As the COVID-19 pandemic continues to wreak havoc on the U.S. economy, apartment operators are paying attention now more than ever to rent payment behavior trends. We’re reporting on May rent payment behavior to provide a clearer picture of how COVID is affecting renters’ ability to pay rent. Below is a brief summary of key takeaways.
May Rent Payments Hold Surprisingly Steady But Renters Face Ongoing Financial Challenges
Overall, full rent payments made on May 1 showed stronger results than anticipated. This is likely due to residents accessing funding sources and prioritizing paying rent, as operators work hard to create payment plans.
That said, the total percent of rent collected during the May grace period was 6 percentage points down from the pre-COVID three month trailing average, compared to a 7 percentage point decline in April.
Class C properties have seen the most notable drop in rent payments, while metro areas including Atlanta and Dallas also experienced a decrease. Evidence of payment plans deepened across Seattle and Los Angeles, proving that apartment operators are still working to provide renter relief in areas that need it most. Despite concerted efforts to support renters, there’s still a critical need for state and federally-funded rental assistance programs.
Our full COVID-19 Rent Payment Report uncovers insights on:
In April the apartment industry moved quickly in response to COVID-19, as shelter-at-home laws, eviction moratoriums, and rising unemployment rates became a new reality. Although rent payments trended downward in April, rent payment behavior didn’t decline as much as expected. Today, all eyes have turned to May, to determine whether rent payments will be harder hit as the economic effects of the pandemic set in.
Data Indicates Renters Still Prioritizing Rental Housing Payments
Who paid May 1st rent? So far, May seems to be on a similar rent payment trajectory to April, including a slight bump in first-of-the-month payments — roughly 4% more total rent was collected on the first day of May compared to the trailing three month average. This suggests that as federal relief and unemployment checks roll in, Americans are prioritizing rent payments first.
In this analysis we will dive into May payment behavior starting with first day payments, as well as interesting patterns leading up to it. This includes a regional analysis of metros highly affected by the pandemic, as well as differences by asset class.
April Rent Payments Showed Slight Uptick Leading Into May
Although total April rent payments collected were down 7% compared to the trailing three month average, first day April payments actually showed a slight increase. As explored in our April Rent Payment Report, this slight uptick was likely due to a mix of reliable rent payers (many of whom are enrolled in auto-pay programs) and apartment operators incentivizing residents to make rent on time and offering renter relief programs such as payment plans.
At the end of the month of April, we saw another slight bump in rent payments, as renters moved to get rent paid before month’s end. This could be partially attributed to Americans starting to receive their federal relief checks, unemployment benefits, and state-funded rent assistance. But who paid May 1st rent?
Similar to April, May Saw An Uptick in First Day Rent Payments
As seen in April above, we also saw a slight increase in full May 1st rent payments compared to the pre-COVID three month trailing average (January, February and March).
This surge represents reliable first-of-the-month rent payers and is bolstered by efforts of apartment operators to encourage early rent payments. Operators have had a month now to solidify communication with residents, refine their rent relief programs, and incentivize renters to pay on time. Both residents and apartment operators are paying very close attention to rent payments in May – and it appears those who can pay, are doing so on the first of the month.
This slight bump in first-of-the-month payments holds true across select cities in May. However, hard-hit metro areas such as Seattle and Los Angeles also show an ever-increasing move towards partial payments, suggesting acceleration toward resident payment plans and other alternative payment arrangements.
Seattle and Los Angeles Show Accelerated Partial Rent Payment Trend
As the economic impact continues to be felt across the U.S., we’re observing more April partial payments. Overall, major metro areas are seeing a continued move toward partial payments, with the percentage of total rent paid on May 1 declining month-over-month in Seattle, Los Angeles, and Atlanta since March 1.
While 22% of Seattle renters paid rent in full on the first day of May, the total first day collected rents of all partial payments compared to rent owed for that cohort were lower compared to April. Seattle partial rent payers paid only 29% of total rent owed in May compared to 34% in April and 62% back in January.
The percentage of renters who made some form of payment (over $100) on the first day of May has seen an increase month-over-month. Seattle in particular has had a notable increase in renters making partial payments, with Los Angeles and Atlanta holding at similar rates compared to previous months.
This likely means that despite growing financial uncertainty, renters are prioritizing paying their rent through some form of payment, and that property managers are working hard to accommodate residents experiencing financial hardship. The increase in overall payments is a likely indicator that apartment operators are supporting renters whether by devising payment plans, accepting partial payments, or offering other rent relief solutions.
First Day May Rent Payments Remain Strong for Asset Class A and B Properties
As seen nationwide, Class A and B properties saw a slight spike in full rent payments on the first of the month in both April and May compared to previous months.
Meanwhile full rent payments at Class C properties on the first of the month experienced a slight 1% drop in May. This may be because Class C residents are more likely to be financially impacted by the pandemic with a higher proportion of residents employed in service economy jobs that were hardest hit, and therefore less able to make rent payments early in the month. This could also suggest that Class C properties will struggle more in collecting total rent payments owed in May – but this will become clearer as the month goes on.
What does this mean for May rent payments? As we saw in April, first day rent payments had a slight surge thanks to reliable rent payers and ongoing efforts by apartment operators to support residents in making their payments.
However, just as with April, May is likely to see a decline in total collected rent payments as the rent grace period wears on. April showed a 7% decrease in total rent collected overall compared to the trailing average, and May might see a similar decline.
That being said, the data also shows several promising signs:
After the tally of first day payments, May is not showing an accelerated decline in rent payments compared to April, as some analysts feared.
The stability of first day payment behavior in May shows residents are locating funding sources and prioritizing paying their housing financial obligations possibly over other bills.
The increased move towards partial payments in metro areas such as Seattle, Los Angeles, and Atlanta suggest that operators and residents are developing payment plans together, and properties are supporting their residents in paying what they can, when they can.
Stay tuned for our next rent payment analysis coming out on May 6th, after the grace period ends (traditionally the first five days of the month).
Important statistical note: Despite the measured payment fluctuations based on the sample set, the variance is within normal statistical range. In other words, the changes are not necessarily significant enough to attribute specifically to COVID-19 versus normal fluctuations expected across the data set. Please reference full Methodology below.
Methodology
Rent payment data is actual transactional data sourced from integrations with property management systems in the multifamily industry.
Analysis includes a 96,268 unit sample from 1,029,428 live units under management by LeaseLock clients. Data is nationwide, representing over half of the NMHC Top 10 property managers in the country and all asset classes (A, B and C). Asset class composition: class A (36%), class B (55%) class C (9%).
All data has been anonymized to remove personally identifiable information for renters and property managers.
https://leaselock.com/wp-content/uploads/2024/03/may-1st-rent-payments.jpg533800Paul Cookhttps://leaselock.com/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2020-04-29 21:20:462024-03-20 07:58:01May 1st Rent: First Day Payments Hold Surprisingly Steady
Security deposits have long been the bane of renters and apartment operators alike, and a recently proposed Pennsylvania bill has taken a giant step towards eliminating them entirely.
What Does New Pennsylvania Security Deposit Legislation Mean for Operators?
Building off the recent Cincinnati Renter’s Choice Law, which requires landlords to offer deposit alternatives, a new Pennsylvania bill goes further to lay the groundwork for total deposit replacement.
In light of mounting renter affordability concerns in the face of COVID-19, this foreshadows a flood of deposit replacement laws to come. Here’s what this bill means for multifamily operators and their residents, and how it compares to other deposit regulations we’re seeing sweep across the country.
The Rising Tide of Deposit Laws
Legislators have been tightening the law around security deposits for years now. There are two forms of laws governing security deposits:
Deposit restrictions: These laws involve tightening caps on deposit amounts, requiring deposit installment plans, and regulating how quickly deposit funds must be returned.
Deposit replacement: These laws seek to replace security deposits with new solutions, such as lease insurance. Cincinnati began this movement by mandating deposit alternatives. However more recent legislation, such as the Pennsylvania bill, shows a growing movement toward replacing security deposits entirely.
While deposit restrictions have escalated for years, more recent deposit replacement laws signal a future where residents, operators, and property owners all benefit from a wholesale move away from deposits completely.
What Operators Need to Know About the Pennsylvania Bill
Similar to the Cincinnati law that recently went into effect, if an apartment operator requires a security deposit, a deposit alternative or payment plan must be offered as well. However, this bill also gives operators the choice to eliminate security deposits entirely through lease insurance.
Choices include:
Deposit installment plans: The resident can pay the security deposit over the course of three months, at minimum.
Lease insurance: Operators may offer lease insurance, which effectively eliminates security deposits entirely and insures the property on every new lease (although residents may still elect for a deposit). Unlike a deposit or surety bond, the typical lease is protected with over $5,000 coverage for rent loss and damage. Because the property is the insured party (not the resident), regulatory burdens are eliminated for operators at the site level.
Surety bonds: Residents may bring their own deposit alternative, the primary example being a bond in which the renter is party to the insurance contract. With a surety bond, the renter pays a non-refundable percentage of the bond amount at move-in, which goes into a claims fund (where losses are managed at the property or carrier level). Bonds typically cover up to the amount of the deposit. With the renter party to the insurance contract, operators must manage additional consumer regulatory requirements related to insurance.
Additional requirements:
Security Deposit: For security deposits and installment plans, properties cannot collect more than two months’ rent upfront, which must then be held in escrow. The property is required to return remaining funds (and any interest acquired in escrow) to the resident within 30 days.
Lease Insurance: There are no such additional requirements for lease insurance, as no deposit is collected and the property is the insured party.
Surety Bond: Resident-sourced insurance products (such as surety bonds) create additional administrative requirements for apartment operators. Upon move-out, property managers must provide residents with:
A copy of any claim filed
Statements of the claims status
How This Bill Differs from Other Security Deposit Regulations
Both lawmakers and the multifamily industry have spent years putting band-aids on the broken security deposit system.
Cities like Seattle, Portland, and Chicago have aimed to treat symptoms of the problem by passing tighter restrictions on security deposits, requiring installment plans and lowering security deposits caps.
The Cincinnati Renters Choice law, as suggested by its namesake, was focused on giving renters choices. While inching closer to the goal line, the Cincinnati law fell a bit short of eradicating security deposits at-large.
Why Pennsylvania Bill Marks Growing Movement Towards Deposit Replacement
The next phase of legislation we see in Pennsylvania is now moving closer toward treating the root problem (rather than just the symptoms) by laying the groundwork to eliminate deposits entirely.
Renter affordability was already top-of-mind for lawmakers prior to COVID-19, and will undoubtedly accelerate this movement as the economic impact of the crisis ripples across the country.
The new Pennsylvania security deposit legislation shows lawmakers are paying attention and continuing to evolve legislation toward full replacement of security deposits as a financial instrument in rental housing. There is agreement among residents, operators, and owners that deposits need to go. Recent legislation suggests that deposits may be headed toward extinction faster than we all thought.
https://leaselock.com/wp-content/uploads/2024/03/Pennsylvania-Bill-Major-Leap-Towards-Eliminating-Deposits-Feature-Image.jpg533800Paul Cookhttps://leaselock.com/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2020-04-21 18:22:432024-03-20 07:58:08Breaking News: Proposed Pennsylvania Bill Makes Major Leap Towards Eliminating Deposits
Important statistical note: Despite the measured payment decline based on the sample set, the variance is within normal statistical range. In other words, the decline is not significant enough to attribute specifically to COVID-19 versus normal fluctuations expected across the data set. Please reference full methodology in footnote.
Now that we’re halfway through the month, we’ve decided to take a mid-month look at rent payment behavior from April 1-15 to evaluate any shifts since publishing our Rent Payment Report. Nationwide, we see a 7% decrease in total rent collected in April compared to the average month, a trend which has continued as rent payments trickle in. Drilling down, we see a growing movement towards partial payments in major metros like Los Angeles, Seattle, and Atlanta.
Mid-April Rent Payments Continue Downward Trend
After a brief spike in payments on the first of the month, full rent payments have continued tracking roughly below average in April. Interestingly, on April 6-8th, the days immediately following the traditional grace period, the percent of renters who made full rent payments stayed mostly the same — if not marginally higher — than average. This minor boost could have been due to grace period extensions, or because April 5 fell on a Sunday and leasing offices were unable to process checks until April 6.
As the month trailed on, however, rent payments fell again. Despite federal stimulus checks being sent to qualified Americans over the past several days, April full rent payments are holding below average, and this trend appears to be continuing on a slight downward trajectory moving into May.
Mid-April Rent Payments Continue Downturn In Most Metro Areas
When we look at locational trends, we see that the drop in full rent payments in Los Angeles remains significant, as found in our earlier analysis. Atlanta and Detroit still show dips in April full rent payments as well, while Seattle actually saw a slight increase—but as we’ll dive into below, the amount paid by partial rent payers has dropped significantly in the Seattle area.
The number of renters who made some form of rent payment dropped in both Los Angeles, Atlanta, and Detroit. Denver held steady, while Seattle showed a slight increase in the percent of renters making April rent payments, as noted above.
Cities like Seattle and Los Angeles Show Movement Toward Payment Plans
However, as we found in our early April reporting, the total percentage of owed rent paid by partial payers declined dramatically in Seattle. So, although Seattle renters made more overall rent payments in April, the portion of total rent paid by partial rent payers dwindled substantially. This could be due in part to operators working in advance to offer payment plans in Seattle, which was hit early on by the crisis. This rent payment gap effect also increased in Atlanta over the last several days.
It’s likely that the growing movement towards partial payments is due to operators proactively adopting payment plans, especially in metro areas like Atlanta, Los Angeles, and Seattle.
City Ordinances Could Have Impact On Partial Rent Payments
The steep decline in the amount of owed rent paid in Atlanta could be related to a new Atlanta Housing ordinance introduced on April 7, which offers rent reductions for residents financially impacted by COVID-19. While the rent relief effort is designed to pay rent directly to property owners or management companies, approved requests can take as many as 15 days to be paid out by Atlanta Housing authorities—meaning there could be a lag between processing applications, approving renter requests, and submitting direct payments to owners. Los Angeles passed a similar ordinance on April 14, which may explain the move towards partial payments seen in that metro area as well.
As we near May, we will continue to track rent payment behavior and publish our findings to help operators understand important trends during the COVID-19 crisis. Stay tuned!
Methodology
Rent payment data is actual transactional data sourced from direct integrations with property management systems in the multifamily industry.
Analysis includes a 96,268 unit sample from 1,029,428 live units under management by LeaseLock clients. Data is nationwide, representing over half of the NMHC Top 10 property managers in the country and all asset classes (A, B and C). Asset class composition: class A (36%), class B (55%) class C (9%).
All data has been anonymized to remove personally identifiable information for renters and property managers.
https://leaselock.com/wp-content/uploads/2024/03/april-rent-payments-mid-month.jpg533800Paul Cookhttps://leaselock.com/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2020-04-16 18:22:592024-03-20 07:58:10Mid-Month Update: April Rent Payments Trickling In Below Pace – But Better Than Expected
As the world continues to combat the spread of COVID-19, non-essential businesses are being forced to shut down and civilians are being ordered to shelter-in-place across the US. Inevitably, the unemployment rate has sky-rocketed, leaving many renters, legislators, and multifamily operators worried about rent.
President of the National Multifamily Housing Council, Doug Bibby, recently wrote an opinion piece making a plea for renters to be accountable and make their payments to prevent a potential housing catastrophe.
According to National Apartment Association President and CEO, Robert Pinnegar, “To minimize the damage, NAA is urging those of our nation’s 40 million renters who’ve been financially unaffected by COVID-19 to make their rent payments in full and on time. Paying rent ultimately keeps people in their homes by ensuring housing providers can meet their own financial obligations and keep the entire apartment community afloat in these troubling times.”
In Response to Downward Trend in April Rent Payments, Operators Work to Provide COVID-19 Rent Relief
We’ve tracked April rent payment data closely, and observed a nationwide decrease in full rent payments in April compared to the average, along with growing movement towards partial payments and deferred payment plans. Many apartment operators are working hard to support renters in making their payments, and devising creative solutions to keep reliable residents in place.
How are top operators ensuring those financially impacted by COVID-19 will receive the necessary rent relief? And how are they providing that rental support to better safeguard their entire community?
How the Rental Housing Industry Has Responded to the COVID-19 Crisis
Operators have spent the last several weeks preparing for the sudden hardship that their communities now face. Across social media, email, discussion forums, and the press, we’re seeing an overwhelming response from property management companies, apartment associations, state governments, and many other rental housing organizations to assemble and circulate COVID-19 resident support resources.
We’ve rounded up key COVID-19 rent relief programs being implemented by several of the NMHC Top 50 apartment managers, as well as organizations such as the NMHC and NAA.
As recommended by the NMHC, implementing customized payment plans has been a popular strategy among top apartment firms. NAA has also released a set of best practices on rent collection amid COVID-19, including templated forms for a payment plan agreement and notice of temporary waiver of late fees.
Lincoln Property Management, for example, mentioned in a letter to its residents that rent relief efforts included payment plan options and other policies designed to alleviate financial burdens for those affected.
Irvine Company is enabling renters to defer 50% of their April and May rent payments over a six month period, interest-free. All they have to do is “request rent assist” to create a new payment schedule. In addition, Irvine Company froze rents and renewal increases through June 1, 2020, is offering short-term lease extensions, and temporarily halted all eviction activity through June 1, 2020.
Equity Residentialhalted evictions for 90 days for those who can document that they’ve been financially harmed by the COVID-19 crisis, and is offering lease renewals with no rent increases over the next three months as well as payment plans to help those in need of assistance.
Essex is another operator that allows renters to fill out a request form if they have a COVID-19 related financial hardship that inhibits their ability to pay rent.
RAM Partners made a statement asking those experiencing financial hardship to reach out to their community manager to discuss options.
AvalonBay outlined new options to help renters through financial hardship, including account credits, flexible transfers without penalty, and payment plan options.
The Bainbridge Companies has contacted all their residents to discuss alternative payment plans and is waiving late fees for those who experienced financial loss as a result of COVID-19, and has paused rent increases. They have also shared valuable resources for residents seeking assistance.
Bridge Investment Group has developed a COVID-19 Financial Hardship Assistance Program in which residents can work with their property’s staff to develop a rent payment plan that will permit a deferral of a portion of April and/or May rent with payment due over the remainder of their lease term. Bridge will also not pursue eviction filings for the non-payment of rent during the pandemic.
Unique Rental Assistance Initiatives
Village Green has implemented its Exclusive Frontline Program which grants move-in discounts for renters who are members of the essential workforce. By waiving move-in fees and deposits for those working on the frontline, Village Green is proactive in supporting the essential workforce.
In a charitable move, Camden Property Trust established a $5 million Resident Relief Fund for COVID-19 Pandemic under which residents who can show COVID-19 related income losses are eligible for up to $2,000 per household. The fund intends to provide financial assistance for living expenses like food, utilities, medical expenses, childcare, insurance, or transportation.
Federal/State/Local Community & Financial Resources for COVID-19 Rent Relief
Many apartment firms have been diligently providing residents with information on government resources regarding direct payments, unemployment benefits, and food banks. They’ve also provided community and financial resources including mental health help, small business loans, children programs, job opportunities, internet access, insurance options, work-from-home tools, and more.
Alliance Residential created a hub for federal, state, and local resources including government relief programs and COVID-19 resident resources. FPI Management also has a list of government resources specifically addressing wage replacement.
BH Management Services created a COVID-19 Resource Page with links to unemployment materials, economic impact payment information, coronavirus information by state, and links to local (Florida) resources.
In Equity Residential’s dedicated blog post, the firm outlines various community non-profits and financial resources offered by the state and federal government, including links to financial assistance programs and unemployment benefits information.
Pegasus Residential created a one-sheet detailing how the government can help those concerned about rent. It outlines information on direct payments and enhanced unemployment benefits.
JMG Realty put together a Resident Resource List linking to different non-profit organizations, as well as a directory of relevant CDC information.
General COVID-19 Resident Resources
WinnCompanies has a website popup informing residents that they can type in their zip code to perform a localized search for COVID-19 related resources. This quickly narrows down resources based on a renter’s geographical location.
Bridge Investment Group said in its COVID-19 Update that they’re monitoring resources available to impacted renters by maintaining a list for each of the states they operate in.
On top of building an extensive hub for Coronavirus Resources for Apartment Firms, the NMHC has rallied industry support around its COVID-19 Rental Relief campaign. In the NMHC resource center, operators can find helpful templates for communicating with residents regarding rent flexibility, federal assistance, and rent obligations.
The NMHC also released a document that aims to help residents understand the newly passed federal resources available to help them meet their financial obligations (and it can be customized by apartment operators).
Calls for Congressional Action
Both the NMHC and NAA have been proactive in fighting to protect both renters and apartment operators. In their March 13th letter to the House and Senate, they called upon lawmakers to provide direct financial assistance to renters.
Nearly a month later, the two organizations sent another letter to Congress regarding COVID-19 Relief Phase 4 which called out the need for additional relief and stimulus legislation, including help for rental housing providers, housing professionals, and residents. The NMHC is urging people to tell Congress that COVID-19 rent relief for the housing industry and residents is essential.The NAA’s positioning statement echoes this sentiment, and is encouraging others to contact their Member of Congress and demand Congress protect apartment communities.
Congress is also considering a $100 billion rental assistance fund to support renters in making their payments, which would also ensure owners can continue paying their mortgages. We will continue to monitor this bill and provide updates as we learn more. The more resources we share in times of uncertainty, the better off all our communities will be.
One thing is certain: the more information we share in challenging times, the better off all of our communities will be. “One of the really powerful things we’re witnessing is the way the industry is coming together,” says Dana Caudell, President of Property Management at The Bainbridge Companies. “It’s not about competition right now, it’s about how we can best help our residents and operate our businesses in these uncertain times – and if someone has a great idea or resource, we’re going to share it.”
Our April Rent Payment Report aims to inform apartment operators and the wider multifamily industry about important rent behavior trends during the COVID-19 crisis. Read below for a brief summary of key findings.
April Rent Payment Report Shows Fewer Full Payments, More Partial Payments
While full rent payments made on April 1 returned better-than-expected results, we observed a 5% decline in full rent payments over the trailing five day grace period. Partial rent payments showed 6% growth across all markets, while major metro areas like Seattle and Los Angeles saw measurable decreases in total rent paid at -10% and -9%, respectively.
The COVID-19 public health emergency appears to be the driving force behind a nationwide movement towards partial rent payments, as operators deploy deferred rent payment plans to residents and waive resident fees.
Our full COVID-19 Rent Payment Report provides insights on:
Changes in rent payment behavior for the month of April
Important statistical note: Despite the measured payment decline based on the sample set, the variance is within normal statistical range. In other words, the decline is not significant enough to attribute specifically to COVID-19 versus normal fluctuations expected across the data set. Please reference full methodology in footnote.
As we move towards the end of the 5-day rent payment grace period, the data trend suggests that fewer American renters will make April rent payments on time compared to previous months. This downward trend first observed in cities like Seattle is starting to reveal itself in other major metro areas such as Los Angeles – as we’ll explore below.
Although the first day of the month (April 1) saw a slight uptick in rent payments — a mix of both reliable full-payment renters and good faith partial-payment renters — the trend has since moved downwards.
By the second day of the month (April 2), there was a slight decrease in full rent payers (-1.17%) when compared to the same period in January through March. By the third day (April 3), the percent of renters who made full payments over the first three days of the month (April 1-3) dropped by 5%.
The percent of renters who made partial payments dropped even lower over the same period in April — by 7.5%. While it’s still too early to conclude the number of renters who will default in April, the data suggests a continued downward trajectory moving into Monday, April 6, when the grace period ends.
A range of major US cities are seeing a similar downturn, with Los Angeles in particular seeing a steeper than average drop in April rent payments thus far.
Los Angeles was one of the early leaders in implementing a “shelter in place” order, beginning March 19 — nearly a week before most major metros. The percentage of renters who paid full rent on the first 3 days of April compared to the same period in March dropped by 8%, while the percentage of renters paying partial rent dropped by 10%. This decline in rent payments in a single month may be due in part to the early shelter-in-place measure, along with the eviction moratorium passed on March 23rd.
Beyond our measured data set, senior executives across the multifamily industry are self-reporting to LeaseLock better-than-expected payment trends across many US markets for April rents. Executives continue to communicate a spirit of preserving occupancy once eviction moratoriums are lifted, and we are measuring that in the data through observation of more partial payments (suggesting deferred payment plans are being deployed, among other resident support programs, aimed at helping residents impacted by COVID-19 retain occupancy).
We will be taking another look at rent payment behavior after the grace period ends, and will release the full Rent Payment Reporton April 7th. To get regular rent payment data updates, subscribe to our COVID-19 Rent Loss Alerts if you haven’t already.
Methodology
Rent payment data is actual transactional data sourced from direct integrations with property management systems in the multifamily industry.
Analysis includes a 96,268 unit sample from 1,029,428 live units under management by LeaseLock clients. Data is nationwide, representing over half of the NMHC Top 10 property managers in the country and all asset classes (A, B and C). Asset class composition: class A (36%), class B (55%) class C (9%).
All data has been anonymized to remove personally identifiable information for renters and property managers.
https://leaselock.com/wp-content/uploads/2024/03/April-Rent-Payments-Trend-Downward-Feature-Image-2.jpg533800Paul Cookhttps://leaselock.com/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2020-04-04 18:36:372024-03-20 07:58:25April Rent Payments Trend Downward: Data Suggests Impact Across Several US Markets
Important statistical note: Despite the measured payment decline based on the sample set, the variance is within normal statistical range. In other words, the decline is not significant enough to attribute specifically to COVID-19 versus normal fluctuations expected across the data set. Please reference full methodology in footnote.
While the effects of shelter-at-home laws, eviction moratoriums, and rising unemployment rates remain to be fully seen, many operators moved quickly to communicate and support residents in the lead up to April. In this analysis we break down actual data on April 1st rent payments exclusively, and zero in on interesting behaviors that played out in Seattle – which may foreshadow where other major metro areas are headed.
Across the multifamily industry, we see that about 14% of renters make a payment on the first of the month. Many of these are reliable rent payers who regularly pay on the first each month, in some cases through scheduled auto-pay. More recently, however, we also see fluctuations in first-of-the-month payments, especially in relation to partial payments.
Nationwide April 1st Rent Payments Held Steady
Comparing the percentage of people who paid full rent on April 1st, 2020 to the average who paid full rent on January, February and March 1st combined, we see that April 1st rent payments have not taken a dip — and in fact, have slightly increased on a national level.
This holds true when looking at select cities across the nation, including Los Angeles, Detroit, and Seattle.
Seattle Sees an Increase in Partial Rent Payments
Seattle, the initial epicenter of the US COVID-19 outbreak — and the first metro area to go on lockdown — demonstrated some unique variations in payment behavior on April 1st. This could foreshadow the economic effects that will hit renters across the nation in the upcoming weeks and months.
20% of Seattle renters paid rent in full on April 1st (as noted in the chart above) – these likely represent those reliable first-of-the-month rent payers. However, for renters who made a partial payment on the 1st, the percentage of total owed rent they paid on the 1st dropped significantly in March and April. Seattle renters who made a partial payment on April 1st only paid an average of 33% of total rent owed, compared to 61% of rent owed in the beginning of the year.
That being said, the percentage of people who made some form of payment (over $100, to exclude other fees) on the 1st of the month actually rose in Seattle, across many metro areas and nationwide. This suggests that renters are trying to make some form of payment, and also possibly that property managers have been successfully proactive about creating payment plans with affected residents.
What can we take away from this? So far, first-of-the-month rent payment behavior has only shifted minimally on a nationwide scale, but zooming into geographical hotspots forecasts potentially significant shifts in partial rent payment behavior in May.
The good news — with hard-hit regions seeing an increase in payments overall, it suggests the willingness of both apartment operators and renters to find solutions together. We look forward to sharing more rent payment data as it rolls in over the weekend, after the default period ends on April 6th, and again on May 1st.
Update: Preliminary Findings for April 2nd Rent Payments
On the morning of April 3rd, we repulled rent payment data for April 2nd. The percent of renters who paid full rent on April 1-2nd combined, compared to the same period during the 3 previous months, dipped slightly by 1.17%. This fluctuation rate is within the range of normal — as a point of comparison, the percentage of renters who paid full rent during the 1st – 2nd of the month dropped by over 2% between February and March. This demonstrates fairly consistent rent payment behavior thus far, but we expect that numbers will change as we move towards the end of the grace period, so stay tuned.
Methodology
Rent payment data is actual transactional data sourced from direct integrations with property management systems in the multifamily industry.
Analysis includes a 96,268 unit sample from 1,029,428 live units under management by LeaseLock clients. Data is nationwide, representing over half of the NMHC Top 10 property managers in the country and all asset classes (A, B and C). Asset class composition: class A (36%), class B (55%) class C (9%).
All data has been anonymized to remove personally identifiable information for renters and property managers.
In response to COVID-19, lawmakers are acting fast to protect Americans as many try to make their rent payments. On March 27, 2020, the president signed the CARES Act into law, including immediate protection for renters in the form of a temporary moratorium on eviction filing. This federal eviction moratorium is to be in effect for 120 days.
At the state and city levels, legislators are proposing, enacting, and updating eviction moratoriums each week in order to directly address the financial needs of renters under their jurisdiction. No doubt, it’s difficult for operators to keep track of these changes, especially as they work tirelessly to implement rent relief programs to support their own apartment communities.
COVID-19 Eviction Moratorium Matrix
That’s why we created the Eviction Moratorium Matrix to help centralize the most current information regarding eviction regulations. Updated daily, our eviction moratorium resource will help operators understand new eviction laws to better protect both themselves and renters during the COVID-19 pandemic. Our list includes the following details:
city/county/state
type of eviction measure (halt, court stoppage, partial moratorium, etc.),
links to official reports or government orders
duration
date passed
date that our internal research team last reviewed or updated the information
What Is An Eviction Moratorium?
An eviction moratorium is a legal measure that restricts lessors from filing evictions for non-payment of rent, and also prohibits charges or penalty fees to renters related to the nonpayment of rent. Before the COVID-19 crisis, it was not unheard of for local or state governments to implement eviction moratoriums, whether in response to natural disasters or in advance of rent control laws.
As the U.S. economy battles mounting pressure and uncertainty due to the pandemic, legislators are implementing eviction moratoriums to protect vulnerable renters. This explains the marked increase in search interest around related terms since the onset of the pandemic, with a peak in “eviction” searches following President Trump’s order for HUD to suspend evictions on March 18, 2020.
Different Types of Eviction Moratoriums
With numerous variations of temporary eviction protections for the housing industry, we recommend that you visit the link for more detailed explanations on the terms of the order. For context, other types of eviction moratoriums include:
eviction suspension
eviction ban
eviction halt
eviction stay
How Long Will COVID-19 Eviction Moratoriums Last?
The length of any given eviction moratorium is dependent upon the duration and severity of the COVID-19 pandemic, as well as various other factors. Many lawmakers may choose to extend eviction moratoriums based on the financial stability of their jurisdictions, while other moratoriums will simply remain in effect for as long as their government has declared a state of emergency.
Check the individual orders per location to find information on the length of eviction moratoriums at the city and state levels.
Do COVID-19 Eviction Moratoriums Alone Provide Enough Operator & Renter Protection?
While eviction moratoriums provide foundational support for renter protections, they alone are not sufficient. Additional measures being taken to offer rental assistance include emergency rent relief funds, unemployment benefits, renter services and resources, and even other legislative measures such as deposit replacement regulations. Legislation that gives operators the choice to offer deposit alternatives like lease insurance provides not only more affordable options to renters, but also more protection against rent loss for operators.
Combined, the various efforts to support both renters and operators put the rental housing industry in a stronger position to weather the COVID-19 storm.
https://leaselock.com/wp-content/uploads/2024/03/covid-eviction-moratorium.jpg533800Paul Cookhttps://leaselock.com/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2020-04-02 18:44:252024-03-20 07:58:36COVID-19 Eviction Moratorium Matrix: City and Statewide Residential Eviction Restrictions Due to the Coronavirus
As almost anyone who has worked in multifamily will tell you, this industry can be very slow to embrace change.
Security deposits – and, to a lesser extent, surety bonds – have long been part of apartment operations, and it’s difficult for many property managers to imagine life without them.
However, some forward-thinking operators across the country have eliminated security deposits and surety bonds entirely. In the face of unpredictable events, such as the coronavirus pandemic that has cast the multifamily industry in a cloud of uncertainty, operators have been forced to adjust their current operations in order to better protect both their renters and properties. Subsequently, many have turned to lease insurance.
Lease insurance provides long-term, reliable protection, putting multifamily operators in a stronger position than either security deposits or surety bonds can provide. Especially in these unprecedented times, multifamily operators must adapt quickly with long-term solutions that protect themselves and support their residents.
Why Apartment Operators Should Replace Security Deposits and Surety Bonds with Rental Lease Insurance
Below are the top four benefits of using lease insurance for rental housing:
Better Protection Against Unexpected Events and Market Disruptions
The COVID-19 pandemic has brought a great deal of uncertainty to the multifamily industry as the economy screeched to a halt and left many residents jobless. Lease insurance provides owners and operators with the financial protection needed when unexpected events hamstring residents’ ability to pay their rent.
On the other hand, operators often find that security deposits and surety bonds are inadequate resources in the face of severe rent loss and physical damage caused by residents. As an example, while the average security deposit in the US is roughly $500-750, the standard LeaseLock lease insurance plan provides $5,000 of coverage against missed rent and damage on every lease.
More Traffic and Higher Conversion Rates
Security deposits require applicants to make a large upfront payment – one that can easily total thousands of dollars – before moving in. But in today’s environment of flat incomes and meager personal savings, that’s something many applicants simply can’t afford. Others may have to delay their move-in to save or borrow the needed funds.
Communities that reduce the cost of moving into a new home gain a real competitive advantage, especially those that clearly market themselves as a Zero Deposit community. Properties with no upfront deposit required at move-in experience more prospect traffic, faster move-ins, and higher conversion rates. For example, since ROCO Real Estate replaced security deposits with lease insurance, the company has seen an increase of 10 to 20 leads per property per week, while First Communities saw a 9-day faster lead-to-move-in cycle with lease insurance.
Reduced Administrative Headaches for Onsite Staff
Managing security deposits and surety bonds can be a serious hassle for community associates. In the case of security deposits, state regulations may require them to be kept in separate bank accounts and reconciled every month.
Additionally, when a resident is moving out, associates spend a considerable amount of time determining the amount of the security deposit refund and then dealing with the renter when the resident is inevitably upset about the refund amount. Surety bonds must be sold by onsite staff, and don’t eliminate deposit administration costs. Lease insurance, on the other hand, eliminates deposit administration.
Improved Online Reputation
It’s one of the laws of physics in multifamily: most residents get upset about deductions from their security deposit. Even with surety bonds, the bonding company will seek payment from the renter for any missed rent or damages to their apartment, which will likewise cause frustration.
And when renters are disgruntled about their deposit deductions or having to repay a bonding company, they take to Yelp, Google, Facebook, ApartmentRatings.com, ILSs, and other sites to post angry and negative reviews.
By eliminating security deposits entirely and replacing them with lease insurance, renters are more likely to write positive reviews touting the simplicity and affordability of a Zero Deposit move-in, and the ease of their move-out experience.
Protect Your Apartment Communities With Lease Insurance
Lease insurance is gaining popularity in the apartment industry as more operators begin to truly understand the benefits of moving away from security deposits and surety bonds completely. When it comes to protecting your properties, lease insurance offers the financial protection apartment owners need while also providing affordable living options for renters.
Just as operators have come to embrace renter’s insurance, we believe lease insurance will emerge as the leading replacement to security deposits. And as nationwide momentum moves towards Zero Deposit communities, the mutual benefits for both renters and operators will increase with it.
https://leaselock.com/wp-content/uploads/2024/03/The-Top-4-Benefits-of-Lease-Insurance-Feature-Image.jpg400600Paul Cookhttps://leaselock.com/wp-content/uploads/2024/04/LeaseLock-logo-black.svgPaul Cook2020-04-01 18:45:582024-03-20 07:58:37The Top 4 Benefits of Lease Insurance for Rental Housing
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