When rent comes due, Sarah Curtin has options. Together with her boyfriend, she lives in Quincy, a southern suburb of Boston, in a building of less than 30 units. Rent is $1,405 a month, but last week, the landlord sent out a note offering respite to residents financially suffering due to the coronavirus.
Tenants in Curtin’s building are not obliged to pay rent in full, but they are still “required to make a payment in some amount every month to express your commitment to this property,” the landlord’s email, which Curtin shared on Twitter, reads.
Curtin, who works in the culinary industry and received two weeks of paid leave, is uncertain whether her boyfriend, a brewer who got laid off, and she would take advantage of the opportunity to pay partial rent for some time.
“It is sort of touch and go,” she says, adding that her ongoing job status is yet to be decided after the start of the new month.
Curtin finds herself in a situation similar to that of scores of other renters across the nation. The coronavirus pandemic has largely paused the country’s economy, triggering a record 3 million jobless claims in a single week in March. Many renters – as well as homeowners – are struggling to shoulder their bills, especially in metros with high costs of living.
But landlords are adapting, too, establishing a variety of reprieves for their tenants.
“Apartment firms are very motivated to keep people in place,” says Sarah Yaussi, vice president of business strategy at the National Multifamily Housing Council. “They see a lot of risks not only from vacant units, but they see risk from people moving around.”
Rent discounts and extensions, flexible due-date schedules, the conversion of security deposits into rent payments are some of the concessions property owners have adopted. Some landlords are also teaming up with financial service companies like Jetty, which provides move-in cost support, to work out assistance packages for their tenants.
“Renters were already very cost burdened with regard to rent,” says Jetty CEO Mike Rudoy. “I think the current environment is only exacerbated that, which is unfortunate. Our product is really important to renters today, because there are people that are still moving and every dollar helps in this environment.”
For some landlords, it has perhaps become easier to handle a potential reduction in rent cash flow since the federal government included multifamily mortgage forbearance, small business loans and tax adjustments in the recently instituted $2 trillion economic aid act.
Still, the severity with which the coronavirus crisis hits landlords won’t fully emerge until early April. That is because the first rent payment since the outbreak gripped the country is not due until April 1 – and many landlords permit several days for payment without penalty.
“You’re going to have people who are unable to pay rent that’s due in most situations on April 1,” said Greg Willett, chief economist at real estate data and management software company RealPage. “That will be challenging and that will probably be particularly challenging at the bottom end of the [rental industry]. Most people living in [lower to medium priced units] don’t have any real financial cushion if anything goes wrong.”
The trajectories of supply and demand
Willett predicts that the rate of lease renewals, which normally hovers around 53% nationally, would rise. “In times of uncertainty, as we’re experiencing now, the default action for many households is simply to do nothing, which could lead to a further increase in retention rates for properties in all classes,” he wrote in mid-March.
While some residents may opt to remain in their current dwellings, industry experts say that overall demand for units may not chart a pronounced dip.
“People still need a place to live,” says Caitlin Walter, vice president of research at the National Multifamily Housing Council. “As far as demand goes for apartments overall, that likely won’t change.”
In Boston, Nick Warren, founder and CEO of real estate agency Warren Residential, echoed that prognosis. “I think demand will remain close to the same,” he says. “There might be a little less demand from some people because of job loss.”
Yet, RentCafe saw traffic to its rental search platform drop 25% week over week for March 11-17. In a survey of 6,000 users, the company found that 56% of respondents are still pushing forward with their apartment searches. At the same time, some 17% have decided against moving, while 8% will postpone relocating. Moreover, nearly 30% of those looking for a new place are now seeking cheaper apartments than the ones they initially considered.
Even if there are fewer rental units on the market as people choose to hunker in place, practically staunching supply, price gouging is unlikely. “We have not heard of anybody trying to increase rents,” Walter says.
In fact, rent freezes – in addition to diverse concessions – are taking hold.
The logistics of move-ins and move-outs
In a slate of locales, moving firms have assumed the designation of essential businesses, allowing renters who wish to move in or out to still do so.
“That’s important because if moving companies weren’t [declared essential], then no one would really be able to move in or move out of their rental units during this time,” said Jared Antin, director of sales at New York City-based brokerage Elegran.
Most leases are inked months in advance, letting landlords to prepare units for new occupants and tenants to plan a move. In today’s circumstances, however, there might occur instances wherein new residents may not be able to settle in because current renters have to self-quarantine due to possible coronavirus exposure.
In situations, in which a unit is not ready for a move-in, Warren says, landlords usually provide different accommodations in the form of a comparable apartment or a hotel room for a temporary stay.
New ways of showing apartments
Real estate agents and brokers continue to show rental apartments—virtually, at least, via 3D and video tours. Vacant units, Warren says, are easier to advertise, while physical access to occupied rentals is almost impossible.
“It’s affecting the rental market less than it is affecting the sales market,” he says. “It’s very difficult to convince someone to buy something if they haven’t actually been inside it. Whereas someone might be willing to sign a lease even if they haven’t seen the property.”
Elegran, which manages the leasing operation of SKY, a luxury full-service high-rise in midtown Manhattan, has switched to digital solutions to keep business chugging along, Antin says. As a result, in the third week of March, the company hosted three to four digital tours of SKY units a day.
Nonetheless, inquiries have halved “as many consumers are delaying moving until it’s safe to resume normal activity,” an Elegran spokesperson says.
Utilizing video teasers and social media to market the recently unveiled upscale eight-unit townhouse on 119 West 111 Street in New York, Claudia Rodriguez, a real estate agent with Douglas Elliman, says the building achieved 50% occupancy in about a week in mid-March. Two rent deals, though, fell through due to a “direct impact” from COVID-19, she says.
As part of the lease application for the property, where rent ranges from $2,500 for a studio to $6,500 for a three-bedroom abode, developer and manager Manhattan Residential included a statement spelling out its resident-focused actions amid the pandemic.
“The memo stated very clearly that for any move-ins that were going to be delayed and perhaps overlap with the lease start date, [rents] were going to get prorated for those dates,” Rodriguez says. “In the event that you couldn’t proceed with the move-in altogether because of a fear of job security or if you had a job loss, management would cancel the lease and refund the money.”
Effects on luxury rentals
The headwinds perturbing the luxury segment of the rental market differ from the challenges roiling the lower echelons of the industry. According to RealPage, about 370,000 new high-end units are to reach competition this year (although construction delays and disruptions could deflate this number), marking a 50% increase from the national supply that came online in 2019.
“We have too much product that was either just completed or under construction and you’re not going to have people moving around as much as [it would be otherwise] typical in the near term,” says Willett. “It’s going be really hard to get that new product filled up.”
For the summer months, which usually see a peak in rental demand, it’s still hard to tell what the effects will be, despite the impacts already rippling throughout the industry.
“Everybody’s wondering what this all means for the summer leasing season,” says Robert Pinnegar, CEO of the National Apartment Association. “Traditionally, the summer period is when you see the most movement of people from property to property, from state to state, from city to the city.
“With the uncertainty that’s going on now, especially with the economy essentially being at a standstill, nobody really knows what that’s going to do. And the unknown factor here is what government policy is going to be with regards to how we interact when the businesses reopen.”