Affordable Housing Rent Collections Fell When CARES Act Relief Expired

Affordable housing developer and operator Community HousingWorks has remained stable with above-market rent collections throughout the pandemic, but noticed a notable increase in rent delinquencies in August and September, when the additional unemployment benefits under the CARES Act expired.

“Many affordable housing providers were seeing 11% of residents that either couldn’t pay rent or were behind on rent. At CHW, we have done a little better. As of September 5% of residents were not paying full rent. We expected a deterioration in rent collections, and that has occurred but not nearly as much as we collectively would have thought,” Sean Spear, the newly named CEO at Community HousingWorks in California.

The pandemic has severely impacted service-driven industries, which employ many residents of affordable housing properties. As a result, the housing segment has been the hardest hit early in the recession, compared to market-rate product. “This is an evolving issue,” says Spear. “Everyone’s assumption was that our communities would be particularly affected by this situation. Residents have had a hard time meeting their rent or getting behind in rent at a dramatic scale and they are facing higher potential evictions. That being said, we have been surprised that many of our residents were staying up to date on rent.”

However, Spear also believes that the strong rent collections indicate a bigger issue. “People are sacrificing other needs to pay the rent. The alternative of losing housing is a worse situation,” he says. “To me, this isn’t a good thing that we are seeing higher rent collections than expected. It is creating real stresses on families and individuals in supportive housing. That is an unfortunate consequence of the COVID crisis.”

As residents begin to face more challenges, rent collections have been negatively impacted. After the additional unemployment benefit under the CARES Act expired in late July, Community HousingWorks saw an increase in rent delinquencies. “We definitely saw an increase,” says Spear. “We had been at a little less than 1% of non-payment before the COVID crisis, and in the first months, we increased to 2%. In August, it went up to 3% and in September it went up to 5%.”

The expiration of the additional benefits under the CARES Act is just part of the issue. Unemployment benefits could expire altogether soon, and the market has yet to recover. This could increase rent delinquencies in the coming months. “I think we are particularly concerned because the additional $600 was helping to blunt the rent delinquency issue,” says Spear. “When that went away, we saw the impact. The other factor is that people were eligible for unemployment insurance, and that typically runs for six months. I think that we will start to see a dramatic increase as people’s unemployment benefits burn off and they aren’t able to find work again.”