Rent payments came in better than expected through the second week of April, an encouraging sign given the backdrop of a national economy that shed 17 million jobs in a three-week period due to COVID-19 fallout.
Through April 12, 84% of apartment households made a rent payment, according to the National Multifamily Housing Council’s Rent Payment Tracker. That’s up 15 percentage points from the prior week. Compared to the same time period last year, April’s Week 2 results were down only 6 percentage points. RealPage is among the property management system providers partnering with NMHC to provide data for the national rent payment tracker.
Leveraging RealPage’s payments dataset, we dug deeper into the trends to provide analysis by metro and asset class. Here are some hot-button topics we’re asked about frequently, and our thoughts on each:
How did collections improve so much between April 5 and April 12?
Everyone was understandably nervous going into April’s Rent Week, and the media spin on the numbers weren’t especially encouraging when they said only two-thirds of apartment renters paid the rent through April 5. Context is important. We suspected then the numbers were compressed by the fact that April 5 landed on a Sunday, and that turned out to be true. Most leasing teams are working remote, meaning that no one is onsite to process rent checks – especially on a Sunday. Many renters likely submitted checks by April 5 that weren’t processed until April 6 or 7. Also, remember that few outsiders watched rent payments very closely until now. That means they lacked the context to understand that, even in good times, some households don’t make rent payments. The key number to watch is the gap between households paying rent today versus the same time last year – not just the overall share making a payment.
Are collections still weakest in Class C properties?
Yes. As we noted last week, Class C renters were most exposed to layoffs in the hospitality, retail and restaurant sectors hard hit by COVID-19’s quarantines. Only 79.7% of Class C renters made a payment by April 12 in the RealPage dataset, compared to 84.1% in Class B and 84.8% in Class A. This split aligns with historical trends. In April 2019, Class C payments came in 5 to 6 percentage points below Class A and Class B.
What metro areas are struggling the most with April payments?
Four metros stand out, and the list is similar to what we saw last week. In New Orleans, hard hit by both the COVID-19 virus itself as well as the impact to its tourism industry, rent payments through April 12 came in at a national low of 76.2%, down 12.1 percentage points from the same time last year. In Las Vegas, only 80.5% made a rent payment, down 10.8 percentage points. Sin City has been hit hard, with the Strip is shuttered and many of the tourism-related workers in hospitality and entertainment laid off or furloughed. In Detroit, another city hit hard by COVID-19, payment trends fell 8.0% year-over-year to 83.5%.
The only other city where fewer than 85% of renters made a payment through April 12 is Boston at 83.2%, down 6.0 percentage points year-over-year. In addition to Boston, four other metros reported declines of 6.0 to 6.4 percentage points: Miami, Atlanta, Houston and Orlando. There is some concern we could see further weakness in Orlando and Miami going forward the longer theme parks and beaches remain impacted. Houston is another one to watch given the concurrent challenges in the energy sector.
What metro areas have been the least impacted?
Twelve large metros reported 88% or more apartment households made a rent payment by April 12. The Southern California duo of San Diego (91.3%) and Los Angeles (90.4%) topped the list, followed closely by Minneapolis/St. Paul (90.1%). The Southern California metros were pleasant surprises given their exposure to tourism, hospitality and entertainment.
Metros in the 88% to 89% range included Portland, Denver, Austin, Seattle, Raleigh/Durham, Salt Lake City, Philadelphia, San Francisco and Tampa Bay. Three more – St. Louis, Nashville and Dallas/Fort Worth – came in a few basis points under the 88% mark. Nashville is another pleasant surprise for the same reason we noted for Southern California.
Last week we mentioned Salt Lake City as a surprise on the list of metros with big declines in payment rates. It turns out that was a metro likely impacted by checks made by Sunday, April 5, not being processed until the work week started. Through April 12, 88.2% of apartment households made a rent payment, and that was off only 4.5 percentage points year-over-year.
Raleigh/Durham reported the smallest year-over-year decline (-1.5 percentage points) in rent payments made by April 12. The economy there is heavy on government, education and healthcare – three sectors that tend to hold up well in recessions.
What other trends jump out in the latest numbers?
One big trend is the surge in rent payments made online as renters and property managers both try to avoid in-person contact. In April so far, 61% of payments were made electronically, versus only 51% at the same time last year.
Three additional observations related to April payments data:
Lots of attention is focused on New York City right now given its status as the American epicenter for the COVID-19 outbreak. The metro definition includes part of Northern New Jersey, and that may impact these numbers to some degree, but overall the payment trends are fairly encouraging. Through April 12, 85.8% of apartment households made a rent payment. That was only 4.3 percentage points below the same period in 2019.
Additionally, larger metros continue to report higher payment rates than do smaller metros. This aligns with what we shared last week. Broadly speaking, higher-quality product in larger cities are holding up best. But there is one exception to that rule. Interestingly, though, we also see payment challenges in high-rise properties, many of which are more expensive properties in pricey urban locations. In high-rises, only 82.6% of renters made a payment. That’s 1-2 percentage points below garden and mid-rise. More importantly, the year-over-year decline was deepest at 7.8 percentage points. This trend contrasts with what we see in Class A overall, which is seeing the highest payment rates among asset classes as noted earlier.
On a state level, Iowa and Minnesota report the smallest year-over-year declines in payments made by April 12 with both down less than 2 percentage points. On the flip side, the three states with the biggest declines align with the same three we saw on a metro level: Nevada, Louisiana and Michigan.