Ironically, the pandemic has never created such a better opportunity for apartment-building landlords. Despite eviction bans and variants, national asking rents rose 10.3% in August – which is the first double-digit increase in over 20 years according to rental-management software company Real Page.
According to analysts, fast-rising rents can be attributed to several factors:
- Younger adults have begun renting their own apartments, as opposed to living with their parents.
- Middle-income workers are forced to pay these higher rents, otherwise, they are being priced out of the housing market.
- New apartment supply is seeing very limited growth, however, it is seeing an influx in demand.
- Apartment occupancy rates, for example, hit a record high of 97.1% in August.
- As did household incomes for new renters, which hit a record high of over $70,000 a year.
- The end of the federal eviction ban will further strengthen landlords’ upper hand.
The pandemic continues to puzzle analysts in this regard. At the start of the pandemic, the unemployment rate skyrocketed to 15%. Following that, renters began falling behind on their payments despite federal and local eviction bans. As rent collection became more and more uncertain, a liquidity crisis began brewing in multifamily real estate.
Now, however, the trends are reversing. The multifamily market is looking stronger than ever, with both city and suburban markets holding up. Unfortunately, the reality now is that those tenants who were able to enjoy massive rent discounts will increasingly face major rent increases. Landlords are also gaining extensive support from the federal government. Many government entities – from the Department of Housing and Urban Development to the Federal Reserve Bank to Congress – have stepped in to help landlords struggling with their loans. While the Department of Housing and Urban Development crafted forbearance programs for covered building owners, the Fed purchased over $10.5 billion in multifamily mortgage-backed securities to spur more lending; lastly, Congress provided $46 billion in emergency rental assistance which, in most cases, is being paid directly to landlords.
Indicative of a broader trend, according to Walker & Dunlop Inc chairman and chief executive Willy Walker, is that “for most real-estate companies, going under because of unpaid rent is unlikely. There are not many operators who have such a high level of nonpayment that it is going to cause them to default on their loan.”
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