How Timely are Rent Payments?

The COVID-19 pandemic has been especially crippling to the housing industry, particularly in the multi-family arena, where there has been almost an 8% drop in reported rent payments (year over year). Through the first week of December, the National Multifamily Housing Council reported a 5% reduction in collected rent compared to the first week of November with rent collection dropping by 180,000 households from November of last year.

With the Christmas and New Year Holidays fast approaching, so is the expiration of extended unemployment benefits that will affect 12 million families around the country. The moratorium on UD filings is also about to run its course and the Aspen Institute estimates as much as 40 million tenants could be facing eviction in the first and second quarter of 2021.

The second stimulus relief proposal of $908 billion dollars is being discussed but no agreement has been reached by the bipartisan group of senators. President-elect Biden has pledged to implement an executive order that would extend the ban on evictions and approve additional relief measure upon taking office next month.

The LA County Board of Supervisors will revisit the possibility of extending statewide ban next year with the current moratorium set to expire at the end of next month. The Board of Supervisors met on December 8th to consider a proposal to extend rent repayment plans  that would place more distress on landlord’s ability to collect rent. The rent deferral period would be effective through February and possibly longer. There would be no support for financial support for landlord who have been negatively impacted by the reduction in rent revenue, and the proposal would be the first step in drafting a new law absent any study of it potential impacts.

Industry experts believe there is light at the end of the tunnel as the multi-family sector is expected to rebound net your to pre-pandemic occupancy levels in 2021 and by 2022 a possible full recovery in terms of rent levels. Demand for rental housing should see a significant increase next but fail to reach the peak levels seen in 2018 through last year. Class C type buildings in mostly urban areas had high delinquencies but maintained low vacancy rates and modest rent growth.

There are indictors that suggest offshore buyers could come knocking if travel restriction ease and there is the possibility of more institutional investors, as well as value-add investors to bust into the multifamily market.

Economist estimate a rise in short term treasury rates by 2022, which could be followed by rise mortgage interest rates. Something to definitely keep an eye on.  If you have  any multi-family investment questions, our team is here to help. Please email or call with your inquires at (310) 538-6884.