Multifamily Investment Sales Broker at Marcus & Millichap
P: 630.570.2246
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 Marcus & Millichap
P: 630.570.2246
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.

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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.

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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 Marcus & Millichap
P: 630.570.2246
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 Marcus & Millichap
P: 630.570.2246
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.