apartment search terms saw interest pick up right before COVID hit. After a steep drop during lockdowns, interest recovered and peaked in summer. This aligns with the delayed peak leasing season, proving apartment demand has returned to normal levels.
Interest in studio apartments also dropped when COVID struck. As many renters grew worried about economic collapse, the demand for more affordable apartments and alternative living options — in this case, studios — likely became a growing necessity. Interest in studios has remained highest during the summer months, while leasing season is in full swing.
Demand for virtual tour offerings has also increased. With strict social distancing measures, renters rely more heavily on technology enabling them to take online apartment tours. Thus, searches for “virtual apartment tour,” “3D apartment tour,” and “3D virtual tour” have gained significantly more interest.
2. More Employees Transition to Work-From-Home
The pandemic forced millions of Americans to work from home — or from anywhere for that matter. Many companies switched to remote operations, and search trends reflect this movement. The boost in remote work searches suggests many renters will be working from home, setting up home offices, and in their apartments more often in general.
While searches for “coworking space” declined after COVID hit, interest has bounced back, indicating that renters are pursuing coworking setups at apartment communities. As companies go fully remote, employees may want to balance work-from-home routines with coworking space availability. Therefore, operators should consider offering coworking spaces as an amenity and adapt marketing language for second bedrooms or small rooms to mention “home office space.”
3. Rent Payments & Financial Relief Become Top Concerns
When millions of Americans lost their jobs due to COVID, an economic crisis unfolded almost overnight. The nearly 8 in 10 Americans who were already living paycheck to paycheck pre-COVID were suddenly under significantly more financial strain. We have been closely tracking monthly rent payments to better inform operators how renters are faring during the recession.
Search interest in “rent payments” skyrocketed 525% the same week that the US shut down. While interest has since dropped, theres’s a growing concern of renters being able to afford rent, especially in the wake of uncertainty around newly extended unemployment benefits.
This is why interest in benefits-related terms spiked immensely as the $600 weekly bonus came to an end. Searches continued to rise after President Trump extended the unemployment benefits, indicating that the supplement remains critical.
Renters have also been actively searching for alternative methods by which to pay rent as their own sources of income grow less certain. Across the US, local and state governments have implemented a patchwork of emergency rent assistance funds, but to-date, no broad-scale federal rent relief bill has been passed.
By and large, Class C residents have been hardest hit during the recession. With the conclusion of $600 weekly unemployment benefits in July and President Trump’s partial extension in August, search queries on benefits have risen, meaning it’s top-of-mind for recipients. As renters fall under more severe financial distress, it’s important that operators work with residents in need by devising alternative payment plans.
4. Eviction Legislation Dominates the Headlines
Evictions have been a topic of debate, with local and state jurisdictions implementing various new eviction laws plus a federal eviction moratorium that adds to the confusion. As a result, searches on eviction-related terms have seen an uptick during COVID. While operators, legislators, and the general public have contributed to the rising search interest, there’s no doubt that renters have been invested in understanding the varying eviction legislation. To fully address fears about evictions and protect renters, the multifamily industry must advocate for comprehensive rent relief.
5. Affordability Gains Ground in Apartment Rental Searches
The affordable housing crisis has been exacerbated by the pandemic, and searches for cheaper apartment options demonstrate this. Since March, there has been an increase of up to 130%+ in affordable apartment searches. Peak leasing season may have resumed, but renters on the market are even more money-conscious.
We see this trend with search modifiers in which a user searches for apartments at a specific price point. For example, renters are performing more refined searches for apartments under $800, $900, and $1,000 — all of which have steadily climbed since the onset of COVID. This means renters are apartment hunting with affordability in mind.
Operators Need to Respond To Changing Renter Preferences
What do these search trends say about what renters want?
While lockdowns and public health concerns prevented renters from apartment hunting as they normally would during prime leasing season, renters are now on the move, although their priorities have shifted in favor of convenience and affordability.
Working from home has become the norm for many, making rent payments has proven to be difficult for those financially impacted, eviction legislation continues to threaten renters, and the need for cheaper apartment options has grown more pressing. Operators need to address the modern renter’s mindset in a COVID world by prioritizing convenience and affordability.
Download our Peak Leasing Playbook for more insights on how to modify your leasing strategy as renter preferences evolve — click here.
https://leaselock.com/wp-content/uploads/2024/03/what-do-renters-want-covid-search-trends-feature-image-scaled-7.jpg17052560Paul Cook/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2020-08-12 00:26:162024-03-20 08:08:09What Do Renters Want? Hint: Don’t Be Blockbuster, Be Netflix
August 1st rent payments are slightly above the pre-COVID average.
Percent of renters who paid full rent has hit a new post-COVID low for first-of-month.
Class C rent payments saw a healthy boost after a shaky start in July.
Negotiations about the extension of federal unemployment benefits have dominated the headlines lately, as the ability to afford rent for millions of Americans hinges on the decision. After the $600 weekly bonus came to a halt at the close of July, it’s time to analyze how it’s affected August 1st rent payments.
In July, concerns grew more serious about renters being able to afford rent as signs of financial insecurity began to deepen. The multifamily industry has also been focused on the potential “eviction tsunami” after the federal eviction moratorium expired, enhanced unemployment assistance ran out, and rent payments began to slip — especially among Class C residents.
With talks of an extension for the boosted benefits at an impasse, how are renters upholding their rent obligations on August 1st?
Last Round of Benefits Provide Stimulus for August 1st Rent Payments
Overall, first-day August rent payment behavior has held relatively stable, but signs of financial desperation are emerging.
While July 1st rent payments remained steady amid growing economic uncertainty and a resurgent pandemic, August 1st rent payments have held 1 percentage point above the pre-COVID average at 19%. This is encouraging considering federal unemployment benefits ran out at the close of July, however, it’s likely that the final round of benefits have helped many residents afford August rent.
Without the extension of bonus funds, the ability to pay rent will probably weaken through the August grace period. This negative movement will persist through the month, emphasizing the increasingly dire situation if Congress fails to approve additional assistance.
In previous months, we’ve observed a pattern of first-of-month rent payments coming in relatively high, but then tapering off through the grace period. On August 1st, we’re seeing that the percent of renters who paid full rent on the first is much lower than the previous post-COVID months. This could be due to August 1st landing on a weekend, but also points to obvious strain among many jobless or financially insecure renters.
Federal Stimulus Package Remains up in the Air, Putting Many Renters in Jeopardy
Pending the final decision on whether to extend federal unemployment relief as well as how to structure the stimulus, search trends demonstrate mounting fears among the unemployed who have lost access to direct financial assistance.
Interest in “rent assistance” has seen a steady increase over the course of the pandemic, reaching its peak shortly before sunsetting in the end of July.
This trend is also apparent for the search term “benefits extension,” in which interest reached it’s all-time high the same week that the bonus lapsed. From the initial spike post-COVID, interest has surged more than 230% since, again stressing the need for Congress to agree on a new relief bill to support those who have lost their jobs.
While the unemployment picture seemed to be improving back in June, over one million jobless claims were filed for the 19th consecutive week in mid-July, with 50 million total out of the workforce. To cushion the fall for struggling renters, local and state governments established emergency rent assistance programs, many of which have dried up.
Class C Rent Payments See Slight Recovery
Class C residents are considered to be most vulnerable to job loss during a recession, and the lack of unemployment assistance only further strains their financial security. In the month of July, Class C renters showed signs of financial distress.
This month, Class C properties saw a 1 percentage point increase in first-of-month rent payments since July. Class C rent payments now sit 2 percentage points higher than the pre-COVID average. These numbers will taper off after the first, however, as more residents reckon with reduced unemployment benefits.
Class B properties, on the other hand, have tapered off each month since May, while Class A rent payments have unsurprisingly held strong.
California Slips More as Texas Holds Steady
In California, rent payments continue to weaken, although they’ve dropped only 1 percentage point below the average. Nonetheless, the percentage of rent collected in California reached its lowest, which may be partially due to strict social distancing measures and business shutdowns. Texas is still in recovery mode with rent payments dipping 1 percentage point below last month, but holding slightly above the average.
In Los Angeles specifically, somewhat delayed rent relief efforts have magnified the affordability crisis, despite providing the nation’s largest relief program. Dallas reflects state-level data, showing slight signs of recovery after a 5 percentage point drop last month. This could be due in part to a Dallas County assistance program that was reinstated for a limited time before the conclusion of boosted unemployment funds.
Pending Federal Benefits Extension, August Grace Period Remains Uncertain
There’s no question — with the stalling of unemployment benefits and no final say on the extension, renters will struggle to pay rent. If the HEALS Act does pass and weekly benefits are reduced to $200, it remains to be seen whether the stimulus will be sufficient for renters to prioritize paying rent.
Regardless, the rental housing industry needs to continue advocating for rent relief in order to protect their residents. This means pushing for more comprehensive measures to avoid a potential ‘domino effect’ that would be catastrophic for both renters and multifamily owners.
Check back soon for our rent payment analysis on the August grace period (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 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 (36%), class B (55%) class C (9%).
All data has been anonymized to remove personally identifiable information for renters and property managers.
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Deposit alternatives that are marketed as “security deposit insurance” leave operators exposed to substantial risk. In many cases, these “insurance products” are actually surety bonds which can create confusion and frustration when the bond company collects on renters after move-out.
In addition to creating administrative headaches, security deposits also have the potential to damage the resident experience. Between sticker shock at move-in and disputes at move-out, this creates a 
It’s no surprise that the renter population most vulnerable to economic strife continues to struggle paying rent. 
While first-of-the-month payers are normally consistent in paying rent on the first each month, it’s possible that many skipped making payment over the weekend and instead waited until the week. Even so, several other factors may have contributed to the lag in first day rent payments, including heightened political stress.
Compared to security deposits and deposit alternatives like surety bonds, lease insurance offers 3x more protection on average against rent loss and damages. This shields apartment communities from economic uncertainty. As President at RKW Residential Marcie Williams points out, “Replacing security deposits with lease insurance enables us to protect our assets in an uncertain economy.”
Managing director of asset management at Trinsic Sheri Thomas notes, “We pride ourselves on being an innovative apartment company that provides the highest level of convenience for our residents. Replacing the security deposit cost barrier with lease insurance delivers a frictionless and automated leasing process.”
When renters don’t have to worry about security deposit deductions or repaying bonding companies (who may run collections on unpaid expenses), they’re more likely to write positive reviews. These reviews often emphasize the affordability of a zero-deposit move-in, as well as the ease of the move-out experience.
Operators are also realizing that deposit alternatives like surety bonds don’t provide sufficient coverage. While they offer renter affordability, 
