Independent SFRs Post Lowest On-Time Payment Rates in September
Sun Belt markets also underperformed for the sixth consecutive month.
Single-family rentals owned by independent landlords had the lowest on-time payment rates in September, according to a new report from Chandan Economics.
The firm’s first estimate for September shows that 81% of SFR units paid their rent on time this month— the lowest mark of the three sub-types Chandan tracks. That’s despite a 75 bps uptick in the on-time payment rate month over month. And year over year, the rate is up by 239 bps. Chandan Economics predicts the late-payment rate for SFR units his month will rise to 10.1% over time, with the full-payment rate settling at 91.1%.
By contrast, two- to four-unit properties fared best, with Chandan deeming them ”the most consistent rental sub-type and the least likely to experience distress.” On-time collection rates in 2-4 Family properties never fell below 71.9% during the pandemic, 183 bps and 335 bps better than small multifamily and SFR, respectively. Chandan predicts the 2-4 unit late-payment rate in September will rise to 9.5% over time, with the full- payment rate settling at 92.6%.
Small multifamily projects, defined as those between 5 and 49 units, averaged 82.3% at the September estimate, an increase of 88 bps over August. Year-over-year, the September 2022 on-time payment rate is up by 271 bps. Chandan predicts the late payment rate for this property sub-type will rise to 10.3% over time, with the full-payment rate settling at 92.6%.
And in a twist, the on-time collection rate in independently operated Sun Belt units underperformed non-Sun Belt units for the sixth consecutive month.
“The performance spread widened to 139 bps, as preliminary September on-time payment rates in Sun Belt and non-Sun Belt units sit at 80.1% and 81.5%, respectively,” the report notes.
Independently operated units inside the gateway markets of New York, Los Angeles, San Francisco, Washington, DC, Houston, Dallas, Chicago, and Boston also outperformed non-gateway cities for the ninth consecutive month, but just barely. September’s on-time payment rate stands at 81.2% in gateway units and 81.0% in non-gateway units.
And from a price point perspective, units with monthly rents below $1,000 maintained the lowest average on-time payment rate at 79.6%, while independently operated rental units charging $2,000-$2,499 recorded an on- time rent payment rate of 85.4% through September 15.