May Rents: What to Expect
What Did April Bring?
As lay-offs and furloughs affect workers across the country, 18.6% of the US workforce has filed first time unemployment claims over the course of the past 6 weeks. That’s 30.3 million Americans, with 3.8 million having filed just last week. But, even in light of this, the overwhelming majority of rental households were able to make full or partial rent payments by the end of April.
By April 26th, an estimated 91.5% of professionally managed apartment households were able to make full or partial rent payments. That’s only slightly lower than it was in March, when 93% paid rent. It’s also less than a 3% difference than payment rates in April 2019. At the end of the first week of April, only about 69% of renters had paid their rent, which means that 22.5% of renters made payments in the 2nd and 3rd weeks of the month.
What We Learned
What does this tell us? First, it’s good news that residents are still able to meet their rent obligations despite spiking joblessness and unprecedented economic challenges. One reason for the strong national payment rate is the CARES Act stimulus checks. According to Forbes, one in four Americans indicated that they used their stimulus checks on housing. Another reason is that many landlords and management companies, like LBPM, are being proactive about communicating with residents about their hardships. At LBPM, we’re engaging in constructive communication with residents, setting up payment plans and making it as easy as possible to contact us.
But, while it’s good news that April had surprisingly strong rental payment rates, May could bring fresh challenges and new uncertainties. In April, now-unemployed workers still had some March earnings to carry them through, while others may have drawn down on their personal savings. Many may have used their federal relief funds and credit cards to see them through the month. Without health care provided through their employers, some unemployed residents are facing higher health care costs. In short, there could be many renters who find themselves in a more difficult spot with this next upcoming rent payment.
What We Can Do
While the rent payment rate in May is uncertain and difficult to predict, property owners do have options to help combat the loss of rental income. Minimizing operational costs and postponing nonessential projects can help. Lenders may be able to help, as many financial institutions are offering direct assistance and options to their clients. Depending on how a rental property is designated, there are also a number of loan programs available through the Small Business Association specifically for disaster relief, such as the Economic Injury Disaster Loan Advance or possibly the Paycheck Protection Program. Finally, there’s the option of working hand in hand with residents to work out a solution that benefits both parties.