Delinquency Rates are Rising in Housing Rentals

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Delinquency rates in housing rentals are rising around the country. The Dallas-Fort Worth area is faring slightly better than other states. On a national level, 77.4% of rent payments are current according to the NMHC Rent Tracker. As of the first week of July, Dallas is at 86.4% 

This is a 2.3-percentage point decrease from the share who paid rent through July 6, 2019, and compares to 80.8 percent that had paid by June 6, 2020. These data encompass a wide variety of market-rate rental properties across the United States, which can vary by size, type, and average rental price.

“It is clear that state and federal unemployment assistance benefits have served as a lifeline for renters, making it possible for them to pay their rent,” said Doug Bibby, NMHC President. “Unfortunately, there is a looming July 31 deadline when that aid ends. Without an extension or a direct renter assistance program, that NMHC has been calling for since the start of the pandemic, the U.S. could be headed toward historic dislocations of renters and business failures among apartment firms, exacerbating both unemployment and homelessness.”

Delinquency rates are rising in housing
Source – National Multifamily Housing Council

Covid Hot Spots Aren’t Affected Yet

This does not appear to be closely related to Covid-19 hot spots. Three of the COVID hot spots (Arizona, Texas, Florida) are holding steady at 85-86% according to an article posted by RealPage last week.

Apartment List is tracking only full payments. According to their surveys, only 68% of renters were able to pay the full amount due.  They report that the number of renters unable to pay the full amount due on time was 24%.  In May this jumped to 31%.  A slight drop in June to 30% of renters unable to pay.  For July, the numbers are higher again at 32% unable to pay.  This is likely directly related to unemployment numbers.  

What About Next Month?

In June, unemployment dropped to 11% (down from 15% the month before)  However, as the virus surges again reopening in many states has been put on hold or even reversed. This will likely lead to increasing unemployment numbers. Combine this with expiring unemployment benefits and other protections and it’s understandable why both renters and owners are nervous about the future.

Many states have enacted displacement bans but others are allowing the original orders to expire. This could result in a wave of individuals with no shelter during a time when many states are discussing new “shelter in place” orders.

Another Side Effect

Renters are much less like to move during the pandemic due to both the cost of doing so and fears of exposure to the virus. On the other hand, some renters are forced to move into lower cost housing in order to afford the rent.

High vacancy rates are driving rent rates down according to a survey by Apartment List.

Source: Apartment List

How will a high delinquency rate combined with lower rental rates affect the assessed value of apartment complexes?  Contact one of our trained professionals to discuss your situation.

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