Apartment rental payments are holding up fairly well—at least for now.

The National Multifamily Housing Council reported that 79.3 percent of surveyed households made a full or partial rent payment by August 6. That’s slightly better than last month’s 77.4 percent, and just shy of the August 2019 level of 81.2, according to NMHC’s Rent Payment Tracker.

“Over the past few months apartment residents have largely been able to meet their housing obligations,” NMHC Chair David Schwartz said in a written statement.

“In no small part, this is due to the enhanced unemployment benefits enacted under the CARES Act and significant steps by apartment owners and operators to help their residents,” said Schwartz, who’s also chair and CEO of Chicago-based Waterman. “These unemployment benefits that have proven so important to so many households have now lapsed, meaning greater financial distress for millions and the potential worsening of America’s housing affordability crisis.”

The Rent Tracker covers 11.4 million units of professionally managed apartments across the country of varying sizes and rental prices.

Walt Smith, CEO of Seattle-based Avenue5, said on an August 10 webinar accompanying the Rent Tracker that most of the market stress has been on the more upscale end of the apartment segment during the COVID-19 pandemic. For those renters who lost their jobs, even enhanced unemployment benefits aren’t covering their income needs. Occupancy in some gateway international cities such as Manhattan, Chicago, San Francisco, Los Angeles, and Miami has sagged several percentage points during the traditionally strong summer leasing season, reflecting “unparalleled stress” in that segment, Smith said.

“That is in my view a portent of what could happen” across all economic levels if further income support isn’t forthcoming for the unemployed, Smith said.

NMHC is urging the Trump administration and Congress to restart negotiations on a new COVID-19 relief package. “It is critical lawmakers take urgent action to support and protect apartment residents and property owners through an extension of the benefits as well as targeted rental assistance,” Schwartz said in his statement. “That support, not a broad-based eviction moratorium, will keep families safely and securely housed as the nation continues to recover from the pandemic.”

 

Source: GlobeSt By Scott Graham | August 13, 2020 at 06:50 AM

With a broader pool of potential renters, close-in apartments exceed expectations for one company.

 

While COVID-19 has slammed many parts of the economy, suburban apartments are performing well for one company.

Chris Berry, managing director and co-portfolio manager for Barings, says several of the firm’s close-in suburban multifamily holdings “have exceeded expectations since fourth quarter 2019.”  Berry says that Barings these properties, some of which are located outside of Boston, Denver, and Austin, have experienced increasing rents and expect to keep occupancies high. 

These suburban properties often rent at a discount to urban apartments, which broadens the pool of potential renters. That’s valuable in times of economic dislocation.

“We see in our portfolio that the rents have been pretty strong in the suburban assets,” Berry says. “We’ve seen more strength in those suburban locations, and we’ve seen occupancies not really move at all. They are still very high for suburban locations.”

 

Even before the current crisis, the suburban product is better positioned to weather the current storm because its cost basis is lower. “Most of the product you find in the CBD [central business district locations] is mid- and high-rise construction,” Berry says. “Land is costly, or it’s tougher to build in those locations. So you need pretty strong rents to make those deals pencil out.”

In the suburbs, the land is usually cheaper, and construction is less complex. “That has created a competitive discount for the suburban assets relative to the CBDs,” Berry says. “Now that everyone is so focused on affordability, you’ve got a broader pool of renters who are looking at those suburban locations.”

While suburban performance has been strong so far, Berry isn’t ready to declare victory. The economic dislocation caused by coronavirus could take years to play out.

“It’s very early,” Berry says. “Right now, I think everyone is looking to see what’s going to happen with this extension or non-extension of the benefits right now, which I certainly think needs to get done. Since the start of the pandemic, we’ve had 50 million people put in for unemployment. So I think we do need something right now.”

Berry says the high unemployment numbers highlight why people are focused on affordability. “That is why we think those suburban locations are doing a little bit better right now than the urban stuff,” he says.

Berry said Bearings’ primarily Class A portfolio has achieved 96 percent collections so far. “The renters who are in class A apartments can generally work from home, and they haven’t been as impacted by what’s going on in the economy,” he says. “In general, Class A is still doing pretty well, which is where we focus our attention.”

Barings, which represents a $45 billion global real estate platform, owns properties in both close-in suburbs and downtown areas. “If you were thinking about Seattle, we would go to a Redmond or Bellevue—somewhere that’s still close in and still has good access to jobs,” Berry says.

 

 

Source: GlobeSt By Les Shaver | August 06, 2020, at 07:35 AM

 

A confusing and hazy executive order signed this weekend leaves the future of eviction protections in doubt. 

Has the eviction moratorium that lapsed July 25  been renewed or not? That’s a source of confusion for many after President Donald Trump signed an executive order and three memoranda on Saturday, including an order regarding eviction protections. It turns out, no protections have been extended at all.

The wording is pure legalese, but also clear enough. It starts out strong:

The CARES Act imposed a temporary moratorium on evictions of certain renters subject to certain conditions.  That moratorium has now expired, and there is a significant risk that this will set off an abnormally large wave of evictions.

And then changes course:

The Secretary of Health and Human Services and the Director of CDC shall consider whether any measures temporarily halting residential evictions of any tenants for failure to pay rent are reasonably necessary to prevent the further spread of COVID-19 from one State or possession into any other State or possession [emphasis ours].

The order stipulates four steps of government action:

  • Investigate if it’s necessary to stop evictions — as a way to help stop the coronavirus from spreading, presumably from people crossing state lines looking for new housing.
  • Identify ways to give renters and landlords financial assistance.
  • “Encouraging and providing assistance” to various organizations or individuals to help guard against evictions and foreclosures, though it isn’t clear if this includes financial help.
  • Review existing “authorities and resources,” which could include government programs.

Although the order gives the Secretary of the Treasury and the Secretary of Housing and Urban Development the green light to explore ways to fund financial assistance to tenants behind on rent, the executive order stopped short of actually banning evictions or setting up such a fund. In other words, without further action from the Trump administration or Congress, nothing has really changed — yet.

As of July 31, every benefit provided by the  CARES Act has now vanished, including the eviction moratorium. That means tenants who can’t pay rent can be legally made to leave their rental properties. Congress has stalled on another stimulus bill that might renew some protections and will likely include a  second stimulus check, but there are new hope talks can resume this week.

Regardless, rent was still due Aug. 1. and will be again Sept. 1. With no federal unemployment enhancement or rent protections in place, as many as 40% of US renters are at risk of losing their homes if the federal eviction moratorium isn’t reestablished soon,  according to Statista. 

The CARES Act’s eviction safeguard is thought to have helped as many as  23 million US families  (roughly one-third of all US renters ) stay in their homes during the coronavirus recession. Eviction notices are now legally allowed to proceed and evictions can begin starting Aug. 24. Some landlords have already reportedly filed for evictions in violation of the law, even before the protection ended. Some states have extended eviction protections for some renters, though coverage may be uneven.

What happens now that eviction protections have ended?

The federal CARES Act that was passed in March temporarily banned evictions and late fees until July 25. It also required a 30-day notice to vacate before you can be evicted. 

If you live in a property covered by the CARES Act, landlords can now legally ask you to leave and start charging late fees, but the soonest they can legally file an eviction to force you to leave is Aug. 24. As long as Congress passes an extension or renewal of the eviction ban before Aug. 24, tenants who are behind on rent should continue to be temporarily able to remain in their homes.

Does the Aug. 24 eviction stay apply?

The CARES Act protected only about one-third of rental properties in the US: specifically, those that received federal funds or were financed under a federal program like Fannie Mae or Freddie Mac. It isn’t clear if Congress will broaden the scope of properties covered under the law. 

Here’s where things get tricky: If your landlord owns your building outright or finance the property without going through the handful of federal programs that guarantee most mortgages and doesn’t get any government assistance like Section 8 money, the CARES Act didn’t apply to your situation.

For tenants of single-family homes or of apartments in buildings with four or fewer units, it’s going to be tough to find out whether this or a similar law applies to you. But if you live in a multifamily property with five or more units, there’s a tool published by the National Low Income Housing Coalition that’s designed to tell you if the property where you live was covered under the CARES Act. Just enter your ZIP code and scroll through the list of properties looking for yours. (Searching within the page didn’t work for us.)

There’s one more wrinkle, however. Just because your building isn’t listed doesn’t necessarily mean it wasn’t covered — the tool only tracks properties with five or more units and it might not even cover all of those. So if you rent a single-family house or an apartment in a building with four or fewer units, it may not be listed even if the property fell under the CARES Act. 

 

 

Source: CNet Personal Finance

 

An online real estate database company just released new figures showing that renters’ preferred location is tiling toward the suburbs.

Zillow attributed the new data to the impact of the coronavirus because of the spike in unemployment. Zillow reasoned that renters were hit more severely by the economic effects of the coronavirus than homeowners Instead of shelling out their savings on an apartment, for instance, millions of people who previously rented have chosen to move back in with family.

Joshua Clark, an economist at Zillow, said that while the change may be viewed as a trend of shifting tastes that would be a misleading conclusion. Clark said the trend is due to the economic reality that renters face since the government issued stay-at-home orders and shutdown of many parts of the economy.

Now, real estate investors will have to decide how this recent trend will factor into their investments. To make that decision, investors will have to decide whether this trend will continue past the beginning of the year 2021 when a human vaccine for the coronavirus will likely be publicly available because offices will safely reopen and no longer ask employees to work remotely.

For the analysis, Zillow looked at 34 of the largest U.S. metro areas. In its analysis, Zillow found that rent growth slowed from the months of February to June.

During that period, rent price growth slowed more in urban ZIP codes than in suburbs. And less expensive suburban rentals are now more appealing to price-conscious consumers because they do not need to factor in a premium of commuting to work into their living location as they had to before the coronavirus pandemic.

These changes were able to happen quickly likely due to renters having more flexibility than homeowners. Renters usually have short lease terms and that impacts the fluidity of prices.

Zillow pointed out that the split between urban and suburban rent growth was present in over half of the large U.S. metros studied. It was the largest in Dallas-Fort Worth, Sacramento, San Francisco, and the greater New York metro.

But Clark has warned investors not to jump to a conclusion too quickly based on the indication of the new data.

“It may be tempting to conclude that urban renters who have been cooped up without outdoor space and unable to visit their favorite local bar are ready to commit to suburban life, and that is likely true for many,” Clark said. “But that narrative ignores the job loss that has hit renters, who are disproportionately employed in the industries most affected, and has likely played a bigger role in recent moves.”

 

Source: GlobeSt By Michael A. Mora | August 05, 2020, at 07:12 AM

 

Regional Players Win Deals While Using Localized Knowledge to Their Advantage

In the apartment world, now might be the time of the little investor.

While sales of multifamily properties are cratering,  recent deals show a new pattern: Small- and medium-sized firms are getting them done.

A case in point: Last week, Dallas’ Knightvest Management paid $42 million for  Hawthorne at the Trace in Raleigh, North Carolina. That 15-year-old, 250-unit property is a quintessential value-add strategy, where upgrades can be made in order to boost rents. But it’s also one that gives a lot of big investors pause: Will the tenants be able to pay rent as U.S. unemployment claims top 44 million during the coronavirus pandemic?

Knightvest is relatively small, having acquired just about $1.9 billion of rentals over the past few years. The firm holds on to properties longer than the giant public real estate investment trusts and private firms that like to flip properties every three to five years. Of late, buyers such as Knightvest have been more active than big investors such as Aimco, Mid-America Apartment Communities, Greystar, and others.

While some companies don’t like to discuss their strategies, those analyzing the moves and apartment brokers say this time of economic disruption and uncertainty could be a heyday for regional operators.

“Smaller, more local buyers may feel they have better information about their local markets — and may have a more optimistic outlook,” said John Affleck, vice president of market analytics at CoStar. “And, with many national buyers taking a ‘wait and see’ approach, the local players are winning deals that might have gone to larger players last year.”

‘Looking Down the Road’

Another large deal this month was in Georgetown, Texas, just north of Austin. BSR, a REIT based in Little Rock, Arkansas, paid $51.6 million for the 303-unit  Retreat at Wolf Ranch.  BSR’s done about $600 million of purchases in the past five years, according to CoStar.

Also this month, Miami’s Westside Capital Group won the bidding for The Residences at Veranda Park in Orlando, Florida, paying $45 million for the 150-unit, 12-year-old property. The firm has done about $124 million in deals over the past five years.

Without the massive fund shops and apartment operators to contend with, smaller players can put their localized knowledge about management to work. And their confidence in the markets they know well can help them handle potential confusion surrounding how apartments will perform in the next year or so if the coronavirus and economic downturn continue to spread throughout the country.

But that doesn’t mean the big dogs are completely out of the game.

Greystar, the giant based in Charleston, South Carolina, picked up  Avana Thornton Station in suburban Denver on June 10. It paid $119 million for that 18-year-old, 480-unit complex.

Larger buyers are taking a wait-and-see approach generally. If prices are falling and regional players are making money, the big investors aren’t worried too much.

“The massive equity houses, they can afford to be a little bit late to the dance,” he said. “It’s true that in the last few weeks we’ve seen a lot of local and regional players winning deals. But trust me, it won’t be long until the biggest household names are back in the game in a big way.”

 

 

Source: By John Doherty CoStar News June 17, 2020 | 08:07 P.M.