The additional $600 in unemployment benefits have expired, and apartment owners are concerned about how it will impact rent collections. Affordable housing developers in particular are susceptible to declining rent collections as a result of the expired benefits. Many apartment owners, including KIMC, have advocated for additional stimulus.
“I am certainly worried about it,” Jonathan Needell, president and chief investment officer of KIMC, tells GlobeSt.com. “We are building a bridge over a ravine, but we don’t know where the other end is. We need the stimulus so that we can keep laying bricks to get us across the ravine. Unfortunately, we are on a half-done bridge in the middle. So, we definitely need something. There are some non-profit groups and private groups paying rent for affordable housing, and they are good groups doing good work; but the unemployment benefits are a big deal.”
While no new stimulus has been approved, the Senate is discussing options; however, all current options include a dramatic decrease to the current benefits. “I am worried more for the coasts than I am for the rest of the country,” says Needell. “It seems like there will be support for $40,000 incomes and below, but the people that are $40,000 to $70,000 are the people that I am the most worried about.”
Coastal tenants are the most impacted by the expiration of these benefits. The $600 weekly benefit was only making a nominal dent in those more expensive markets, compared to more affordable markets. With no additional support, however, Needell expects to see a decline in rent collections across the company’s portfolio. “I expect a little weakness unless we see more stimulus. It will be interesting to see what is going to get passed,” he says.
KIMC is already working with tenants to provide as much flexibility as possible. “We took an approach early on in the pandemic where we decided that we wouldn’t change late fees and we entered into payment programs for tenants that needed them,” says Needell. “We aren’t increasing any rents and we slowed down renovations to keep occupancy high and renewal rates high. So, the reality is that we have been pretty nice. We are doing the things to keep people in their homes within our fiduciary duties as investment managers.”
In affordable markets, rent collections haven’t been an issue, but in coastal markets, more tenants struggled to pay rent and others took advantage of the eviction moratoriums. “In Washington and California, the laws have stoked the fires for rent protection,” says Needell. “We have a Washington asset where rents declined as tenants became savvier that they couldn’t be evicted. The same goes for California. In those cases, there are tenants that are taking advantage of the situation as well as tenants that need the protection, and you really can’t tell which one is which. We haven’t had that problem where the unemployment benefit is more meaningful.”