August 7, 2020
With some 32 million Americans receiving unemployment benefits in late June, more renters were late on their July payments than any other time during the coronavirus pandemic, Zillow says. During the first week of July, 22.6% of U.S. apartment households didn’t pay any rent, a higher share than in any month since at least March, although the numbers improved by mid-July. However, an Apartment List survey says one renter in three began August with unpaid housing bills.
The $600 boost to unemployment benefits expired on July 31 and Congress hasn’t enacted a replacement measure yet, meaning those numbers are likely to rise even further in coming months.
Losing the additional $600 per week and only receiving state unemployment benefits means that the share of households facing severe housing burden will skyrocket — from about 3% of impacted renter households to 41% nationally, says Zillow.
In some larger metros, the share is even higher: Zillow projects that 48.4% of Los Angeles renter households will become severely rent-burdened, a figure that rises to 49.7% of Washington, DC households and 59.1% of those in Miami.
A Zillow study says those missed rent payments could have the potential for deep impacts not only for renters, but also for rental owners who owe common costs of property ownership and other workers in the industry.
“The rental market has been more affected by the coronavirus pandemic than the for-sale side appears to have been,” said Zillow economist Joshua Clark. “The steady climb of the past few years has come to an end as rent growth has slowed nationally and prices have outright fallen in a few markets.”
Up until now, he added, the saving grace has been “government aid and eviction freezes, which have provided a lifeline for those who are out of work. But much of that aid has expired, putting many renters and workers who rely on the rental market continuing apace in a vulnerable position.”
For landlords, more than half (53.8%) of the income from a typical rental unit normally goes toward fixed costs associated with property ownership, a Zillow® analysis shows. These expenses include mortgage payments, property taxes, maintenance, insurance and capital improvements.
That’s before accounting for other costs of running a rental business, such as staff wages or management company costs, business taxes, legal and accounting services and landscaping. In total, the average annual return on a rental unit is 6.4%. In 2015, it averaged 13.3%, meaning the margin has fallen by more than half over that time.
“Tenants and landlords are of course affected when payments are missed, and taking it a step further the partners we work with all have individuals that rely on companies like ours operating as we have been,” said Brian Miller, director of marketing at Pennsylvania-based Berger Rental Communities. “So there are plenty of pieces of a larger ecosystem that are feeling an impact.”
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