On today’s show we’re talking about the effect of the pandemic on rental markets across North America. The results are somewhat surprising.
The biggest worry has been whether tenants would pay rent despite the staggering job losses. It seems that the stimulus money that governments have been showering the country with have been effective in protecting rental payments.
The National Multifamily Housing Council Rent Payment Tracker found 94.2 percent of apartment households made a full or partial rent payment by June 27 in its survey of 11.1 million units of professionally managed apartment units across the country.
This is a 0.5 percentage point decrease from the share who paid rent through June 27, 2019 and compares to 93.3 percent that had paid by May 27, 2020.
While the rent collections for June were down 0.5% compared with a year earlier, we are seeing that some tenants are struggling to make payments on time and are paying later in the month than previously. But here too the difference from last year is small. The biggest drop in rent collections happened in March and April, before the unemployment benefits were fully rolled out. Collections have steadily improved in May and June with the June numbers being virtually identical to the 2019 numbers. There is one caution and that is what is happening in the smaller self-managed rental market. We’re hearing data that collections in that segment of the market are much lower. We will try to get more data on that segment for a future show.
So if rental collections haven’t really dropped, then what’s changed in the rental market?
According to a new report on Zumper published in June of 2020, we can see some changes in the rental market. Zumper’s National Rent Report analyzes rental data from over 1 million active listings across the United States. Data is aggregated on a monthly basis to calculate median asking rents for the top 100 metro areas by population, providing a comprehensive view of the current state of the market. The report is based on all data available in the month prior to publication.
Covid-19 has shifted demand away from the most expensive markets. When you look at month over month data, all of the top 10 priciest cities either had flat or declining rents. It seems the pandemic has shifted the demand for apartments away from the most expensive cities, since usually demand picks up as we head into summer but now the opposite is true. As more and more companies move into remote work, many renters don’t want to pay the big city price tag when they are unable to use the amenities and are looking for more affordable options outside of large, metropolitan areas.
The most expensive city in the nation experienced the largest year-over-year drop since we started creating these reports in 2015. San Francisco one-bedroom rent is down 9.2%.
Similarly, the 3 next most expensive markets, New York City, Boston, and San Jose, all had negative year-over-year changes for their respective one-bedroom rents as well.
Some cities have actually experienced rent growth during the pandemic. One city in which my team has projects is Spokane Washington. The Spokane Valley is an area where rents have increased 5.1% year over year for one bedroom units and 3% for two bedroom units. Much of that change is recent with rents having increased 3.8% in the past month for 1BR units and 3% for 2BR units.
In my opinion, there’s no question that changes in employment are affecting people’s choices of rental accommodations. These choices are being influenced by affordability. If someone loses a job, they’re going to be looking for less expensive accommodation. If they’re going to be working from home for an extended period of time, then they may choose to move from a high cost dense urban environment to a lower cost area where they can socially isolate and continue to work from home with more access to the outdoors.