As the financial fallout from the COVID-19 pandemic continues to take shape, May, much like April, saw better than expected rent collections from multifamily real estate properties. In fact, 90.8% of the 11.5 million tenants surveyed by the National Multifamily Housing Council have made full or partial rent payments as of May 20.
This collections rate was only slightly lower than the 93% recorded in the same period in 2019, and even surpassed the 89.2% rate seen during the same period in April, marking another relatively positive month since the declaration of a national emergency on March 13.
Over the past two months, approximately 40 million people have filed for unemployment insurance and the national unemployment rate has skyrocketed to 14.7% (as of the latest jobs report from the U.S. Department of Labor). However, the multifamily asset class has achieved reasonably high rent collection rates so far in part because the federal government’s Coronavirus Aid, Relief, and Economic Security (CARES) Act provided stimulus checks for families and individuals, helping them to meet their financial obligations. According to a recent survey, nearly one-third of Americans polled used their stimulus checks to cover bills, including rent.
Additionally, in the two months since the national emergency declaration, landlords around the country have stepped up communication efforts with tenants to instill that COVID-19 has not relieved renters of their lease obligations. Deferred rents will still be due upon the expiration of the moratoriums, and rent is still due for those who can pay.
Currently, various states and local areas are beginning to reopen offices and businesses and relax social distancing rules to re-energize economies. This could lead to many workers returning from furlough or being rehired, which may give tenants across the country the financial confidence they need to pay rents.
As states and cities have still not fully reopened, Congress is deliberating a follow up to the CARES Act, which could send another round of stimulus aid to tenants across the country.
Multifamily has outperformed other real estate asset classes in past recessions because people always need a place to live. In fact, during the COVID-19 pandemic, housing became of utmost importance as people needed places to “shelter in place” or “work from home” while practicing social distancing. Although it’s too early to know exactly how collections in the upcoming months will fare, the April and May reports have given the multifamily sector some optimism.