News feed - Multi-Family housing

Apartment Rents Rise; Perks, Discounts Fade

Covid-19 vaccine rollout, higher employment bring more people back

into cities looking to rent

Median asking rent rose 1.1% on an annual basis in March to $1,463 a month across the country’s 50 largest markets, according to Realtor.com.   (JSO Comment:  Don't get to excited)

By: Will Parker                                                                    April 24, 2021                                   Wall Street Journal

Americans are paying more to rent homes again, ending a stretch during the pandemic when they enjoyed flat or falling rental prices and widespread landlord concessions.

Federal government stimulus payments and expanding payrolls are boosting savings, enabling building managers to lift rent prices on apartments and houses nationwide. A record-low inventory of homes for sale also leaves more people renting.

Median asking rent rose 1.1% on an annual basis in March to $1,463 a month across the country’s 50 largest markets, according to a report from Realtor.com. That marked the first month where the pace of rent growth had increased since last summer, the report showed.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Covid-19 vaccine rollout and rising employment are prompting more people to move back into cities and look for apartments to rent, which is helping landlords fill their empty apartments with fewer, if any, freebies.

Landlords in much of the country had cut asking rents during the pandemic. Many also offered concessions—from one or two months of free rent to American Express gift cards—to keep tenants in their buildings during Covid-19. Many renters, especially in large cities, stopped renewing their leases. They left to buy homes, or if they lost jobs, to move in with friends or family. Before the pandemic, landlords had enjoyed years of uninterrupted rent increases.

Rising rents add to the mounting evidence that the economy is rapidly gaining strength. Analysts are forecasting that the U.S. economy could grow around 7% in 2021, which would be one of its strongest years in decades.

Higher rents could play a role in an anticipated rise in inflation, unleashed by waves of stimulus checks, low borrowing rates and pent-up demand after months when the pandemic damped consumer spending. Rent accounts for about one-third of the consumer-price index, which economists expect to tick higher in the months ahead.

“The key question is how long does it stick around?” said Danielle Hale, chief economist at Realtor.com. News Corp, which owns The Wall Street Journal, also operates Realtor.com.

Rent increases could further strain the one in six American tenants who are in debt because of missed rent payments.

Real-estate investors believe the rental market is primed for another period of price growth, comparable to the years that followed the financial crisis, when effective rents outpaced inflation. In some markets, like Nashville and Denver, they increased more than 10% for multiple years, said Matthew Lawton, an executive in the capital-markets division at brokerage JLL.

“History is going to repeat itself,” he said.

The hottest home-sales market in 15 years is also expected to prop up rents. As more people are priced out of the for-sale market, they will flock to the only other option: renting. 

“A lot of these markets with rent increases are also markets that have pretty substantial home-price increases,” Ms. Hale said.

Rent increases now span the income spectrum and blanket much of the country. In upscale suburban areas outside large cities, like Greenwich, Conn., near New York City, a big factor is that home prices are up and there is very little inventory left in town to buy.

“It’s creating opportunities on the rental side,” said Greenwich real-estate developer Eric Schwartz, whose firm is preparing to offer rental units in a new 59-apartment complex in Greenwich. He said he has received more than 500 inquiries.

Owners of middle-income apartment buildings in places like Tampa, Fla., and Chicago, said they are raising rents after months of discounts. Some landlords had problems collecting rent from tenants who lost work last year and vacancy rates rose above 15% at their buildings, rare before the pandemic.

“We’re raising rents, even on current residents, maybe 3% from the end of last year,” said Karlin Conklin, an executive at property-investment company Investors Management Group. “And brand-new people are coming in the door.”

Asking rents in traditionally lower-cost, midsize cities like New Orleans, Memphis, Tenn., and Richmond, Va., are up, too. They have risen 10% or more in the past year, according to Realtor.com.

Even in New York City and San Francisco—where rents tumbled by double-digit percentages last year over 2019—there are signs of a turnaround. San Francisco rent rose 3.4% in March over the month prior, according to listings website ApartmentList, the largest monthly rental increase in the city since the pandemic began. And in Manhattan, though there is conflicting data, some reports point to the beginning of a recovery, with rental prices rising modestly since the fall and high vacancy rates slowly starting to reverse, too.

“For a certain time, it seemed like it didn’t matter what you gave [in terms of concessions], the demand just wasn’t there,” said Robert Nelson, a New York apartment landlord. Now, he says he has experienced a jump in new leases across his building portfolio this spring.

In areas where rents were most heavily discounted, it could take years before rents are back to pre-pandemic levels. More new apartment buildings are also expected to open this year than did last, and that additional supply could damp rent growth in certain markets, analysts say.

But more workers returning to offices could boost rents further, and already has in certain cities. “The places that are reopening most quickly, like Florida and Texas…that’s where the demand is the strongest,” said Greg Willett, chief economist at rental-property software firm RealPage Inc.

JSO Comment: The following graph was not included in this article.  Don't get fooled by the hype when there are statistics that tend to tell a slightly more realistic story.  The rent change was very significantly down.  The article talked about the cut in rents to attract or even keep tenants, but it never delved into how deep were these cuts - or were we supposed to know!  Annual rent increased are around the 3% marker...  Time to recovery to pre-pandemic levels?    

COVID closed your apartment building's gym. Should you get a rent break?

A lawsuit alleges that a luxury high-rise in Streeterville violated the city's landlord-tenant ordinance after shutting down many of its amenities and not giving tenants a discount.

Alby Gallun                                                                       February 22, 2021                             Crain's Chicago Business   

 

For an average rent of nearly $2,700 per month, residents at the Streeter, a 49-story luxury high-rise in Streeterville, get to use the building’s fitness center, hot tubs, steam rooms and complimentary Starbucks coffee bar. Should they get a discount if those amenities are shut down due to a pandemic?

Michelle Weisberg thinks so. Weisberg, a tenant in the 481-unit tower at 345 E. Ohio St., has sued, arguing exactly that. The suit contends that the owner and manager of the Streeter violated the city’s landlord-tenant ordinance by not reducing her rent to account for their decision to close most of its common-area amenities as the coronavirus spread last March. Weisberg says she’s entitled to a refund, but her landlords won’t give her one.

 

Believing she’s not the only tenant who feels that way, Weisberg is asking a judge to certify her case as a class-action complaint, potentially adding hundreds, if not thousands, of residents to the suit. That could put the building’s manager on the hook for a large sum of money. The property manager, an affiliate of Southfield, Mich.-based Village Green, manages eight properties in Chicago, and their tenants should be included in the suit, according to the complaint, filed Feb. 16 in Cook County Circuit Court.

It’s a question many apartment dwellers have asked during the pandemic. People pay top dollar to live in some of the city’s most expensive high-rises for the location, the views and amenities that have only become more extravagant over the past decade or so. A swimming pool and fitness center don’t cut it anymore: The newest multifamily towers include demonstration kitchens, game rooms, wine-tasting events, even boxing rings.

 

Those extras are worth something, but how much? Weisberg’s suit doesn’t state how much money she is seeking, and her attorneys did not respond to requests for comment. A Village Green executive declined to comment, as did a spokesman for the owner of the Streeter, the State Teachers Retirement System of Ohio.

The case may go nowhere, but if it gains some traction, copycat suits could follow.

“There will be major implications if it goes somewhere,” said Michael Zucker, managing partner of Peak Properties, which manages about 8,000 apartments in Chicago. “Every lawyer in the city will pick up on that. There was not a single landlord that didn’t shut down amenities during the pandemic.”

Village Green closed most of the common areas at its Chicago properties, including the Streeter, and suspended all resident events and classes on March 13, when Gov. J.B. Pritzker issued his stay-home order, according to the lawsuit. Some, but not all, of the common areas and amenities at Village Green's properties here reopened at the end of June, and some remain closed, the complaint says.

Under the city’s landlord-tenant ordinance, “each Village Green tenant impacted by the closure of common area amenities in each Village Green building located in Chicago, including The Streeter, are entitled to a refund of the portion of the rent for these closures due to the casualty,” the suit says.

The complaint alleges that because Village Green and the pension plan also ran afoul of the Illinois Consumer Fraud & Deceptive Practices Act because they failed to disclose to tenants that they had violated the landlord-tenant ordinance.

Many apartment landlords have tried to respond to residents unhappy over cutbacks in amenities. Zucker estimates that about 100 tenants at Peak-managed buildings have raised the issue with the firm. Zucker placated a few with rent credits, but he offered the vast majority something else, like free online fitness or cooking classes.   

“We would handle it on a case-by-case basis, and many times we’d have to get very creative,” he said. “The first thing you want to do is figure out what’s getting their goat.”

Peak also tried to foster goodwill with tenants by paying to bring ice-cream or coffee trucks to its properties. The owner of some Peak buildings sprung for gift certificates to local restaurants. One of Peak’s most-popular COVID amenities was a truck staffed by bike mechanics who would tune up tenants’ bikes on-site, Zucker said.     

“People really appreciated that,” he said.

Many big buildings are still restricting tenant access to amenities. Peak, for instance, manages a reservation system to limit the number of people in fitness centers at its properties, Zucker says.

The lawsuit against Village Green alleges that its decision to reduce amenities has paid off financially by reducing staffing and other costs it must absorb when they are open. But the pandemic has increased other costs for landlords. Zucker estimates that Peak’s cleaning expenses are about 10 percent higher than they were pre-COVID.

 

Many downtown landlords have also suffered from big drops in occupancy and rent since last spring, though the market may be turning a corner. The Streeter’s occupancy rate has fallen to 87 percent, down from 91.6 percent a year ago, according to CoStar Group, a real estate data provider. Net rents at the building fell about 12 percent from the first quarter to the third quarter last year, but are down about 5 percent now, according to CoStar.

 

 

Millions of Renters Are In a Deep Financial Hole

At least three million renters who were employed last March lost their jobs and were still out of work in November.

By Les Shaver                                                                  January 13, 2021                                          GlobeSt.com

 

The recent stimulus will help millions of renters.

The additional stimulus payments will bring their typical rent burdens from more than 80% of their income to less than half of that percentage, according to a Zillow analysis. But even with this help, millions of people are behind on their rent payments and face an incredible challenge catching up.

At least three million renters who were employed last March lost their jobs and were still out of work in November, according to Zillow. More than a million of those people are in the accommodation and food services industries, which have been devastated by restrictions aimed at limiting the spread of COVID-19

For those workers who lost their jobs, federal and state unemployment insurance is now the primary income source. The typical unemployed renter living alone spent 81.2% of that income on rent in November, but that should come down to 43% after they receive the $300 a week from the current stimulus package.

In early January, the number of renters who could make payments continued to decline. In its recent Rent Payment Tracker, The National Multifamily Housing Council found that 76.6% of apartment households made a full or partial rent payment by January 6. Compared to January 6, 2020, this is a 1.7 percentage point or 192,613 household decline. It compares to 75.4 percent that had paid by December 6, 2020.

Renters have been able to get by with the help of legislation passed last year, with the additional $600 a week in unemployment insurance payments from the CARES Act bringing down the rent burden to 29.5% for unemployed renters paying the typical rent, according to Zillow.

But even with eviction moratoriums, Moody’s Analytics estimated that nearly 12 million renters would owe an average of about $6,000 in back rent and utilities by this month. For low-income renters, it won’t be easy to catch up. Low-income renters typically spent 53.1% of their income on rent in 2019. Only 51% of those renters said they could afford an unexpected $1,000 expense.

“Even though supplemental assistance has resumed, there are financial wounds to heal from the three-month period when some renters were sending more than 80% of their unemployment benefits out the door on the first of the month,” said Chris Glynn, senior economist at Zillow in a statement.

Problems could again arise after March 14, when the current $300 weekly supplement expires.

As eviction moratoriums are lifted, eviction could be a significant issue in Q1 or Q2, according to John Loper, an associate real estate professor at the University of Southern California. However, with about 90% of rents being collected, he says only 10% of rental stock has eviction potential.

Multifamily Rent Collections Down 24% in December

Data from Rentec Direct shows that renters continue to struggle to make rent payments during the pandemic. 

 

By Kelsi Maree Borland                                              December 16, 2020                              GlobeSt.com

Apartment rent payments continued to decline in December. As of December 10, rent collections were down 24% from March collections, according to research from Rentec Direct, which aggregates rent collection data to analyze the impact of the pandemic.

Rent payments continue to trend well below March collections; however, payments have improved since September 2020, when collections were 35% below March and a record low for the pandemic. In October collections were down 28%, and in November, payments were 27% below March.

 

Whether or not payments will continue to improve in December is still in question. Rents payments are already down 24% in the first 10 days of the month, generally a good indicator of payment activity. However, the increase in COVID-19 cases across the country and the absence of a new a stimulus plan has put more pressure on renters to make payments.

National Multifamily Housing Council found that rents fell 8% in the first six days of December over the previous month with renters making 75.4% of rent payments—similar to the data from Rentec Direct. The NMHC data found the decrease concerning, but also said that the first six days of the month weren’t necessarily an indicator of total collections for the month.

While renters are struggling to make rent payments, they are utilizing online payment tools more frequently. Online payments surged 8.1% in December, according to the Rentec Direct report, and online rent payment options dramatically increase collections for landlords. In November, online payments increased 1.8% compared to March and in October, payments made online were up 4.3%. Online payment activity has increased consistently since September.

Landlords and property managers are showing increased interest in the online rent payment tools as a result of the pandemic. In November, rent payment applications increased 4.1% over February 2020. This is down from the pandemic peak in August, but interest in online payments has grown throughout the pandemic.

Landlords jarred by sudden drop in rent collection

As pandemic intensifies, 1 in 4 tenants paid nothing last week

  By: Georgia Kromrei                                                       December 08, 2020                                   The Real Deal

 

Market-rate apartment owners just reported the lowest rental payment rate since April.

In its monthly survey, the National Multifamily Housing Council found that only 75 percent of renters in 11.5 million market-rate apartments paid some or all of their rent by Dec. 6. The figure represents a 5-percentage-point decrease from November, and is nearly 8 points lower than it was a year ago.

The president of the Washington, D.C.-based lobby group, Doug Bibby, said the results should come as no surprise.

“As the nation enters a winter with increasing Covid-19 case levels and even greater economic distress — as indicated by last week’s disquieting employment report — it is only a matter of time before both renters and housing providers reach the end of their resources,” said Bibby.

He also said that the group, which represents landlords, was encouraged by news of a potential relief bill from Congress. The specifics have not been announced, but Virginia Sen. Mark Warner told CNN that the four-month, $908 billion package will include rental assistance, and is expected this week.

In the meantime, as Covid-19 cases in the United States pass the 15 million mark, property owners are hoping renters will continue to pay — even as other expenses fall by the wayside. In his 2016 landmark study on eviction in low-income communities, Princeton researcher Matthew Desmond noted that “rent eats first,” meaning it is prioritized over other household expenses.

Indeed, the consistency of rent payments in the multifamily sector have made the asset class a relative safe haven for investors during the pandemic, especially in areas where regulations do not prevent rehabbing apartments and raising rents.

Although examples of apartment distress have so far been isolated, all might not be well in the multifamily sector.

The NMHC rental tracker does not distinguish between partial and full payments. And there is no accounting for instances where tenants and landlords may have negotiated a plan to use security deposits as payment — a practice which was adopted officially by some locales to keep rent payments flowing.

But the survey is conducted the same way each week, and the drop in collection last week was the largest since early in the pandemic.

A weekly survey conducted by the Census Bureau found that in November, nearly 9 million out of 53.3 million rental households were not caught up on rent. Households behind on rent were disproportionately lower-income, an indication that the recovery from this crisis will be more uneven than that of past crises.