Rental market conditions in the United States have changed fundamentally since the Great Recession, according to America’s Rental Housing 2020, a new report from the Harvard Joint Center for Housing Studies.
With higher-income households accounting for much of the growth in rental demand since 2010, new supply has been concentrated at the upper end of the market, the report stated. Meanwhile, rising demand and constricted supply have reduced the stock of low- and moderate-cost rental units, leaving modest-income Americans caught in the middle.
Even more alarming, the report found that a majority of the lowest-income renters spend more than half of their monthly income on housing. After paying rent, the median renter earning less than $15,000 in 2018 had only $410 left each month to cover all other necessities.
As the economy remains dormant, state and city governments have stepped in with efforts to funnel millions of dollars into new rental assistance programs aimed at dealing with unpaid rent.
The National Multifamily Housing Council (NMHC) found that 84 percent of apartment households made a full or partial rent payment by April 12 in its second survey of 11.5 million units of professionally managed apartment units across the country, up 15 percentage points from April 5.
“We are pleased to see that it appears that the vast majority of apartment residents who can pay their rent are doing so to help ensure that their properties can continue to operate safely and so apartment owners can help residents who legitimately need help,” said Doug Bibby, president of NMHC. “Unfortunately, unemployment levels are continuing to rise and delays have been reported in getting assistance to residents, which could affect May’s rent levels. It is our hope that, as residents begin receiving the direct payments and the enhanced unemployment benefits the federal government passed, we will continue to see improvements in rent payments.”
Bob Pinnegar, president and CEO of the National Apartment Association, shed some light on what rent is used for and how it affects the economy, especially in the current climate.
“There is a misconception that all landlords are wealthy,” he said. “The fact of the matter is that many rental housing owners are small businesses who have bills they need to pay. A rent strike or rent freeze can ultimately put every resident in a community at risk if the landlords can’t meet their financial obligations to keep the property operating.”
Pinnegar said another common misconception is that there is a huge profit for rental housing owners.
“The truth is that only nine cents of a dollar go to owners and investors, including public pensions and 401(k)s,” he said. “The mortgage accounts for 39 cents, payroll is 27 cents for employees that keep the community running, 14 cents goes for property taxes which fund schools and teachers as well as emergency services and 10 cents are put toward capital improvements, like a new roof or HVAC repair, which maintain the quality of the community.”
Pinnegar said the apartment industry wants to keep people in their homes and meet its ongoing financial obligations. “Our asks to the federal government are tied to the simple fact that 90 cents of a rent dollar goes to the critical external expenditures that make that happen,” he said. “Failure to meet these obligations will have monumental consequences for owners, residents and the local and national economies, resulting in more people losing their homes and greater harm to the pre-existing housing affordability crisis.”
The apartment industry contributes $3.4 trillion to the economy and supports 17.5 million jobs, not just in the building but for local businesses, according to the NMHC. “Apartments are an economic engine that helps drive the economy,” said Pinnegar. “There is already a severe imbalance between the current demand and current housing supply. If we don’t take steps to preserve what we currently have, then we’ll be facing a worsened affordability crisis on the other side of the pandemic.”
Concerns are setting in for smaller property owners who feel they are being overlooked at this time.
“Roughly two-thirds of the industry have private lenders who expect mortgage payments. They may or may not grant forbearance,” said Pinnegar. “Even if smaller owners do get forbearance, it creates a financial burden as it can either extend the term of the loan or increase the monthly payment. The stimulus has good intentions; however, it has created uneven consequences for residents of rental housing. And despite what most people think, many rental housing owners are small mom and pop owners.”
Pinnegar said emergency rental assistance would provide much-needed support to cost-burdened renter households and rental housing providers.
He explained, “By creating an emergency rental assistance program for those affected by COVID-19, expanding access to mortgage forbearance, providing financial assistance for property-level financial obligations, expanding the Small Business Administration’s Paycheck Protection Program to include all multifamily businesses and better tailoring the CARES Act eviction moratorium, we can help alleviate the financial burdens for both owners and residents and help keep people in their homes while still paying the bills.”