The global COVID-19 pandemic is changing life as we know it, and nearly every industry has been forced to adapt in one way or another. The rental industry is no exception – the industry as a whole has discovered new ways to meet safety guidelines while continuing to provide essential housing services to renters across the nation.
Widespread layoffs and economic turmoil has resulted in many Americans struggling to keep up with cost-of living expenses. According to the U.S Department of Labor, the national unemployment rate is at almost 8 percent, with more than 12.5 million Americans currently unemployed. Even with federal stimulus checks and other benefits, a majority of qualifying recipients used the money to catch up on overdue bills.
Rent is often the most expensive cost-of-living expense, with one in four renters in the United States spending more than 50% of their income on housing. As a response to a climbing unemployment rate, several states across the nation have implemented an eviction moratorium to protect renters who are struggling to pay rent. Unfortunately, landlords still need to make an income in order to see a profit on their investment. The good news is that the majority of renters are still making full or partial rent payments on time. However, data from September 2020 indicates that renters are more financially burdened now than at the onset of the pandemic.
Rental payments decline as the pandemic continues
We pulled aggregated anonymous data from our Rentec Direct property management software platform, representing 620,000 rental properties nationwide. Using January and February as a baseline and considering March to be the official onset of the pandemic (when most state shutdown orders occured), our data showed that the number of rent payments received by property managers and landlords has been steadily declining over the past several months. As of September 10th, rent payments received nationwide were 35 percent lower than rent received for the same period in March, prior to the onset of the pandemic in the United States. This is the biggest drop we’ve seen in rental payments received by landlords so far, following a 29 percent drop in August.
These numbers indicate that renters are struggling financially right now more so than when the pandemic first hit the U.S. It is not necessarily surprising when you consider the fact that 16 percent of Americans have no emergency savings. The pandemic is worsening the financial hardship for many when it comes to elevated unemployment, reduced income and increased debt.
Online rental payments see little change
Interestingly, but not surprisingly, electronic rent payments in September saw a 1 percent increase compared to electronic rent payments received prior to the pandemic. When compared to the 35 percent decrease in total rent payments received, it is clear that online rent payment options increase the likelihood of on-time rent payment.
Not only are electronic payment options becoming increasingly critical for property management businesses in order to meet social distancing measures, but electronic methods also give renters the option to set up reliable automatic payments. According to a 2018 study, only 33 percent of renters who scheduled recurring monthly rent payments were charged a late fee, compared to the 47 percent of renters who were charged a late fee making manual rent payments. Of renters with no online payment options, 57 percent were charged a late rent fee.
Moving forward
It’s a true challenge to predict the future during these unprecedented times, but the continued rise of national COVID-19 cases certainly poses a threat to America’s economic future. Despite the unemployment rate decreasing slightly in recent months, this is still the highest unemployment rate our nation has seen since the Great Depression. Several states are implementing re-closures, layoffs are continuing, and federal benefits are expiring. All of these changes will absolutely impact renters across the country, potentially burdening their financial situation further.
The coming months will help us further understand the impact of the pandemic and reveal how renters will handle their cost-of-living expenses. My advice for landlords and property managers is to strongly consider implementing online rent payment options, if you haven’t already. Not only is it safer given the current social distancing mandates, but it is likely to save you money in the long run.
Source: geekestateblog.com