A new aid package gives small businesses a second chance at accessing much-needed relief as unemployment numbers increase by the millions for the fifth week straight. We see a continued uptick in leasing interest since COVID-19 was first declared a pandemic one month ago. Plus, the latest data on how many residents were able to pay rent by the third week of April, and what rent growth looks like for both new and existing leases in cities across the country.
Headlines: New Aid for Small Businesses, Plus the Latest on Rent Payments, Unemployment & Leasing Activity
A $484 billion coronavirus aid package was signed into law on Friday, replenishing the Small Business Administration’s rapidly depleted Paycheck Protection Program and disaster assistance loan program. Industry organizations like the NMHC, NAA, and NARPM, as well as the U.S. House Committee on Financial Services, are already pushing for the next bill to include specific aid for renters, property owners, and multifamily businesses.
89% of U.S. renter households paid their rent by April 19—just 4 percentage points below the rates we saw this time last year. Property managers and owners are anxiously awaiting May 1, by which time many more Americans will have lost their jobs, but also may have received stimulus checks and expanded unemployment benefits. Payment rates are behind the curve in 3 places: Class C properties, where many residents already had high rent-to-income ratios, and are now out of work; cities with more hospitality and retail jobs, like Las Vegas and New Orleans; and in high-rise apartment buildings, where corporate leases and short-term rentals are more common (both of which are struggling in the current crisis).
More than 26 million Americans have filed for unemployment. To put that number into perspective, it’s as though the working populations of 25 states all lost their jobs. In just 5 weeks, the crisis has essentially erased all of the gains the job market had made since 2008. The impacts are now spreading beyond the industries that were directly impacted by the virus, diminishing the likelihood of a sharp but short V-shaped recession and recovery. Cities with a high concentration of leisure and hospitality jobs (such as Las Vegas and Orlando) will shoulder more of the impact, while cities with a larger share of government jobs (like Washington D.C. and state capitals) could still see economic growth during this time.
New lease signings are still down significantly, though by a smaller margin than before: 36% fewer leases were signed than during the same week a year ago, in comparison with a rate of 45% fewer signed leases in late March and early April. Traffic to property websites also rose to near-normal levels over the last few weeks; but these site visits aren’t translating into actual inquiries from prospective residents at the same rate. This makes it critical for leasing agents to swiftly follow up with leads that do come in—renters who may be more serious about finding a new apartment quickly than prospects in previous cycles. This leasing season, renter demand is expected to hold up best in Class B properties in both cities and suburbs; and will be most threatened for luxury towers in downtown neighborhoods, where high prices and density could drive residents away for the time being.
Rents for newly signed leases are just 4% lower than a year ago. This figure balances two opposing trends: Hot markets like Phoenix, Charlotte, and Dallas have seen modest rent growth of up to 2%; while expensive West Coast cities like San Francisco, Seattle, and Los Angeles have seen rents slow by as much as 12% over the past year. Rents for renewed leases had grown by 4.6% at the beginning of the year; but 65% of property managers now plan on keeping rents flat for existing residents, according to a recent RealPage poll. Record-high retention is expected to keep occupancy rates steady throughout 2020; though some residents will consider moving once shelter-in-place orders are lifted. This makes lease expiration management an important consideration for property managers trying to be flexible in meeting renters’ needs.
This Week’s Best COVID-19 Resources for Property Managers:
- Reapplying for Small Business EIDL Loans Under the CARES Act (National Association of Home Builders)
- 6 Steps to Make Sure Your COVID-19 Payroll Protection Loan is Forgiven (gkhouses)
- Industry Roundtable: Multifamily Leaders Tackle the COVID-19 Crisis (Multifamily Executive)
- COVID-19 Rent Relief Programs from NMHC Top 50 Apartment Operators (LeaseLock)
- National Small Business Town Hall: Small Business Resources (U.S. Chamber of Commerce)
- April Apartment Market Conditions Showed Weakness Amid COVID-19 Outbreak (National Multifamily Housing Council)
- Freddie Mac Boosts Multifamily Forbearance Program (Multi-Housing News)
- From the Front Lines – Podcast Series (Institute of Real Estate Management)