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

Economic headlines offer a confusing mixed bag lately. A wide range of indicators shows surprising strength in everything from jobs, wages, and personal savings to home sales and apartment demand. The economic downturn triggered by COVID-19 turned out to be the shortest recession in American history.

But one narrative remains stubbornly negative: a looming “evictions tsunami.” Media reports now suggest more than 11 million renters are at risk of eviction when the federal moratorium expires at the end of July.

How can that be? Well, it probably isn’t – and that’s good news for everyone.

To be clear, evictions will increase when the federal moratorium expires at the end of July. Evictions are a lose/lose proposition, and even one eviction is too many. But the totals will almost certainly come in as a fraction of that widely cited 11 million figure.

The doomsday predictions are based almost entirely on a Census survey that the Census itself couches as “experimental.” There’s ample evidence suggesting that the vast majority of renters are paying the rent and that most of today’s renter distress is structural – tracing to the severe shortage of affordable housing, a problem that long predates the pandemic.

It’s critical to get the facts correct, so we can drive aid toward those truly in need. Here are 10 facts that point to a far less dire outlook.

Eviction Forecasts are Based on a Miniscule, Problematic Dataset

Nearly all studies predicting an evictions tsunami are based on the Census Household Pulse Survey representing around 70,000 respondents per surveyed period. That’s not just renters. That’s all households. If we assume the sample is representative of the national 35% rentership rate, that implies roughly 0.05% of the nation’s 47.2 million rental units are tracked. The Census employs many brilliant researchers – who have long been hamstrung by underfunding – and the team wisely couches their Household Pulse Survey with detailed technical documentation. The Census labels HPS data as “experimental” and urges users to “take caution” when analyzing the data. Census researchers usually work around small-sample issues with sophisticated weighting methodologies. But the Census admits unusual challenges with nonresponse bias in HPD surveys, noting that “weighting adjustments are limited by a lack of information about nonresponding units.” Because HPD covers so many new topics (including rent payments), there’s no benchmark on what subpopulations are getting missed or underrepresented.

Despite all these caveats from the creators of the survey, eviction forecasters have largely ignored the warnings and mispositioned the data to be rock solid.

Census Pulse Surveys Have Obvious Holes

Given the Census team’s warnings, it’s no surprise to find obvious holes in rent payments data from the Household Pulse Survey.

For example, the Census shows Dallas/Fort Worth and Atlanta in the top five metros for rent debt – lumping the booming Sun Belt metros in with New York, Los Angeles, and Detroit. That is very improbable for several reasons. Both Atlanta and Dallas are well ahead of the national pace in the economic rebound, and there is not a single supporting datapoint suggesting either metro ranks among the nation’s worst by any other economic measure of significance.

Additionally, both Atlanta and Dallas (unlike New York or Los Angeles) have an outsized concentration of large, professionally managed apartment properties and few mom-and-pop rentals. That is a key factor because there are abundant data showing that large, professionally managed apartments are collecting rent at near-normal levels. RealPage data on actual collections in both Atlanta and Dallas (with coverage in both markets individually topping what the Census tracks nationally) showed that more than 96% of apartment renters paid rent in June 2021, and the numbers have been consistently high throughout the pandemic era. By comparison, the Census surveys show that 21% of Atlanta renters and 16% of Dallas/Fort Worth renters are behind on rent. That doesn’t make sense at all, and it raises a big red flag over the broader dataset.

Larger Datasets Show Much Healthier Rent Collections

An honest evictions forecast must consider all available data, but most researchers aren’t doing that – relying exclusively on tiny-sample Census surveys and ignoring vastly larger datasets representing different subsets of the rental housing universe.

For example, the National Multifamily Housing Council collects actual payments data on 11.5 million units. That’s 450 times more than Census surveys, and it’s one-fourth of all rentals nationally. And it’s not a survey; it’s real payments data. NMHC data shows nearly 96% of apartment renters paid rent in June 2021, and that was off only 0.4 percentage points. That’s a very big deal. In single-family rentals, surveys by the National Association of Realtors last year reported rent collections at 95%. Large single-family rental owners have reported even better numbers.

But eviction forecasters pushed back hard against NMHC and NAR data and convinced policymakers and reporters to largely ignore it. They noted that industry groups represent larger apartment properties and bigger single-family portfolios. It’s true these datasets do not cover mom-and-pop rental housing owners, who command significant market share in the most challenging markets, like New York. But rather than dismissing it altogether, why not apply those larger datasets to represent their share of the market? For example, NMHC’s data covers roughly 25% of the rental stock, so apply the 96% payments number. That one simple step would significantly reduce any researcher’s estimated number of households at risk of eviction.

RealPage tracks a sizable chunk of the nearly 4 million units of affordable housing across the country attached to federal programs. Collections tend to be structurally lower in affordable housing. Back in June 2019, only about 89% of renters in affordable housing paid rent. In June 2021, the numbers came in at 87%, down 2 percentage points – illustrating that the vast majority of renter distress existed prior to the pandemic. It’s critical for policymakers to focus on those truly in need, and shift to “a scalpel, not a chainsaw” approach that is focused on renters in affordable housing and mom-and-pop rentals.

Rental Housing is a Hot Market

Typically in periods of distress, we’ll see demand-side issues cause erosion in housing fundamentals. But that’s not happening in 2021. The market-rate apartment sector is having its best year in decades – if not ever – with record numbers in demand, occupancy and rent. Renters are flooding in with higher incomes and consistently paying the rent. The single-family market is more fractured, but similar trends have been reported in professionally managed portfolios. Still, there’s admittedly a “tale of two markets” happening here. On one end, there’s ample demand from deep-pocketed renters to pay market rates without pushing up on affordability barriers. That’s a huge share of the overall rental market. On the other end, there’s a severe undersupply of designated affordable housing for lower-income families, as outlined in depth by Harvard’s Joint Center for Housing Studies.

Jobs are Coming Back, Incomes are Up

National unemployment dropped to 5.9% in June. Yes, that’s well above the 50-year low of 3.5% set in February 2020. But over that 50-year period, the national average was 6.2%, meaning today’s unemployment rate is better than the long-term average. Job openings hit the biggest numbers on record, and many employers are going to unprecedented lengths to hire more workers. The labor shortage is driving up incomes. Wages surged 6.6% between February 2020 and June 2021. Incomes jumped even more in retail (8.6%) and restaurants/hospitality (7.9%). In market-rate apartments nationally, RealPage data shows huge growth in incomes for renters signing new leases. In May, the average household income for new renters hit a new high of $68,000.

Of course, big growth in jobs and incomes doesn’t translate to every single household. The mismatch between unemployed workers and available jobs is a complex challenge. But the overall story is very encouraging.

Personal Savings are Up, Debt is Down

There’s a false narrative that Americans are spending out of savings – or going into debt – to pay rent. While that might be true in some cases, it’s not typical. In fact, personal savings are up significantly. In May, the personal savings rate hit 12.4%, up from 8.3% in February 2020 and well above the historical average of 9.0%, according to data from the Federal Reserve. The personal savings rate reflects the share of disposable income put towards savings.

The second false narrative is that renters are going into debt to pay rent. Again, that’s not reflected in the data. According to the Federal Reserve, household debt service payments as a percentage of disposable personal income hit an all-time low of 8.2% in the 1st quarter of 2021. Credit card delinquency rates also hit a record low at 1.89%. Federal checks certainly helped many households pay down debt and increase savings.

Forbearance Numbers Remain Very Low

To help rental property owners, big lenders offered forbearance programs that allow them to defer mortgage payments. If there were indeed major problems, that should be apparent in the number of forbearance requests from Freddie Mac, which owns a massive share of multifamily mortgages. But forbearance requests have remained consistently low. As of June 2021, only 3.0% of properties in their mortgage pool were in forbearance. Previous reports indicate the majority of properties in forbearance were “small balance,” meaning more likely to be smaller, family-owned rentals.

Renters View Property Managers More Favorably Than Headlines Suggest

Property managers get little love, with headlines often sharing isolated horror stories suggesting a hostile relationship worsened by unpaid rent. And if a mass eviction crisis loomed, you would expect renters to be widely unhappy with their landlords. But as it turns out, those anecdotes don’t align with most renter experiences across the country.

J Turner Research pioneered the concept of the ORA Score or online reputation assessment. ORA Scores in apartments nationally increased 109 basis points between May 2020 and May 2021, based on a same-store analysis by RealPage of both conventional and affordable housing. That means apartment renters are happier today with their property managers than they were last year – even though a pandemic. Those gains trace to yeoman efforts by property managers to protect their renters throughout the pandemic – funding rental assistance funds, providing flexible payment programs, and offering creative virtual solutions for residents to engage with each other and with site staff. In fairness, the RealPage study focused only on professionally managed apartments, and the renter/landlord relationships may differ in the more challenged mom-and-pop rental sector.

NMHC has published guidelines for apartment owners to navigate evictions, with a heavy emphasis on empathy. That approach differs from the ruthless image depicted in anecdotes and will help further reduce evictions.

Rental Assistance Funds are Underutilized

Congress allocated nearly $47 billion toward its Emergency Rental Assistance program based largely on the same problematic datasets forecasts a mass eviction wave. Six months after its creation, only about 3% of the funds have been spent. Housing advocates have been quick to blame the slow pace of bureaucracy. That is certainly a contributing factor, and those delays must be addressed quickly. But is that the only factor? Curiously, no one is asking what should be a logical question to ask: Was it too much, too late? If funds remain unspent, Congress would be wise to reallocate those funds toward addressing the structural, pre-pandemic affordability challenges – either through vouchers or, even better, the creation of new affordable housing.

Local Eviction Bans Persist

One of the more curious omissions by eviction forecasters: Few are adjusting for localized eviction bans that will outlast the federal moratorium. Not coincidentally, extended bans tend to be concentrated in big coastal states hit harder by economic challenges related to the pandemic. For example, California and Washington extended their eviction moratorium through September 30. New York’s runs through the end of August. New Jersey’s ban goes until January 1, 2022, but the state is considering a  novel approach to weed out abuse, where higher-income renters could be evicted sooner. It’s worth pointing out that in these types of markets, local or state bans could very likely be extended further as local advocates pressure policymakers.

What’s Next?

Assuming there’s no last-minute extension of the federal eviction moratorium, eviction notices can begin as early as August 1 – though the timelines vary based on a variety of local and asset-specific factors. But a notice or filing does not mean an actual eviction. That process takes time and often resolves amicably. When cases do go to court, they rarely move quickly – particularly with many local courtrooms backed up. Evictions will take place, and that’s an undesired outcome for both renters and property owners.

As noted earlier, the real challenge right now is the severe undersupply of affordable rental housing. According to Harvard, we need 8.3 million additional units of designated affordable housing just to meet current demand. The Biden administration has proposed funding to build or maintain 2 million additional units – which would be a significant start. More affordable housing creation is the single most important step in solving America’s structural rental distress – a challenge that existed long before COVID-19.


Source: Ten Facts to Challenge the Evictions Doomsday Narrative | RP Analytics

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

Rent collections at U.S. professionally managed apartments are in solid shape as of mid-June.

Among properties where RealPage, Inc. property management software is used, the share of households making rent payments as of June 13 is up 1.6 percentage points from the year-earlier figure and up 2.7 percentage points from the payment level recorded for the initial 13 days of May.

This improving rent collection pace reinforces that weak payment results posted during the first few days of June simply reflected that the initial period of measurement included a weekend.

The National Multifamily Housing Council had reported payments for the June 1-6 timeframe at 77%, off 3.8 percentage points from results posted at the same time in 2020. Previous Patterns Hold in Property Class Payments As has been seen since the COVID-19 pandemic began, rent collections remain better in the upper-end and mid-range apartments than in the lower-tier properties.

RealPage stats show payments for June through the 13th at 91.5% in the Class A block of product and 90.7% in the Class B inventory. Collection levels are lower at 86.2% in Class C projects. Renters in the Class C stock generally live paycheck to paycheck, lacking resources to rely on when employment is interrupted. Sun Belt Metros Lead the Way Key Sun Belt metros generally register the strongest payment stats, according to the RealPage data.

Four Florida markets are top 10 performers for collections, with the share of households already up-to-date on payments for June at 96% or better across Miami, Tampa, Fort Lauderdale, and West Palm Beach. Austin and Phoenix are additional Sun Belt metros that rank among the payment leaders. Providence is the metro that actually leads for the biggest share of households (97.7%) making June’s rent payment, while results also are strong for Salt Lake City, Virginia Beach, and Cincinnati.

Metros, where payments lag, include Milwaukee, New Orleans, Las Vegas, Seattle, and Portland. Collection rates range from 86% to 88% in those locales. The biggest year-over-year drops in collections as of June 13 are in Milwaukee (-7.1 percentage points), Portland (-5.4 points), and the combo of Seattle, San Jose, and Minneapolis (all -3 to -4 percentage points).


Source: Mid-June Apartment Rent Payments Look Good

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

Over the past year, many of us at RealPage have referred to the date as Tom Hanks Day, since it’s when America’s Dad shared that he and wife Rita Wilson had contracted the virus. It’s also when the NBA shut down pro-basketball play and when the World Health Organization first classified what was happening as a global pandemic.

apartment market data services

As with so many things, then, the U.S. apartment market entered a fundamentally different period one year ago today.

Starting on March 12 and then proceeding through most of April, many apartment renters froze in place. Searches for new accommodations dropped drastically from year-earlier levels, and new-resident lease signings plunged. At the same time, retention of existing renter households at initial lease expiration soared to record heights. Said bluntly, people stopped moving and hunkered down.

One year later, key stats for the apartment market are in much better shape than what was initially feared back in March 2020.

Demand Is Robust

After apartment leasing activity took a giant hit in Spring 2020, people began to move around once more around mid-year. Apartment demand soared in the 3rd quarter and held well above what’s seasonally normal as 2020 drew to a close. By the end of the year, absorption of market-rate units in the country’s 150 largest metros was up to roughly 296,000 units, only a hair under annual results in 2017 through 2019.

Demand remains above the seasonally typical volume in the first few months of 2021. More than 30,000 units were absorbed in January and February, a time period when cold weather normally limits the net increase in occupied apartments to just a handful of units.

With demand proving stronger than many expected, U.S. apartment occupancy has avoided any damage. The February 2021 average occupancy rate of 95.4% for the U.S. is basically unchanged from the February 2020 figure of 95.5%.

Renters Are Paying (Mostly)

Unprecedented layoffs in March and April 2020 triggered fears that many households would no longer be able to pay their rent. That didn’t happen, at least not in the professionally managed apartment properties sector of the rental housing stock.

According to National Multifamily Housing Council research – to which RealPage contributes data – the share of households meeting their rent obligations ranges between 93% and 95% for each month since the initial U.S. outbreak, in most months off no more than 2 percentage points from year-earlier results.

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While a now-improving economy might suggest that the worst is behind us for missed rent payments, there’s still some downside risk. Households suffering financial stress certainly need the rental assistance that is part of the Biden administration’s American Rescue plan. However, RealPage analysts have concerns that forgiveness of back rent owed could lead households to deprioritize meeting their rent payment obligations.

Pricing Power Is Mixed

Effective asking rents for new-resident leases generally dropped as COVID emerged, sliding a little in most locations but much more in select spots, especially expensive gateway cities.

How you feel about today’s pricing power is influenced by where you are, since there’s a huge spread in the results between the country’s top and bottom performers. Annual rent growth is great in metros like Riverside, Sacramento, Phoenix, Tampa, and Atlanta. On the other hand, the hole remains deep in New York and the Bay Area, and there’s also lots of work to do in Seattle, Boston, Washington, DC, and Los Angeles.

In the latest stats, month-over-month rent growth proved very solid during February. Markets that had displayed momentum previously are continuing to do quite well, and green shoots are beginning to show up in the places that had taken the biggest pricing hits earlier.

We’re Still Building

Lots of apartment product remains on the way. Ongoing construction coming into 2021 totaled roughly 583,000 market-rate units, and this year’s scheduled deliveries reach just over 400,000 units, surpassing annual additions delivered throughout the past few years.

The activity has cooled off a little over the course of the past year, with both starts and new multifamily building permit approvals down by 10% to 15%. Still, that’s a minor dip compared to what happened in the 2008 to 2009 recession, with the numbers remaining high by long-term historical standards.

multifamily data services

Developers remain eager to build in the suburbs, especially across fast-growing Sun Belt areas. While there’s less capital available for urban core construction, don’t write off that segment of the stock. Conversations about building more downtown towers are in process, as a project that gets going in the immediate future is likely to be delivering in a much-improved leasing environment.

Property Trade Volumes Are Coming Back

Information from Real Capital Analytics shows a moderate decline in the nation’s apartment sales volume during 2020, mainly reflecting that trades paused during the summer months. There was a brief period when many took a wait-and-see position, holding off until some clarity on valuations could be established. However, sales came roaring back during the final quarter of 2020, and the typical sales price – about $176,000 a door – basically didn’t move from its pre-pandemic level. Cap rates even compressed by another couple of ticks during the course of the year.

The stack of capital available for apartment investment remains huge, probably even bigger than it was pre-pandemic as some money that had been designated for other types of real estate now could go to apartment buys. Anyone on the sidelines waiting for fire-sale prices on distressed assets appears to be out of luck, with maybe the exception of a few small properties with mom-and-pop owners.

Operations Continue to Evolve

Apartment operators had to move fast to adapt to the changes that COVID brought to day-to-day practices on-site and in the back office. After addressing safety issues for both employees and residents, the first moves often were to introduce or expand virtual leasing capabilities and to address rent payment options.

Lots of changes continue, as operators are assessing how their resident profiles are evolving and how the needs and preferences of their customers are shifting. The use of technology to move processes offsite is accelerating, and many operators are taking a hard look at expenses and how those costs might be trimmed.

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

 

The National Multifamily Housing Council (NMHC)’s Rent Payment Tracker found 91.3 percent of apartment households made a full or partial rent payment by July 20 in its survey of 11.1 million units of professionally managed apartment units across the country.

 

This is a 2.1-percentage point decrease from the share who paid rent through July 20, 2019, and compares to 92.2 percent that had paid by June 20, 2020. These data encompass a wide variety of market-rate rental properties across the United States, which can vary by size, type, and average rental price.

 

“The extended unemployment benefits and other government support that have proven critical to keeping apartment residents in their homes expire in just a few days,” said Doug Bibby, NMHC President. “Lawmakers are currently negotiating, but Members of Congress and Trump administration leaders need to understand that unless comprehensive action is taken now to protect the tens of millions of Americans who live in an apartment home, they risk destabilizing the nation’s housing market, undermining the nascent economic recovery, and turning the ongoing health and economic crisis into a housing crisis.” 

 

The NMHC Rent Payment Tracker metric provides insight into changes in resident rent payment behavior over the course of each month, and, as the dataset ages, between months. While the tracker is intended to serve as an indicator of resident financial challenges, it is also intended to track the recovery as well, including the effectiveness of government stimulus and subsidies.

 

However, noteworthy technical issues may make historical comparisons imprecise. For example, factors such as varying days of the week on which data are collected; individual companies’ differing payment collection policies; shelter-in-place orders’ effects on residents’ ability to deliver payments in person or by mail; the closure of leasing offices, which may delay operators’ payment processing; and other factors can affect how and when rent data is processed and recorded.

Total unit counts may change as units are leased or vacated and survey methodology is refined.

 

 

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

 

Washington, D.C. – The National Multifamily Housing Council (NMHC)’s Rent Payment Tracker found 80.8 percent of apartment households made a full or partial rent payment by June 6 in its survey of 11.5 million units of professionally managed apartment units across the country.

 

This is a 0.7-percentage point decrease in the share who paid rent through June 6, 2019, and compares to 80.2 percent that had paid by May 6, 2020. These data encompass a wide variety of professionally managed market-rate rental properties across the United States, which can vary by size, type, and average rental price.

 

“These are trying times for the country, and we are reminded on a regular basis how crucial safe and secure housing is during a period of uncertainty and upheaval, so we are glad to see that residents who live in professionally managed properties continue to pay their rent,” said Doug Bibby, NMHC President. “While our Rent Payment Tracker metric continues to show the resilience and strength of the professionally managed apartment industry, it does not necessarily tell the whole story, as it doesn’t capture rent payments for smaller landlords or for affordable and subsidized properties, and according to Harvard, more than half of renters with at-risk wages due to the pandemic live in single-family and small multifamily rentals with 2–4 units.”

 

 

“There are serious signs of economic dislocation outside of our reporting universe that underscore the need for Congress to pass a direct rental assistance program and extend unemployment benefits before it’s too late,” said Bibby. “According to the Harvard Joint Center for Housing Studies, nearly a fifth of households with at-risk wages in small multifamily apartments may have difficulty paying rent.  In addition, 32 percent of renter respondents to the Census Bureau’s Household Pulse Survey reported no or slight confidence in their ability to pay next month’s rent.” 

 

“At the beginning of the outbreak lawmakers took swift action to extend and enhance unemployment benefits as well as create other programs aimed at keeping individuals employed. Thanks to those forward-looking steps, millions of Americans have been able to continue to be able to afford healthcare, food, and shelter,” said David Schwartz, NMHC Chair, and CEO and Chairman of Chicago-based Waterton. “However, those benefits will expire on July 31. Unless policymakers move to extend them, the families and individuals relying on them will find themselves without a safety net, undercutting the initial economic recovery. We urge lawmakers in both parties to continue to sustain and support Americans as our nation and the economy begin to recover.”

 

The NMHC Rent Payment Tracker metric provides insight into changes in resident rent payment behavior over the course of each month, and, as the dataset ages, between months. While the tracker is intended to serve as an indicator of resident financial challenges, it is also intended to track the recovery as well, including the effectiveness of government stimulus and subsidies.

 

However, noteworthy technical issues may make historical comparisons imprecise. For example, factors such as varying days of the week on which data are collected; individual companies’ differing payment collection policies; shelter-in-place orders’ effects on residents’ ability to deliver payments in person or by mail; the closure of leasing offices, which may delay operators’ payment processing; and other factors can affect how and when rent data is processed and recorded.

 
Total unit counts may change as units are leased or vacated and survey methodology is refined.

Find more information, including the methodology, on the NMHC Rent Payment Tracker here.