The COVID-19 pandemic and corresponding economic shutdown has, as many expected, caused widespread financial hardship throughout the U.S. as over 30 million workers have filed for unemployment since March 14 — the day after a national emergency was declared.
In anticipation of the economic turbulence, the federal government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which included a 120-day moratorium on evictions due to non-payment of rent for tenants of properties financed with mortgages that are federally backed. The CARES Act also prohibited penalties and fees associated with missed rent payments during the moratorium. These tenant protections are in addition to similar moratoriums passed by state and local governments aimed at assisting those impacted financially from the pandemic.
The unprecedented moratoriums and anticipated increase in unemployment caused many to worry a perfect storm was brewing that would lead to a massive deficiency in rent collections in April.
Fortunately, that concern has not materialized just yet, as tenants for the most part have met their April rent obligations. Through the week ending April 19, the National Multifamily Housing Council (NMHC) reported that out of the 11.5 million apartment units surveyed, 89% of tenants had paid at least part of their April rent. This represents only an approximate 4% decline over full or partial collections received in April 2019 and March 2020, which were both at 93%.
Notwithstanding this overall positive data, there were some notable items that indicated we are not out of the woods yet. First, only 69% of tenants were able to meet their rental obligations by the first week of April, which was down from 82% in April 2019 and from 81% for March of this year. Much of this gap was closed in the second week of the month, as 15% of renters made some form of rental payment, increasing the total to 84% compared to 91% and 90% in April 2019 and March 2020, respectively.
Second, many of the COVID-19 related layoffs came towards the end of March into early April – meaning the full financial implications may not be felt until May or later. This matches general expectations as many anticipate collections to continue to decline in May and potentially through the summer.
Finally, while the data does reflect a large and diverse sample size throughout the country, rent collection trends will always vary depending on the local market, asset type and tenants. In fact, some anecdotal evidence shows that New York and Louisiana, two of the areas hit hardest by the virus, are experiencing larger reductions in rent collections compared to the rest of the country.
While we still have a ways to go before we truly understand the financial impact the pandemic has had on the multifamily sector, it appears that the industry in general may have made it through the first month without a disruption as serious as many expected.