Yahoo Finance People are still paying rent during the coronavirus pandemic
Mass layoffs and furloughs beginning in March spurred fears that tenants would not pay rent starting in April — but by April 20, 89.2% had, down only four percentage points from the same time in April 2019.
And updated data reveal that even more renters faithfully paid rent so far in May, despite the novel coronavirus pandemic. Some 90.8% of renters paid May rent by the 20th of the month, down only 2.2 percentage points from the same time last year, according to the National Multifamily Housing Council’s (NMHC) rent tracker, which compiles statistics from major real estate data providers including Entrata, MRI Software, RealPage, ResMan, and Yardi.
“Everything that, basically, was said about apartments two months ago, a month ago, was incorrect… just a lot of misdata everywhere,” said Grant Cardone, CEO of Cardone Capital, with about 8,000 apartments in the U.S.
May rent payments are up 1.6 percentage points from 89.2%, the percentage of payments made by April 20. The improvement was expected as May began: Only 10.4% of renters expected not to make May rent, compared to 8.8% in April, according to a survey of about 1,000 Americans by Volition Capital, a Boston-based growth equity firm.
"Each week we see new evidence that Americans are prioritizing rent and that the work apartment firms did to create flexible payment plans is paying dividends,” said NMHC President Doug Bibby in an email.
During the pandemic, many landlords have been working with tenants who face financial hardship. Though 19.8% of renters did not pay May rent by the sixth of the month (when most rent payments are considered late), most arranged deferred or partial payment plans with their landlords.
“When [the coronavirus] happened, I think in six days we had contacted 7,700 residents and said what can we do to help you. That’s how you maintain clientele. Real estate is a business, it’s not just I’m gonna hold something. I have to take care of the client,” said Cardone. As of mid-April, some 40% of renters planned to ask for a deferment in May, according to a survey by Grace Hill, a South Carolina-based property management training company, which polled 25,000 renters from April 10 to April 16.
During the pandemic, renters have demanded relief, even turning to Twitter with a #cancelrent hashtag. Renters are 58% more likely than homeowners to live paycheck to paycheck, and less than half of all renters have at least $500 in emergency savings, according to a survey of 1,000 renters by Clever, a St. Louis-based home buying and selling assistance website.
Not easy for landlords, either
But striking deals with tenants isn’t always easy. Landlords have been stretched during the pandemic, trying to cut breaks while operating on thin profit margins. On average, 39% of every rent payment goes toward mortgage payments, 27% goes to payroll, 14% goes to property taxes, and 10% goes toward major repairs, according to Bob Pinnegar, president and CEO of the National Apartment Association.
In response to economic turmoil, the U.S. government has issued a number of relief measures under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act prohibits evictions and penalties for tenants in properties with federally-backed mortgages, and over 30 states have issued bans on evictions and penalties for not paying rent. The good news for landlords is as lockdown restrictions lift, even more Americans are expected to make full rent payments.
“Everybody thinks the world’s gonna come to an end here. It will not come to an end. So like, 39 million people unemployed today, it’s probably gonna get worse before it gets better. But people, we go on… We will be french kissing again in public, doing selfies, hugging it out and sharing tequila and cigars with one another,” said Cardone.
Sarah Paynter is a reporter at Yahoo Finance. Follow her on Twitter @sarahapaynter
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