To support the multifamily community through the current COVID-19 crisis, we’ve launched a series of discussions centered around its impact on the rental housing industry with the latest data, expert insights and actionable measures stakeholders can take to minimize fallout. You can register for upcoming webcasts and watch previous episodes on demand at the COVID-19: Resource Center.
This is a condensed summary from the webcast, COVID-19: Impact on Single Family Rentals, broadcast on April 1, featuring RealPage® Chief Economist Greg Willett, VP and Deputy Chief Economist Jay Parsons, and SVP Single Family Inaas Arabi, with special guests Adam Haleck, President and CFO Northpoint Asset Management, and Tony Cline, Managing Broker Home Vault Property Management.
State of the Economy, Certain Metros & Single Family Rentals
The economic situation is changing by the hour. The U.S. federal government and the Federal Reserve are taking dramatic steps to turn the tide. The biggest concern right now is the unprecedented number of people losing their jobs. Last week about 3.3 million people filed for unemployment. The previous record was just under 700,000 in late 1982.
At this rate, the number of people losing their jobs could double this week’s number filing for unemployment, with job cuts in a two-week period expected to equal or exceed all the losses recorded in 2008 and 2009.
Economists at the Federal Reserve Bank of St. Louis project that 47 million people could lose their jobs as a result of the COVID-19 downturn, pushing the unemployment rate to an unprecedented 32%. However, most of these positions are expected to be reinstated in 2021.
Layoffs have been harshest in the hospitality sector and among retailers, including restaurants and entertainment venues. Markets with heavy exposure to these sectors will likely be hit hardest. For example, Las Vegas’ share of total workers holding hospitality jobs is about 2.5 times the national average. In Orlando, that count is about double the national norm. The rest of Florida is also expected to endure severe economic setbacks.
Other spots with substantial downside risk due to industry composition include San Antonio and two Southern California metros—Orange County and San Diego. The share of renters in those industries could influence the percentage unable to pay rent.
On the flip slide, the regions expected to be more economically stable are those places where the job base is largely in government and healthcare—sectors generally considered to be the most stable employment categories. This means metros like Washington, D.C., and adjacent Baltimore and Philadelphia, as well as state capitals like Sacramento, the Raleigh/Durham area and Columbus, Ohio.
Of all the sectors in rental housing, Single Family has probably been the least impacted operationally since many property managers are equipped to work remotely. However, the impact will be felt this month as property managers watch the interrupted flow of rent payments. Many are bracing for the blow.
In our live webcast poll, we asked the 535 attendees what percentage of their tenant base they expected to struggle paying rent in April or May. The results: Nearly half responded that 10%-25% will struggle; 26.6% expect that 25%-50% will have difficulty meeting rent; 17% feel less than 10% will come up short; and 9% said that more than half would not be able to pay.
We also talked directly with Single Family executives about the challenges they’re facing, and Adam Halek, President and CFO of Northpoint Asset Management in Salt Lake City, Utah, expects to see a 30% delinquency rate from the properties he manages across the country.
For the Single Family investor who bought in recent years and has been offering their properties as short-term rentals (STR), this may not be a viable business model in most metros for a while. We expect that many owners operating in the STR space will seek out long-term tenants or will offer the homes for sale, creating a buying opportunity for the long-term investor looking to expand their single-family rental holdings.
A GLIMPSE AT THE CARES ACT*
We’ve heard a lot about the $2 trillion stimulus package, officially called the Coronavirus Aid, Relief and Economic Security (CARES) Act.
Property managers are eager to understand how they can benefit. In general, it will provide some monetary relief for many who have lost their jobs or regular paychecks. The industry hopes it encourages people to meet their rent obligations, but it doesn’t require recipients to use the money that way.
For those recently unemployed, the Act provides an additional $600 per week beyond what they would already receive in regular unemployment benefits (amounts will vary state-to-state). Federal funds would also be awarded to the gig- workers and freelancers, who are generally not beneficiaries of state-level unemployment programs.
In addition to the unemployment payments, one-time checks will also be awarded to individual households. Depending on income levels, these payments will range up to $1,200 per adult and $500 per child. Congress has also included some major protections for both property owners and tenants, including mortgage leniency and short-term eviction bans.
Adam notes that one of the biggest challenges he has been facing is the amount of misinformation circulating regarding government relief—especially around eviction bans. “Most of the eviction suspensions apply to government-funded properties.” He has had to spend time re-educating managers on the matter so they can educate tenants. He has been advising both property managers and landlords to keep the dialogue open and act with compassion, noting that he’s had several owners take the initiative to waive rent for the month or defer it. He advises, “Stay the course. The economy will come back.”
Another industry veteran we interviewed, Tony Cline, Managing Broker of Home Vault Management based in the Denver area, expressed his doubts that funds from the CARES Act would be distributed in time for May 1 rent. And though the eviction bans are a huge concern—“I’ve never been in a situation to wait 150 days to get someone out who can’t pay rent”—he has been communicating with his managers and owners to remember that “the majority of our tenants are good people in bad situations.”
BEST PRACTICES FOR PROPERTY MANAGERS
Despite the grim circumstances, there are best practices and solutions that Alex and Tony have in place that have helped minimize the devastating impact of COVID-19, some of which include:
- A Cloud-Based Solutions Platform
Having an integrated cloud or SaaS platform like Propertyware allows property managers, virtual assistants, tenants, owners and other team members to log in from any location with an internet connection to manage operations and work safely and efficiently.
- The integrated communication tools like portals, community message boards, texting and chat conversations make it easy to engage with prospects, tenants, owners, applicants and vendors. Tenants can submit maintenance requests through the portal. And during times of crisis, managers have all the tools they need to keep their tenants and owners informed.
- Online Payments and Leasing
“My advice is to have a plan for what you can see coming. For example, we have 4 payment options for tenants with timelines and schedules.” Alex provides tenants with options that are not only convenient for them—enabling tenants to pay by credit card, debit card, ACH and rent money—but safer.
- Propertyware’s online payment solution eliminates the need for any physical contact, and its recently launched online lead-to-lease process enables prospects to complete the entire leasing process—application, screening, deposits, first payments and e-signatures—anytime, anywhere.
- AI Screening
You can’t change the behaviors of current tenants, but you can improve the screening process for new tenants. AI Screening is able to accurately predict the ability and willingness of a prospect to pay rent—making it easier and more objective to land your ideal tenant.
Tony notes that current circumstances have necessitated more video tours. “We’re getting a lot of requests to just do video showings, and we have eliminated pre-vacancy showings altogether.” PMCs can get more mileage from video tours by leveraging Propertyware’s listing widget to showcase your properties across listing sites.
LONG-TERM OUTLOOK FOR SINGLE FAMILY RENTALS
Single Family is well-positioned for the long term. The number of Millennials in their mid-20s to early 30s far outnumbers those in their mid- to late 30s. Like every other generation, they are already exhibiting suburban migration tendencies as they mature, get married and have kids over the course of the next few years, and that will favor single-family home living. While some will buy, others can’t afford to purchase yet, and the economic downturn we’re now experiencing will make buying even harder. Single-family rentals will be an attractive alternative.
To see the complete session, COVID-19: Impact on Single-Family Rentals—including all expert insights, guest interviews, survey and Q&A responses—watch it on demand here.
*This content is intended to notify readers of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only. You are urged to consult your own attorney concerning your situation and specific legal questions you have.