Financial relief and other emergency measures will bolster the U.S. apartment sector as local governments and federal agencies adapt to the economic turbulence unleashed by coronavirus, according to a new report by Marcus & Millichap.
All levels of government have responded to the crisis with measures such as extending unemployment benefits and banning evictions, while many multifamily landlords are offering rent flexibility to help residents through a rough patch. Collectively, the policies will ease the pain for an industry that was already benefitting from solid fundamentals, including vacancy rates for workforce housing tightening to near 20-year lows at the end of 2019.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, the $2.2 trillion coronavirus rescue package signed into law on March 27, provides a 60-day foreclosure moratorium that protects borrowers with federally backed mortgages as well as renters living in a property with such a loan. Marcus & Millichap’s report observes that most state governments have also taken measures to pause evictions, with moratoriums typically lasting between 30 and 60 days, while many city governments have followed suit by halting evictions at least through the end of April.
The federal government also acted quickly to expand and extend unemployment benefits as virus-related businesses closures brought the fastest wave of layoffs in American history. The far-reaching move will relieve some of the stress on the multifamily industry by helping renters facing hardship, even though delays are inevitable as many unemployment systems are currently overwhelmed with claims.
MOST RENTERS STILL PAYING
The CARES Act provides further relief in the form of a one-time payment of $1,200, along with $500 per child under the age of 17, to all American taxpayers earning up to $75,000 in adjusted gross income. The payment in the form of a direct deposit is expected to arrive by the end of April.
Despite the unprecedented turmoil in the economy, the National Multifamily Housing Council (NMHC) found last week that 69 percent of apartment residents made their rent payments by April 5, a decrease of only 12 percent from the previous month and 13 percent year-on-year. Looking ahead, multifamily landlords may face mounting challenges if rental income drops, demand for apartments weakens and costs—such as maintaining clean common areas—increase.
Economic headwinds will have a variable impact across markets, with large tourism-based economies suffering the most damage as Americans wait out the health crisis at home. On the other hand, the strength of e-commerce should help stabilize job markets in regional logistics hubs in the central and Midwestern U.S., according to Marcus & Millichap.