Mounting economic fallout from the pandemic is fueling apartment landlords’ concerns that more tenants will struggle to make their rent payments, even after most managed to come up with the money for April.
“May 1 will be a bigger watershed,” said John Pawlowski, a senior analyst at real estate research firm Green Street Advisors. “Think about when the job losses started accelerating.”
Only 69% of renters had made a full or partial payment during the first week of April, according to the National Multifamily Housing Council, a trade group for apartment industry. By April 26, the figure had climbed to nearly 92%.
While dire predictions for April were mostly wrong, few see the pressure abating on renters or property owners. Loan forbearance, expanded unemployment benefits and other government programs to soften the blow will go only so far.
The cascading damage could spell trouble for an industry that includes everything from mom-and-pop owners with a few properties to large companies with national portfolios. Whether or not the money comes in, mortgages, utilities and property taxes still have to be paid.
So far, large apartment landlords, including Equity Residential and Camden Property Trust, have reported strong collections, leading analysts to predict that they’ll fare better than smaller owners.
Many factors will influence if or when people are able to make rent in May — from the timing of job losses to whether tenants have gotten stimulus checks from the federal government or state unemployment benefits.
Even that assistance won’t be enough in high-cost areas, like New York and California, according to Doug Bibby, NMHC’s president.
“We’re nervous,” said Bibby. “The only mitigating factors are the direct payments to households, individuals and children, and the unemployment checks that are coming in — and those are coming in sporadically.”
Daryl Carter, the chief executive officer of landlord Avanath Capital Management, anticipated that renters at his company’s roughly 10,000 units from California to Florida would struggle in April and gave them a 10% discount.
Even so, he was preparing to process as many as a thousand requests to modify rent. In the end, fewer than 50 residents asked for relief. He’s bracing for next month to be different.
“We have residents who work at restaurants and hotels and things like that,” said Carter, whose company has average rents around $1,200 a month. “We are likely to see a bigger impact.”
Some renters are already behind. Chris Davis, 31, used his tax refund to help pay bills in March. Then, late last month, he had to self-quarantine after his daughter got sick. Missing more than two weeks of work meant he couldn’t make the $785 April rent payment for his family’s two-bedroom apartment in North East, Maryland.
He’s been back working at a truck wash for more than a week, but catching up will be tough, let alone making a payment for May. As of Saturday, his direct payment from the government still hadn’t been deposited, in part because he doesn’t have a bank account, he said.
“The thing I’m dependent on right now is getting that stimulus check,” he said. “That’s the only thing that’s going to get me out of this bind.”
Other renters aren’t able to apply for government benefits. A Brooklyn woman, who asked that her name not be used because of her immigration status, recently lost work as a home health aide. Because she’s undocumented, she’s unable to collect unemployment and is worried that she’ll run through her modest savings trying to pay the $1,700 rent on her family’s one-and-a-half-bedroom apartment.
She plans to withhold her rent this coming month, joining a rent strike to pressure Governor Andrew Cuomo into forgiving monthly payments during the pandemic. Getting stuck with a big bill for back rent at the end of the crisis is untenable, she said.
“I don’t want to end up bankrupt,” she said. “Where do we get that money from?”
For Bruce Brunner, a small landlord in Minneapolis, there’s a less adversarial route: Work with renters on a case-by-case basis to find a solution everyone can afford. In recent weeks, he said nearly all his tenants have been able to pay because they still have jobs or were able to collect unemployment.
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