Apartment Rent Collections Continue to Decline

Multifamily fundamentals continue to show signs of distress in the wake of the widespread job and economic losses created by the Coronavirus. 

The latest report from the National Multifamily Housing Council’s Rent Payment Tracker, which measures the number of apartment households that make a full or partial rent payment, shows a drop of 2.4%—or 279,457 households—year-over-year, as well as a monthly decline. According to the NMHC Tracker, 86.2% of apartment households made a full or partial rent payment by September 13, compared to 86.9% that paid by August 13 of this year. The survey measures 11.4 million units of professionally managed apartment units across the country.

“While it remains clear that many apartment residents continue to prioritize their housing obligations and that apartment owners and operators remain committed to meeting them halfway with creative and nuanced approaches, the reality is that the second week of September figures shows ongoing deterioration of rent payment figures—representing hundreds of thousands of households who are increasingly at risk,” said NMHC president Doug Bibby in prepared comments.

Other research highlights small but growing problems with the multifamily asset class. Effective rents in the second quarter nationally declined by 0.4%, according to a report from Moody’s Analytic’s REIS subsidiary—the first decline since the multifamily sector started its recovery from the 2008 to 2009 recession. Further, according to REIS, 41 out of 82 major apartment markets recorded declines in effective rents, compared with just seven such markets for the first quarter of 2020 and zero a year ago.

The debt markets are also showing signs of strain, another REIS report found.

“In our review of August’s remittances, we’ve noticed some conflicting data, in addition to a multifamily sector displaying its first sign of pandemic related stress,” the two researchers wrote. “While the overall delinquency rate is fairly stable and even showing signs of decline, the volume of special servicing remains stubbornly high and is inching higher.”

“In certain cuts of the data, we even see sector-specific conflict in terms where stress is hiding and likely to show up in the near future,” the authors said.

A new report from Rentec Direct that evaluates the impact of COVID-19 on rent payments this month also gives further cause for concern. “Rentec Direct’s data has shown a consistent downward trend in the number of rent payments received nationwide by property managers and landlords, and the month of September has seen the biggest change with a 35% drop in total rent payments received. We began tracking data in March 2020.”

But Rentec did offer property owners a word of advice. “Of tenants who pay rent electronically, nationwide rent payments in September 2020 are 1.0% higher than online payments received in March 2020. Online rent payment options dramatically increase the likelihood of paying rent.”