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Randolph Taylor

Earlier, resident retention levels at lease expiration had moved drastically, reflecting the impacts of COVID-19 on household living preferences and the resulting shifts in apartment pricing that occurred in the market.

Retention soared when COVID-19 first emerged, as households hunkered in place. The U.S. retention rate got as high as 58.4% in April 2020.

As 2020 progressed, renter needs evolved, and many properties began to experience more resident churn. Among the renters working from home, some households opted to move to other neighborhoods or even other metros, taking advantage of the opportunity to save money. In other cases, some households jumped on the chance to upgrade to larger or better-quality apartments, once pricing slipped among a block of the more upscale properties.

At its weakest, U.S. apartment resident retention got down to 51.1% in December 2020.

Class C Properties Outperform

Lower-priced Class C properties are chronically in short supply across much of the nation, limiting the choices of those who might want to move from one of these communities to another. In turn, Class C projects usually sustain the highest resident retention rates. That was true again in 1st quarter 2021, when Class C resident retention came in at 61.9%.

For the middle-priced Class B stock, retention usually looks much like the industry’s overall average. A 53.4% share of Class B renters with leases expiring in early 2021 opted to remain in place.

High-priced Class A developments normally experience the most renter churn, with results impacted in part because residents of existing luxury projects often are tempted to move into just-completing properties that are offering rent discounts during initial lease-up. Within the Class A stock, resident retention when leases expired during 1st quarter was limited to 47.6%

Big Differences Register Across Metros

While the average resident retention rate is back to normal, notable differences in performance exist from one metro to another.

Retention is way up in some comparatively affordable metros where apartment demand is proving solid at the same time that limited new supply is coming on stream. In the most notable examples, 1st quarter 2021 retention is up 8 to 9 percentage points from the average levels posted for the same period of 2018 through 2020 in Detroit and Riverside/San Bernardino.

The increase comes in at 5 to 6 percentage points in Sacramento, Providence and Greensboro/Winston-Salem, while retention bumps reach roughly 4 to 5 percentage points across Columbus, Salt Lake City, Memphis, Cincinnati and Virginia Beach.

At the other end of the performance spectrum, resident retention has plunged in expensive metros where sizable rent cuts are encouraging households to move around. In much of the Bay Area, resident retention in January through March 2021 was off the level that was normal in the early months of the previous three years by 11 to 12 percentage points.

Retention declines of 6 to 7 percentage points registered in Seattle, Los Angeles and New York, while it also was much tougher than usual to hold onto existing renters in Oakland, Miami, Orlando, Austin and Newark/Jersey City.

Multifamily Investment Sales Broker at eXp Commercial
P: 630.474.6441
Randolph Taylor

Adobe Stock

Millennials, or people spanning the ages of 24 to 39, are officially the nation’s largest generation, according to Pew Research Center. The young, but mature, age group is targeted to be in their prime home-buying years, but research shows they continue to lag behind previous generations in fulfilling the goal of homeownership.

To delve into the topic, Apartment List recently released its 2021 Millennial Homeownership Report that analyzed data from the annual Apartment List Renter Survey and Census Bureau’s Current Population Survey to assess whether millennials are catching up, if the generational homeownership gap exists, and how the ongoing COVID-19 pandemic might impact these trends in years to come.

Generational Gaps

The 2020 millennial homeownership rate stands at 47.9%, according to the most recent data from the Census Bureau’s survey. For members of Generation X, or people aged 40 to 55 in 2020, the homeownership rate is over 20 percentage points higher at 69.1%. The Silent Generation, or the children of the Great Depression, have a homeownership rate of 77.8%, and the baby boomers hold the nation’s highest homeownership rate at 78.8%.

“Over the past half-decade, the millennial homeownership rate has increased faster than that of other generations, but this is largely reflective of the stage of life that millennials are currently inhabiting,” says Rob Warnock, Apartment List research associate and author of the report. “There are simply more new first-time homeowners in their 30s than their 60s. Controlling for age provides a more apples-to-apples comparison across generations and per the chart below, shows that despite recent increases, millennial homeownership continues to lag both Generation X and baby boomers.”

Apartment List

At age 30, 42% of millennials own homes, according to the report. In comparison, 48% of Gen Xers and 51% of boomers owned homes when they were the same age.

As millennials progress in their careers and their purchasing power improves, they have become responsible for a slightly larger share of the nation’s home purchases each year, from 34% in 2017 to 38% in 2020. First-time home purchases—typically dominated by younger adults—have grown similarly, from 31% to 33% over the past three years.

“But they come nowhere close to rates from the homeownership boom that preceded the Great Recession, when more than half of all home purchases were made by first-timers,” says Warnock.

COVID-19 Consequences

Last year, the country saw a rise in both unemployment and home prices, so affordability remains the biggest roadblock to prospective millennial home buyers. To shield the housing market from a volatile economy, interest rates were dropped to record lows, which made it easier to finance a home, but only for those who can afford the cost of a down payment. According to Warnock, many millennials cannot.

Over three-quarters of millennials say they are waiting until they have the financial means to purchase a home, over three times the share who say they are waiting to settle down in a single place or waiting to commit to homeownership with a life partner.

Forty percent of millennials say the COVID-19 pandemic has had a direct effect on their homeownership plans, including 21% who are now delaying homeownership altogether. For most, this delay is driven by economics, such as the result of a partial or total income loss (67%), a reduction of down payment savings (21%), or a concern that homeownership is no longer a prudent decision in a volatile economy.

Apartment List

Among millennial renters, there is even some declining optimism about the prospect of homeownership. In 2020, 18.2% of millennial renters say they plan to rent forever, up for the third consecutive year from 12.3% in 2019 and 10.7% in 2018.

For those who plan to always rent, 74% say they simply cannot afford homeownership. This is significantly more than those who cite the potential lifestyle benefits of renting, including added flexibility (34%) and avoiding unforeseen maintenance and expenses (32%). Plus, some millennial renters whose young adult years were mired by the Great Recession remain skeptical, with 21% of committed renters saying that buying a home is financially riskier than renting one.

“Interestingly, a second group of renters has emerged who are delaying homeownership because they are less certain of their housing preferences in a post-COVID world,” continues Warnock. “The pandemic has forced everyone to consider the pros and cons of their current living situation, whether it be price or location or amenities.”

For millennials whose homeownership plans are now delayed, 28% are reconsidering what type of home they want to purchase, while 27% are rethinking where they want to buy entirely, says the report.

Small Savings

Over 80% of millennial renters plan to buy a home in the future, but many are still a long way from realizing their goal. The survey finds that 63% do not have any dedicated down payment savings set aside, and only 15% have saved over $10,000.

Apartment List

While lenders tend to be more lenient in their down payment requirements for first-time buyers, the upfront costs of homeownership remain a massive issue for many renters, with 62% saying the down payment is a reason they are waiting, compared with just 31% who cited recurring monthly payments.

“To overcome a lack of personal savings, many millennials are turning to their parents for help,” says Warnock. “In this year’s survey, over 20% said they are expecting down payment assistance from family, highlighting how wealth in one generation can affect wealth in the next. But for the remaining 80%, homeownership may be realistic only if their personal savings increase dramatically and/or they narrow their search to some of the nation’s most affordable markets.”

Millennial Minorities

The report also states the millennial housing struggle is not uniform. The United States as a whole suffers from massive wealth inequality, and one of the major contributing factors is a low rate of minority homeownership, particularly among millennials.

White millennials maintain a homeownership rate that is substantially higher than non-white groups, and only barely lower than previous generations. Hispanic and Asian homeownership trails well behind, despite not having significant gaps between generations. For Black Americans, the homeownership rate is lower than the rest and millennials face the largest generational divide. By age 30, the white millennial homeownership rate (51%) is two-and-a-half times higher than the rate for Black millennials (20%).

Apartment List

White homeownership has exceeded minority homeownership for generations, but white millennials who do not own homes are less likely to say that they plan to buy in the future. According to our survey, the share of millennial renters who expect to rent forever is highest among whites (20%), compared with Blacks (17%), Asians (17%), and Hispanics (14%).

“This speaks to the role of homeownership as a vehicle for wealth creation in America,” says Warnock. “As the wealth gap widens between white and non-white Americans (and between homeowners and renters), more non-white renters recognize that purchasing a home can improve economic security for themselves and their families.”

Multifamily Investment Sales Broker at eXp Commercial
P: 630.474.6441
Randolph Taylor

How Quickly Will Apartment Rents Start Growing Again?

But rent change performances were bifurcated across metros in 2020, and that trend is expected to continue in the near term, with some markets far out-performing other locations.

Some markets have already recovered back to pre-pandemic levels, so future rent growth in these areas will take pricing to all-time highs. This group includes some slow-and-steady Midwest region markets and some Sun Belt spots where building has been restrained.

Less encouraging, rents probably won’t get back to early 2020 levels until 2022 or later in a handful of markets that have seen a lot of new supply of late. This group includes most of the Texas markets, as well as Minneapolis and Nashville.

In the worst cases, RealPage models suggest there is a long way to go in some of the gateway markets, which have been hardest during the COVID-19 pandemic. This group includes the Bay Area, New York, Los Angeles, and Chicago. Pricing performances in those markets might not get back to the early 2020 results until 2025 or later.

Multifamily Investment Sales Broker at eXp Commercial
P: 630.474.6441
Randolph Taylor


Apartment leasing appears to be on the rebound.

The indicator showed signs of improvement in the third quarter, according to a new report from RealPage, and other recent data also showed healthy activity in the space, possibly pointing up the beginnings of recovery for the second half of 2020.

Greg Willett, chief economist at the real estate technology and analytics firm expressed cautious optimism. “While the US economy has a long way to go before it’s fully healed, there’s enough job production to allow new household formation to return in some areas, so apartment demand is back,” he said in prepared remarks.

Occupied apartments climbed by nearly 147,000 units, outpacing absorption in the second quarter by more than four times. Even more promising, demand in Q3 increased by 8% year-over-year.

This research comes on the heels of AppFolio data that also found improvement in apartment leasing after the first six weeks of the pandemic, following a sharp decline during the early days of COVID-19’s arrival in the US.

“At the outset of the pandemic, as people adjusted to stay-at-home orders and physical distancing mandates across a number of states, our early data suggested a significant decrease in lead volume,” said Stacy Holden, industry principal and director. “However, after about six weeks, leasing activity largely rebounded to expected levels. People still want to move to places that meet their needs.”

Societal trends, such as the surge in both working-from-home and remote learning, also drove leasing up. “With many people having had the ability to work remotely this year, the need to live close to the office may have diminished for some,” she explained.

Still, other metrics for recent apartment activity paint a mixed picture.

US effective asking rents as of the third quarter are off 1.2 percent from the rates seen a year earlier, according to RealPage. More recently, the ApartmentList reported that rents have dropped in nearly half of the nation’s top 100 markets.


Source: GlobeSt By Rayna Katz | October 02, 2020, at 07:18 AM

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P: 630.474.6441
Randolph Taylor


Investor activity in the net lease space has remained strong for necessity-based uses, publicly-traded companies with strong financial positions, and uses such as quick-service restaurants with drive-thrus.

Despite market volatility and uncertainty created by the COVID-19 pandemic, investor activity within the net lease space for specific uses and credits continues to remain relatively strong, albeit at levels lower than pre-COVID. The industry is anxious and unsure about the long and short term effects of this crisis, and no one can provide any clear answer as to what the near term holds. This crisis didn’t begin as one with deteriorating financial conditions or a collapse of credit. It’s a health care crisis that will, in turn, have an impact on virtually every corner of the economy. 

In SRS National Net Lease Group’s second-quarter 2020 Net Lease Market Overview, we found that investor activity in the net lease space has remained strong for necessity-based uses, publicly-traded companies with strong financial positions, and uses such as quick-service restaurants (QSR) with drive-thrus.

The continued interest we are seeing in net lease and what makes it a strong investment option now is due to some of the same fundamentals exhibited during the Great Recession. Being that single-tenant assets have lower price points compared to large, multi-tenant centers, the majority of net lease buyers and owners consist of small private investors or groups seeking yield and are attracted to owning a tangible asset. Since the COVID-19 crisis began, SRS’ National Net Lease Group has closed 140 transactions valued at $502 million. Additionally, the group has nearly $800 million of assets under LOI or in escrow and $2 billion in assets currently listed for sale.

For the report, SRS reviewed first and second quarter 2020 sales for the following sectors: Automotive, Bank, Big Box, Casual Dining, C-Store/Gas, Dollar Stores, Educational, Fast Casual, Grocery, General Retail, Medical STNL, Pharmacy, and QSR. It’s especially important to understand the impact the ongoing pandemic has had on the relationship between the length of the lease term and capitalization rates across all product types, as well as how the pandemic has affected buyer bias toward certain sectors.

Sectors proving their resilience include:

Grocery: Investors continue to look at this sector for stable cash flows. The average cap rate has dropped by 48 basis points, which perhaps can be explained by a combination of 1) increased demand for these safe assets and 2) a majority of grocery stores are comprised of strong, high credit grocers.

Pharmacy: Average cap rates for pharmacy net lease compressed by 25 basis points. This was attributed in part to the longer average lease term, as well as the broad “flight to quality” due to the pandemic.

Convenience: The C-Store/Gas Station space remained a very active sector of net lease as it exemplifies internet resistance, as well as being labeled essential. Cap rates expanded by just 8 basis points due largely to the geographic location of the properties transacting during Q2 vs Q1.

Sectors of concern include:

Big Box: the big-box sector within net lease has seen diminished activity for numerous quarters, pressured by online competition.

Casual Dining: Casual dining net lease was heavily affected by COVID-19 with most transactions occurring early in Q2 likely originating pre-COVID. While cap rates compressed Q2 vs Q1, this is due to transactions occurring in primary markets only, with higher quality tenants.

Right now, investors are reacting out of concern in the short term, but the fundamental characteristics of net lease and investment real estate in general, are based on a long-term investment approach, particularly the fundamentals of an investor’s basis, tenant credit, and location. Based on those attributes the phrase “survival of the fittest” will likely hold true post-COVID-19 recovery.

Source: GlobeSt By Matthew Mousavi | August 06, 2020, at 03:34 PM

Marcus & Millichap executes more tax-deferred exchanges than any other real estate firm. Nearly half of our 1031 exchange clients choose Net Lease properties as their upleg option. Of those, the largest percentage are trading out of Apartments. With steady returns and reliable, low-maintenance tenants, Net Lease are some of the most sought-after properties in the entire retail sector. 


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Multifamily Investment Sales Broker at eXp Commercial
P: 630.474.6441
Randolph Taylor


Fundraising Slows After Reaching Peak


Economic volatility brought by the coronavirus pandemic slowed the momentum of fundraising for “opportunity zone” projects, which had been on a roll with a  record haul of $1.6 billion in the first six weeks of the year. Since then, funds that file with the Securities and Exchange Commission have reported bringing in just $114 million, according to data collected by CoStar.

Unlike stock and bond prices that have rebounded on renewed investor and consumer confidence, investors still appear cautious about putting their money in real estate. Many are still trying to weigh how the pandemic has affected valuations and the economic rationale behind deals.

The slowdown comes at a time when advocates say civil unrest in the wake of the death of George Floyd, a black man who died while in Minneapolis police custody, has highlighted the need to steer fresh investment to underserved communities — a key aim of the federal program. While promoting the effort, some in Congress issued a report earlier this month urging participants to take steps ensuring their projects don’t exacerbate racial disparities.

Cresset Partners and Diversified Real Estate Capital were among fund managers with early-year success. The two firms’ Cresset-Diversified QOZ Fund I raised $465 million, and they launched Fund II before the coronavirus outbreak hit.

Nick Parrish, a managing director for Cresset, said raising money for the new fund has gotten off to a slow start, but he said that’s been true across most real estate funds.

“There was a period where everything shut down. People were paralyzed,” Parrish told CoStar News. “That’s not just for qualified opportunity zone funds, we saw it across all business risk assets.”

Still, he argued the value proposition of opportunity zones remains. Under the program, launched in 2018, if investors stay committed for 10 years, they can defer all the capital gains taxes due and what they earn.

“Market volatility is a reminder of the value of long-term assets. As people are watching their stock accounts bounce up and down, it’s a good reminder of owning long-term, cash-flowing real estate,” Parrish said.

The plunge in stock values in late February prompted a lot of selling and repositioning of portfolios. The capital gains from those sales could still end up in opportunity zone funds. Last month, the IRS extended the time frame for making investments to the end of the year.

The extension is significant because many investors have held off from making long-term commitments considering the broad uncertainties resulting from the economic downturn caused by the pandemic, according to Stephen Sharkey, a partner in the Baltimore office of DLA Piper who wrote a note posted on the firm’s website this month. Investors hesitant to choose opportunity zones now have more time to assess the recovery and decide where to deploy their money.

“A lot of those deals may still be good deals, but a lot of your assumptions you have to retest. You must look at things like financing, like taxes. You must look at things like construction costs and rent growth. All of these things are built into a model, and they all got thrown up in the air. What’s the future of office and what’s the nature of urbanization? Those are some big questions, and they had to be answered.”

Cresset and Diversified’s Fund I was set to finance two projects yet to begin. Cresset renegotiated construction costs for The Finery in Nashville, Tennessee, and opted to drop a hotel component in favor of more multifamily.

“I’m not sure I’d want to be delivering a hotel into this environment with what’s happened to hospitality,” Parrish said. The pandemic “gave us a little window to pivot.”

Protests Create New Challenges

Opportunity zones provide tax breaks to investors who transfer recently realized capital gains into qualified funds that sink money into real estate projects and businesses located in specially designated economically distressed areas, with a goal of boosting jobs and housing. That ties those funds directly to communities more beset by racial and economic inequality, the kinds of places that have attracted attention during the nationwide protests over Floyd’s death in Minneapolis.

About 16% of Minneapolis is made up of people of color, but African Americans total 30% of the city’s population in opportunity zones, according to data from the Congressional Black Caucus Foundation, whose members include Sens. Tim Scott of South Carolina and Corey Booker of New Jersey, the Republican lead and Democratic co-sponsor, respectively, of the law that created the opportunity zone program.

In a report released this month, the caucus said the program has the potential to facilitate growth in distressed communities through promoting business creation. But it could also become a subsidy for gentrification rather than preserving and stimulating the local economy.

“With the high concentration of people of color, it is important to pay close attention to the effect of programs that encourage investments in low-income communities of color to ensure racial disparities are not fueled but are closed over time as a result of both direct and indirect economic gains to the community,” the caucus said.

To ensure opportunity zones have the maximum potential to benefit the residents living in those areas, the caucus included several recommendations for improvement:

  • Consult with community members to determine what new businesses will be created.
  • Provide adequate job training.
  • Allow residents to contribute to qualified opportunity funds and receive tax benefits.
  • Create new housing that reserves a percentage of affordable units.
  • Create a public system to measure the impact of investments and help ensure transparency.
  • Reserve a percentage of jobs during construction for residents.

Since the Floyd protests began, several new funds and initiatives have launched to support black businesses or work with community agencies on fund deployment.

PayPal Holdings announced a $530 million commitment to support black and minority-owned businesses and communities in the United States, especially those hardest hit by the pandemic, to help address economic inequality. The commitment earmarked $500 million to create an economic opportunity fund.

“Black lives matter and we need to drive transformative change. We must take decisive action to close the racial wealth gap that sustains this profound inequity,” Dan Schulman, president, and chief executive of PayPal, said in a statement.

Ellavoz Impact Capital, a New Jersey-based social impact qualified opportunity fund management firm, announced a partnership with New Jersey Community Capital, the state’s largest nonprofit financial institution specializing in development, to launch the Ellavoz Shared Values Opportunity Fund. The fund’s purpose is to provide equity capital for affordable housing projects and entrepreneurism.



Source: Mark Heschmeyer CoStar News June 18, 2020 | 09:49 AM

Multifamily Investment Sales Broker at eXp Commercial
P: 630.474.6441
Randolph Taylor


The outlook for the fall semester was overwhelmingly positive, with 93 percent of respondents indicating that they expect fall semester to open on time with residents in on-campus housing.

The coronavirus (COVID-19) pandemic has had a major impact on all aspects of on- and off-campus student housing. In an attempt to better assess that impact and the sector’s outlook for the future, Student Housing Business (SHB) conducted a survey of industry professionals over the course of several weeks in May.

The survey was segmented by industry function for specific elements of the business, allowing SHB to better understand the pandemic’s distinct influence on each segment of the industry. 

Of the survey’s 569 respondents, 79 defined their role in the industry as that of an on-campus housing officer or operator. In this segment of the industry, 38 percent of institutions laid off or furloughed employees, and 24 percent instituted pay cuts.

Sixty-four percent of respondents noted that they are involved with traditional on-campus residence halls; 10 percent are involved with public-private partnership development; and 26 percent work with both types of residence halls. 

Of those polled, 88 percent of universities saw residents leave behind clothing and belongings when they moved out in March following evacuation orders due to the pandemic, and 67 percent had not begun the process of turning on-campus housing rooms yet. 

Looking toward the summer, 60 percent of respondents indicated that they do not anticipate summer camps, internship programs, students living in on-campus housing, or courses over the summer.

Of the group that operates on-campus housing as part of a public-private partnership, 57 percent did not close their doors at the same time as traditional on-campus housing. Sixty-nine percent offered the same rent concessions and forgiveness, however. 

The outlook for the fall semester was overwhelmingly positive, with 93 percent of respondents indicating that they expect fall semester to open on time with residents in on-campus housing. Eighty-eight percent expect there to be modifications to housing and dining as a result of COVID-19 in order to promote social distancing. Ninety percent of institutions polled were developing those plans at the time of the survey. 

In terms of quarantine planning, 79 percent of respondents indicated that their institutions were planning on keeping an existing on-campus housing facility offline to use as potential quarantine space during the 2020-2021 academic year. 

Seventy-nine percent of respondents believe that future on-campus housing projects will need to take social distancing and other implications from COVID-19 into account, but 83 percent do not anticipate their institution moving to renovate existing traditional residence halls in direct response to the pandemic.  



Source: REBusiness Online Posted on June 24, 2020, by Jeff Shaw in Features, Student Housing

Multifamily Investment Sales Broker at eXp Commercial
P: 630.474.6441
Randolph Taylor


The continuing long-term decline in turnover has accelerated recently due fewer tenants moving because of the COVID-19 economic downturn


A commercial real estate services company is reporting seeing that landlords of multifamily property are seeing turnover fall to the lower levels in more than 20 years.

According to a report by CBRE, turnover, which is the percentage of total rented units that are not renewed each year, fell from 47.5 % in 2019 to 42.1 % in April. The report attributes the decline to historical trends that have been exacerbated due to the coronavirus pandemic.

“The continuing long-term decline in turnover has accelerated recently due to fewer tenants moving because of the COVID-19 economic downturn,” the report said.

The report, however, said the new isn’t all bad since the benefits of lower turnover generally outweigh the disadvantages. Specifically, the report said landlords can see cost savings from continuing rent income and from having fewer “make-ready expenses,” which can range between $1,800 and $3,000. Rent increases are also generally higher on renewals than from new leases, the report said.

According to the report, the COVID-19 lockdown mandates and related uncertainty have discouraged renters from moving, which has helped owners maintain occupancy and cash flows. The report also said turnover is expected to rise from April’s low, given that there’s been an acceleration of leasing activity in May. However, the report said, turnover is expected to remain low for the rest of the year.

Historically, turnover has been falling since 2000, when it was around 65%. The report said that turnover began rising in the mid-2000s because of greater economic opportunity for renters, increased units, and an influx of young millennials entering the market. The past recession led turnover to fall, however,  and only in recent years did it begin ticking back up again, according to the report.

Despite the overall trends, the turnover rate has differed greatly depending on the geographic regions. Some real estate investment trusts have reported that metro areas like New York and Washington, D.C. had the lowest turnover rates for the first quarter in 2020. The reports attributed this to the pandemic and seasonal trends. The South and West saw higher turnover rates, while the Northeast and the Midwest also saw lower rates, the report said.

These trends likely won’t significantly change due to the COVID-19 pandemic, the report said, but different infection rates and localized seasonal trends could influence the rate.

“Northern metros only recently entered the spring leasing season, so turnover rates were not as affected by the early stages of COVID-19 as they were in other warm-weather metros that were already well into the spring leasing season,” the report said.


Source: GlobeSt. By Max Mitchell | June 08, 2020, at 11:59 AM

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Randolph Taylor


A feared collapse in apartment rent collections amid the COVID-19 shutdowns has failed to materialize. But can that streak last?

Despite mass unemployment and underemployment, multifamily rental payments have held up far better than many industry experts expected amid the economic wreckage caused by the spread of the novel coronavirus.

 More than 36 million people have filed for unemployment in recent weeks and millions of others working fewer hours and taking reduced pay. That’s amid new estimates that real GDP growth for the second quarter will come in at -42.8 percent. Toss in a backdrop in which, as of December,  69 percent of Americans had less than $1,000 in savings accounts, and it would seem to paint a bleak picture on the ability of renters to meet their obligations.

Yet 87.7 percent of apartment households made a full or partial rent payment by May 13,  according to a survey of 11.4 million professionally-managed apartments across the U.S. by the National Multifamily Housing Council (NMHC). That’s up from the 85.0 percent who had paid by April 13, 2020, during the first full month of the crisis caused by the spread of the coronavirus. That’s also down from the 89.8 percent of renter households who made rental payments the year before when the U.S. economy was still strong and long before the coronavirus began to spread.

“Once again, despite the economic and health challenges facing so many, we have found that apartment residents who live in professionally-managed properties are meeting their obligations,” said Doug Bibby, NMHC President.

So what gives?

There are a few things at work. For one, NMHC’s dataset is weighted towards renters more likely to be able to continue working their jobs remotely and those with some savings as a backstop.

NMHC gathered its data from five leading property management software systems: Entrata, MRI Software, RealPage, ResMan, and Yardi. It does not represent all apartments in the U.S. For example, the data does not include many government-subsidized affordable housing properties. “These excluded properties are the ones more likely to house residents experiencing financial stress,” says NMHC’s Bibby.

The data also does not include smaller apartment properties that typically don’t use those software systems.

“There are thousands and thousands of buildings with 10 units, 20 units, 40 units,” says John Sebree is the senior vice president and national director of Marcus & Millichap’s Multi-Housing Division. “They generally don’t have property management software…. However, they generally have personal relationships with their clientele. [So,] their collections are a little better.”

In all, the percentage of renters who made full or partial payments at less-expensive,  class-C apartment properties continues to be lower —by about five percentage points—than the percentage of renters at class-A or mid-tier class-B properties who made payments.

“There’s a little more financial distress among residents of lower-priced Class C properties,” says Greg Willett, chief economist for RealPage, Inc. “Many of those who held jobs in hard-hit industries like hospitality and retail stores live in the nation’s class-C apartment stock.” These families often earn lower incomes and have little or no emergency cash reserves to deal with income interruptions, says Willett.

Still, even in class-C stock, the percent paying rent remains high.

A big reason: The expanded federal $600-a-week unemployment benefits put in place as part of the CARES Act on top of whatever each state normally pays out has left many workers making more money now than when they were in their jobs, enabling them to keep up with rental payments.

 As an analysis from explained, Congress arrived at the $600 a week figure by looking at the national average unemployment payout of $370 per week and the national average salary for unemployment recipients of $970 per week. So the goal of the $600 was to make up the difference.

But given the income inequality in the U.S., far more workers’ wages are below that average figure than above. The net result has been that for millions of workers, being unemployed has led to a rise in their weekly pay. The multifamily sector has been a backdoor beneficiary of that federal largesse since it has translated into more people being able to pay rent than one would expect with an official unemployment rate approaching 15 percent.

“The enhanced unemployment benefits provided by the CARES Act are helping the financial burdens of those who have lost their jobs,” says Willett. “These households appear to place rent payments as a top priority.”

The issue going forward, however, is that the expanded benefits are scheduled to expire at the end of July. So the concern multifamily property owners were feeling before the CARES Act was enacted could rise anew later in the summer if the economy has not sufficiently recovered.

“As current federal support programs begin to reach their limit, it will be even more critical for Congress to enact a meaningful renter assistance program,” says Bibby. “It’s the only way to avoid adding a housing crisis to our health and economic crisis.”

Regional differences

Rental payment rates are also varying by region.

“Rent payments tend to be best in the places where the local economies are heavy on the tech sector or government defense tend to have the high shares,” says Willett. May’s best collections through about the middle of May 2020 are in Sacramento, Calif.; Virginia Beach, Va.; Riverside-San Bernardino, Calif.; Portland, Me.; Portland, Ore.; Denver, Colo.; and San Jose, Calif. “Some 93 percent to 94 percent of households in these places have paid their rent.”

Trouble spots include New York City; New Orleans and Las Vegas. These are locations where the spread of COVID-19 has been especially challenging or where tourism is particularly important to the local economy. The payment figures also are well under normal in Los Angeles, says Willett. Higher-cost markets like New York and Los Angeles are also cities where the expanded federal unemployment payouts are less likely to result in unemployed workers making more than they did while they had jobs.


Source: Multifamily Investor Bendix Anderson | May 19, 2020

Multifamily Investment Sales Broker at eXp Commercial
P: 630.474.6441
Randolph Taylor


Federal Government Action Will Assist Renters in Maintaining Income; Strong Multifamily Fundamentals Pre-Coronavirus Provide Sturdy Framework


Unemployment benefit expansion mitigates financial impact. Many throughout the nation are faced with uncertainty as COVID-19 rattles the economy and labor markets. The federal government has been fast-acting in its response, exhausting numerous fiscal and monetary measures to keep the economy afloat and provide income to those who suddenly face hardships. Unemployment benefits have been both increased and expanded, supporting laid-off workers’ ability to stay up to date on important bills, including rent. The new criteria for unemployment benefits include freelance workers, the self-employed, contractors, and part-time personnel in addition to those who would typically meet specified standards. The federal benefit period lasts until July 31, and those who qualify for unemployment will receive $600 per week on top of a state benefit, which varies throughout the nation and generally aligns with the cost of living. State benefits will also be extended an additional 13 weeks beyond the exhaustion of the prototypical benefit period. This action will be wide-reaching and relieve some of the stress that hangs over both tenants and owners of multifamily. Although, the process of distributing payments will likely be delayed as unemployment offices are being overwhelmed with requests.


Government payment provides renters with an income stream to offset financial burdens. The other vital aspect of the stimulus package is the one-time payment to all adult Americans that filed taxes in 2018. Most adults will receive $1,200 in addition to $500 per child under the age of 17, with installments phasing out for individuals that made over $75,000 and dropping off completely above the $99,000 threshold. The federal government has indicated that direct deposit payments will arrive by the end of April; however, those who will be receiving checks in the mail might not get them for at least a couple of months. The additional income should make up for some wage losses and supplement income streams for those who have not been negatively impacted. Based on early reports, 69 percent of renters were able to meet April rent obligations by the fifth of the month, down 13 percent year-over-year despite unparalleled circumstances. 


Apartment fundamentals on solid footing entering this year. Multifamily housing performed exceptionally well over the course of this cycle, driven by the affordability of renting an apartment relative to owning a single-family house, and the younger generations’ preference for leases and added amenities. Over the past few years, workforce rentals became increasingly undersupplied, as vacancy was near 20-year lows ending 2019. Among the three segments, Class C vacancy contracted by the greatest margin since 2009’s peak, dropping 570 basis points into the mid-3 percent range. Class B vacancy followed closely behind, dropping 330 basis points since the Great Recession peak into the low-4 percent area as of the beginning of this year. Tightening conditions have supported the need for rapid inventory growth; however, rising construction costs have led builders to construct more Class A units, which has not provided much relief for the budget-friendly rental segment. Despite the elevated construction of luxury apartments over the past decade, Class A vacancy has also dipped 230 basis points since 2009 into the 5 percent range, demonstrating robust demand throughout all echelons of multifamily housing.



Challenges Presented by the Virus-Driven Downturn

Will Differ Throughout the Nation


Some markets and niches are better prepared to weather the storm. The risk level that the apartment industry will face differs throughout the country, as some markets and population segments will have to combat more pronounced headwinds. Lower-tier space may be burdened by the fact that their tenant base is more likely to be affected by job losses and financial hardship, whereas midtier space might be better suited to maintain cash flow. Additionally, upper-tier space has a stronger ability to avoid losses from missed rental payments as more tenants are able to work from home and have savings built up; however, newly built luxury apartments will find it difficult to build a tenant roster over the short term. Working-class rentals in some of the nation’s more expensive cities will face obstacles as government payments don’t go as far as to cover monthly rental costs. On the other hand, metros with diverse economies will be less at risk as several sectors of the U.S. economy are still functioning, including technology, industrial and construction. 


Multifamily owners will have to overcome hurdles. In the short term, finances will have to be closely watched and managed, as a reduction in rental income is entirely possible, while expenses may arise concurrently. The extra costs to maintain clean common areas through increased labor and sanitation, as well as the likelihood of more maintenance expenses linked to wear and tear as residents spend more time than usual in their apartments will be hurdles. Additionally, owners of newly built apartments will find it more difficult to fill units, as fewer people are moving around and actively searching for residences. A longer-term headwind could be the slowdown of household creation amid more people moving back in with their families or seeking roommates due to financial burdens. These challenges will dissolve once the economy is returned to full functionality and the health crisis is over, but with no clear timetable, it is important for owners to be cognizant of the obstacles they will face.


National Insights:

• Large tourism-based economies are facing more direct impacts that will weigh on their labor force. These headwinds may linger until the population feels safe traveling again.
• Rentals in markets at the height of their COVID-19 outbreaks are more at risk from strict shelter-in-place orders. State and local government reaction will be vital to regaining economic momentum.
• Regional logistics hubs in the Midwest and the central U.S. may be more stable, as e-commerce will act as a tailwind in maintaining the job market. Although, international supply-chain disruptions may have an adverse impact on some coastal markets.

Federal agencies and local governments putting moratoriums on evictions. The CARES Act initiated a 120-day eviction moratorium that disallows borrowers of federally backed mortgages or who participate in federal assistance programs from beginning eviction proceedings for nonpayment, started on March 27. These same landlords must also give tenants a 30-day notice to vacate the property after the eviction moratorium period has passed as well as conform to local eviction laws. Landlords that fit into these classifications and have fewer than five units fall under the homeowner protections included in the CARES Act, which disallow evictions for 60 days started on March 18. Properties without federally backed mortgages or that do not participate in federal assistance programs would default to the state provisions. More than half of the state governments have enforced a pause on evictions, typically lasting between 30 and 60 days. Additionally, local governments, particularly in some of the nation’s most densely populated cities, have followed suit in halting evictions through at least the end of April. Owners that are not disallowed from evicting tenants should take into consideration that it may be more challenging to fill vacant units given the current conditions.


National Multifamily Housing Council Recommendations:

• Halt evictions for 90 days for those who can show they have been financially impacted by the COVID-19 pandemic. (Does not apply to evictions for other lease violations such as property damage, criminal activity or endangering the safety of other residents and staff .)
• Avoid rent increases for 90 days to help residents weather the crisis. Create payment plans for residents who are unable to pay their rent and waive late fees for those residents.
• Identify governmental and community resources to help residents secure food, financial assistance, and healthcare and share that information with residents.


Borrowers of federally backed mortgages granted relief. The Coronavirus Aid, Relief, and Economic Security Act includes protections for those with multifamily mortgages backed through federal agencies, including Freddie Mac and Fannie Mae. Borrowers of these agencies may request loan forbearance, given that they were on time with payments through February 1 and can provide proof of financial hardship from the new coronavirus. The period of forbearance is initially set at 30 days, with two additional extensions available for borrowers that request it within the time frame specified in the agreement. This may be a resource that provides owners an opportunity to cushion themselves, while being aware that it includes stipulations for owners, including bans on evictions and disallowing late payment fees. Additionally, those who seek forbearance will be required to repay within 12 months. Borrowers with mortgages through private lenders should communicate with their providers to discuss options that are available to help them through this challenging time.


Governments Pausing Evictions;
Loan Forbearance Available for Borrowers



Owners Acclimate to Changing
Conditions; Long-Term Outlook Strong


The apartment industry is adapting to combat headwinds. During times of uncertainty, owners may find it necessary and beneficial to be more hands-on with their investments. Open communication with tenants regarding their financial status could formulate realistic expectations for rental income so that owners can anticipate any losses and put plans in place to maintain cash flow. Additionally, owners facing financial uncertainty should reach out to lenders to discuss loan forbearance options and talk to property managers about logistics and operational procedures. Every owner will face their own unique challenges, and the ability to adapt while in the unchartered territory of a global pandemic will be favorable in prospering through these headwinds. Some may even find this is an opportunity to retain quality tenants through new leases, as they are less likely to explore other options during the crisis. Investors looking to buy and sell will have to discover new pricing as the eminent downturn will alter asset values and underwriting standards.


Multifamily remains a solid commercial real estate investment through periods of uncertainty. The $2.2 trillion stimulus bill provides a safety net for the short term while the population works together to slow the spread and medical researchers race to find a vaccine that can bring a sense of normalcy back to daily life. Multifamily owners are concerned with the financial impact that will come of this, but several factors support an optimistic viewpoint. Government payments and unemployment benefits will help renters replace lost income over the near term, enabling them to pay on time. The underlying trends that have supported apartments throughout this cycle continue to be in place and will sustain robust demand for rentals in the long term. One of the fundamental principles driving multifamily housing is that people will always need a place to live. The global pandemic will not push prospective renters toward single-family housing as an alternative as the rent to home payment gap remains significant.

National Multi-Housing Group
John Sebree First Vice President, National Director | National Multi-Housing Group

Prepared and edited by
Ben Kunde Research Associate | Research Services

The information contained in this report was obtained from sources deemed to be reliable. Every effort was made to obtain accurate and complete information; however, no representation, warranty or guaranty, express or implied, may be made as to the accuracy or reliability of the information contained herein. This is not intended to be a forecast of future events and this is not a guaranty regarding a future event. This is not intended to provide specific investment advice and should not be considered as investment advice. Sources: Marcus & Millichap Research Services; Bureau of Labor Statistics; CoStar Group, Inc.; Experian; Federal Reserve; Global Financial Data; MBA; Moody’s Analytics; NYSE; Real Capital Analytics; RealPage, Inc.; Standard & Poor’s; TWR/Dodge Pipeline; U.S. Census Bureau; Yardi © Marcus & Millichap 2020


Multifamily Investment Sales Broker at eXp Commercial
P: 630.474.6441
Randolph Taylor

The Unintended Consequences and Risks of Forbearance

To stop the spread of Covid-19, communities are coming together, staying home, washing hands and social distancing to protect the most vulnerable. A similar level of cooperation is needed in the commercial real estate industry among tenants, owners, lenders and the government to prevent a cascade of bankruptcies. In the words of one commentator, we are “too connected to fail.”

For example, the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES) allows multifamily property owners who hold federally backed mortgages to request forbearance on their loans. The policy is intended to prevent a wave of multifamily loan defaults and potential foreclosures by giving owners some relief in the event tenants fail to pay rent. Though the forbearance provision is well-intentioned, many believe adjustments need to be made to better align the interests of tenants, property owners and lenders, and avoid dire consequences for the entire system. For example:

Landlords who seek forbearance can’t evict tenants, charge late fees or issue negative credit reports for those who fail to pay rent. While this is appropriate for people who have lost their jobs due to Covid-19, the policy covers all tenants, even those whose incomes have not be affected.

Many believe the Agencies should require tenant relief to be predicated on direct impact from Covid-19. Those whose employment can be documented should be subject to business as usual. This is particularly important as unemployment rises over time. A Wall Street Journal survey of 57 economists suggests that 14.4 million jobs will be lost in the coming months, and the unemployment rate will rise to a record 13 percent in June.


Though the forbearance provision is well-intentioned, many believe adjustments need to be made to better align the interests of tenants, property owners and lenders, and avoid negative consequences for the entire system.

Servicers are working on a case-by-case basis to help property owners, but since major modifications require Special Servicer sign off, we expect the bigger deals to be subject to significant fees. Meanwhile the Special Servicers may not have the bandwidth to address smaller deals, which may be ignored.

The good news is that we see evidence of owners, tenants and lenders across the commercial real estate spectrum coming together to avoid irreparable damage to the system. Most apartment residents understand that their rent payments are crucial to running a safe and livable property. The National Multifamily Housing Council (NMHC) found that 84 percent of apartment households made a full or partial rent payment by April 12, up 15 percentage points from April 5, based on a survey of 11.5 million units of professionally managed apartments across the U.S.

In addition, many landlords are being compassionate and flexible, offering modifications that can be paid back incrementally over the life of the lease when the crisis abates. Owners tell us they are communicating with tenants to find out who is facing hardship, and reaching out to elderly residents in particular who may lack a support system. Others say they are focused on maintaining staff and operations, as supporting tenants is the right thing to do and will have significant upside for the property’s reputation over time.

Finally, in this uncertain economic landscape, lenders are like doctors. They need to manage borrowers like a physician working to help cure a patient. To that end, we are seeing many banks, and some life companies, allowing shortfalls to be tacked on to the back-end balloon payment. Lenders also need to make allowances for this unprecedented situation and recognize that even the most stable borrowers may require forbearance and remain excellent candidates for future financing.


Multifamily Investment Sales Broker at eXp Commercial
P: 630.474.6441
Randolph Taylor




The issue is exceptionally complex with the answers varying on a case-by-case basis. The “Acts of God” exception is intended to provide protection when a catastrophic, unforeseen event occurs. Common examples would be that the property has been destroyed by hurricane, tornado, or earthquake.  A pandemic might qualify as an “Act of God,” but that will depend on the answer to several questions, including, but not limited to:


  1. Is the property itself quarantined or somehow actually affected by the virus?
  2. Is the buyer quarantined and physically unable to close on the deal?
  3. Is the city or state forcing businesses to close or imposing restrictions that make closing impossible?
  4. Is the buyer refusing to close because of fear, panic, or volatile financial markets?
  5. Has a lender, after contingencies were removed, refused to provide funding because of the pandemic?
  6. Did the buyer go under contract after the pandemic started or know these issues might arise?


In certain circumstances where there is a direct nexus between COVID-19 and the reason the deal cannot close – e.g. the federal government has seized the property for public use (turning a hotel into a temporary hospital) or the buyer’s lender has refused to fund closing because of COVID-19 related restraints on capital – the issue might be more clear. However, in far more circumstances, the answer will be unclear and require detailed legal analysis. 



(This is not to be construed as legal advice, rather for discussion purposes and all parties are advised to obtain legal advice from a licensed attorney prior to signing any legally binding document or acting on a pending legal matter)
Multifamily Investment Sales Broker at eXp Commercial
P: 630.474.6441
Randolph Taylor


In an effort to keep renters in their homes and to provide some economic flexibility to multifamily property owners amid the growing COVID-19 crisis in the United States, the Federal Housing Finance Authority (“FHFA”) announced on Monday, March 23rd, that it directed Fannie Mae and Freddie Mac to offer at least 90 days mortgage forbearance to multifamily property owners negatively impacted by the pandemic who have mortgages backed by Fannie Mae or Freddie Mac, with the condition that borrowers taking advantage of the forbearance (i) suspend evictions for renters unable to pay rent as a result of the coronavirus for the duration of the forbearance, (ii) repay the delayed payments in twelve equal monthly installments once the forbearance period ends, (iii) use the proceeds of any business interruption insurance to pay the delayed mortgage payments, and (iv) allow tenants to repay past due rent over a period of 12 equal monthly installments. FHFA’s action follows the moratorium on foreclosures and evictions that it and the U.S. Department of Housing and Urban Development instituted with respect to loans to single-family homeowners.

Multifamily property owners should keep in mind that the forbearance granted under FHFA’s action only temporarily affects their loan payments – it does not affect their maintenance obligations to their tenants in any way. Since many states and municipalities have enacted shelter-in-place orders, there will be more people staying inside at their homes, and thereby increasing the likelihood of wear and tear in their rental areas.

States are taking action on this issue as well with legislation that goes beyond FHFA backed loans.  California, Illinois, Indiana, and other states have taken action to directly suspend or to allow local governments to suspend enforcement of all residential (and in some cases, commercial) evictions even if tenants are not meeting their obligations to pay rent. Additionally, all states obtained eligibility to provide small businesses with disaster relief in the form of Small Business Association loans which will theoretically help small businesses pay rent during this time.

For multifamily property owners and mortgage servicers, it pays to be aware of the ever-shifting policies and regulations that are being promulgated by the federal and state governments and their various housing authorities and regulators daily. We will continue to actively monitor developments in the COVID-19 situation and reactions in the legal community.


Source: Thompson Coburn LLP