The COVID-19 pandemic has affected business, society, and the economy in a multitude of ways, and has certainly impacted the nation’s rental housing industry, including the more than 40 million residents who call apartments home and the 17.5 million jobs it supports.
At the beginning of the crisis, apartment owners and operators quickly pulled together and implemented strategies to protect the health of their staff, their residents and their businesses.
Adapting to a pandemic
Property owners considered how to stem the spread of the novel coronavirus inside apartment communities as large swaths of the country entered quarantine, as well as how to keep residents engaged when they were isolated in their apartments and how to manage maintenance requests amid social distancing requirements and the proper use and disposal of personal protective equipment (PPE).
As the weeks turned to months, and the overall economic impact of 30 million unemployed Americans crystallized, many in the industry worked with their residents on payment plans, waiving late fees, and other creative solutions to keep people in their housing.
Further helping bridge the gap were federal, state, and local relief efforts, including enhanced unemployment benefits and a one-time stimulus payment. However, as the pandemic continued, it became clear that this bridge was not long enough to ensure that the worst of the effects from missed or partial rent payments could be avoided.
There exists a misconception that owners of rental properties enjoy large margins. In truth, on average, only 9 cents of every dollar of rent is returned to the owner as profit, with some of this further returned to investors, including public pension funds and real estate investment trusts, on which many Americans rely for their retirements.
On average, approximately 39 percent of income from rental payments go toward the mortgage on the property and roughly two-thirds of the industry have private lenders and are ineligible for federal mortgage forbearance provided by the CARES Act. Missed rent payments or reduced collections could lead to foreclosures, which puts all residents at risk of losing their housing.
Further, approximately 27 cents of every dollar cover payroll expenses, including paying employees who operate and maintain the property, ongoing maintenance, utilities, insurance, and similar expenses. This portion of a rent dollar not only ensures that residents can continue to enjoy safe and secure housing, but that the onsite staff who provides this level of service can continue to do their critical work.
Other expenditures include property taxes — which help finance critical support services for the local community such as fire departments and schools — and capital expenditures such as roof and HVAC replacement that help ensure quality housing for residents.
The need for more support
As the pandemic wears on, and an increasing number of Americans find themselves unable to meet their obligations through no fault of their own, it should become clear that continued financial assistance will help avoid the cascading and deleterious effects of missed rent payments on the nation’s rental housing residents, the businesses providing and supporting housing, and the broader economy and society.
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