The COVID-19 pandemic has been devastating for the U.S. economy, with more than 22 million unemployment claims since the outbreak began. Because of the unprecedented level of income disruption that has taken place, many experts had projected that tenants could have trouble paying rent.
Well, we just got our first glance at the actual numbers in a report by Rentec Direct about the impact of the pandemic on rent payments and rent payment methods. Here's a rundown of the key figures and what real estate investors should know going forward.
How many tenants didn't pay rent in April?
I won't keep you in suspense. The rent received by property managers in the U.S. by April 8 was 17% less than it was through the first eight days of March, according to data from the Rentec Direct property management software platform. Other data points to a similar trend. For example, data from the National Multifamily Housing Council found that 69% of renters paid their rent between April 1 and April 5, down from 82% in the same period in April 2019.
One interesting finding is that landlords who allow renters to make online payments collected significantly more than landlords who don't. The report found that among tenants who pay their rent electronically, the rent payments in April were just 1.5% lower than in March. This begs an interesting question -- did tenants have trouble affording their rent in April, or did they simply not feel comfortable driving to their property manager's office to physically drop off a check?
Not surprisingly, many property managers are eager to offer online payment options during the pandemic. Rentec received 24% more applications from property managers wanting to enable online rent capabilities in March, as landlords began to anticipate this issue. In April, Rentec expects these requests to increase even further to more than 60% higher than the typical online rental capability application rate.
Will May be any better (or worse)?
One of the biggest unanswered questions is whether the rent payment rate will stay low for the duration of the pandemic or if it will rebound sharply in May. Clearly, most of the U.S. economy is likely to remain shuttered after May 1.
However, there are also some positive things that have happened income-wise since April's rent was due. For one thing, stimulus payments of $1,200 per adult and $500 per child didn't start arriving until the second full week of the month. And the same legislation -- the CARES Act -- that created the stimulus payments also increased unemployment benefits by $600 per week, which didn't start hitting Americans' wallets until mid-April. Some states are still updating their systems to allow for the higher payments, and while the increased benefit will be retroactive, it is taking longer than anticipated in many cases.
On the negative side, it's possible that people were able to pay April's rent out of their savings or from income earned during the first couple weeks in March, before the economy was shut down in many places. We'll have to wait and see whether some people who were able to pay in April are not able to pay in May.
The point is that when we hear about May's rent figures, we'll get a better look at how the government's stimulus efforts have translated into actual financial security for renters. In short, April's drop in rent payments was widely expected, but May is still somewhat of a wild card at this point.