The COVID-19 pandemic has altered everyone’s lives, causing nearly every industry to adapt to a new normal. The rental industry has been no exception.
As a response to the nation’s climbing unemployment rate, several states implemented an eviction moratorium at the onset of the pandemic to protect renters unable to pay their monthly rent. Most recently, the CDC issued a federal eviction moratorium through the end of 2020.
Despite the moratorium on evictions, however, rent is still due. While most renters are still making full or partial rent payments, delinquency rates are still higher than average.
How has COVID-19 Impacted Delinquency?
- Increase in Delinquency Rates
What is a delinquent resident? A delinquent resident can be defined as an existing resident that has not paid their rent in full by a certain date.
The economic impacts of COVID-19 have resulted in a significant number of existing residents being unable to make full rent payments on a timely basis. As the percentage of impacted residents increases, and in some areas, dramatically, COVID-19 related challenges disrupt the communication processes that property managers have formerly relied on with their residents.
Because of the increase in delinquency rates and restrictions to in-person communications, we’ve seen a much greater need for a more broad-based engagement approach to working with delinquent residents.
The National Multifamily Housing Council (NMHC) has created a rent payment tracker that tracks rent payments each month. According to the tool, 94.6% of apartment households made full or partial rent payments between October 1-27, resulting in a delinquency rate of 5.4%. This is a 1.2-percentage point, or 141,583-household decrease from the share who paid rent through October 27, 2019 (NMHC). As NMHC data averages housing across all classes, it should be noted that the delinquency rate below Class A properties is considerably higher
2. A Significant Loss in Revenue
Many residents have had difficulty making on-time rent payments – even with federal, state, and local relief initiatives – leading to a significant loss in property revenue. While government aid, such as direct stimulus checks, provide a boost in the short-term, they ultimately push the problem down the line to be dealt with later. Eviction moratoriums do not provide any relief from rent being owed, only preventing removal from the property. Resident debts and property account receivables are increasing every month.
3. Resident Communication Issues
One area in which property managers have been struggling during the pandemic is in finding effective ways to engage and communicate with their residents. Property managers must consider the importance of communication with their delinquent residents. Starting conversations (and identifying solutions) early and often will benefit both you and your residents.
As studies have shown, different age groups communicate differently, and multichannel communication platforms have proven effective during this time. Being able to alternate communication through text messages, emails, calls, and letters allows you to more easily find the most effective and convenient channel for your resident to respond.
4. Behavior of Residents
Because of the various moratoriums that have been put into place, there may not be as much of an incentive for residents to pay rent. All property managers can do is hope that residents will continue to pay without the threat of eviction that would normally enforce payment. To help encourage residents to continue to make timely rent payments, it is a good idea to educate them about where a dollar of rent goes. According to NAA (National Apartment Association), there is a misconception that rental housing owners enjoy large margins and can continue operating in the absence of rent payments. This not the case, however. To summarize the breakdown of where rent payments go:
- Only 9 cents of every $1 are returned to property managers.
- Approximately 39 cents of every $1 pays for the mortgage on the property.
- 10 cents of every $1 is spent on capital expenditures, including roof and HVAC replacement and other important repairs.
- 27 cents of every $1 covers payroll expenses, including paying employees who operate and maintain the property, ongoing maintenance, utilities, insurance and the like.
- 14 cents of every $1 goes to property taxes.
Between mortgage payments and investor returns, a rent payment is much more important than residents might realize.
5. A Feeling of Uncertainty
The pandemic has created a huge sense of uncertainty across the board, not just relating to delinquency. There is a lot of changing information being released in response to the pandemic and how property managers should be operating. This results in property managers being unsure of what information they should be providing to their residents. Many are not sure what they can do, and additionally, don’t want to make things worse.
It is important to find new ways to engage with residents and discuss how timely rental payments help ensure that daily accommodations, services and maintenance continue to be provided at the same level of satisfaction they have come to enjoy and expect.
ClickNotices’ mission is to deliver solutions for the challenges that property managers experience in collecting rent by helping to improve your process and results. We provide our clients with the tools to help engage their residents and create opportunities for connection.
Eviction moratoriums will end at some point. However, leveraging our services and technology will help to manage your daily delinquency during this crisis, and better position yourself moving forward.