How COVID-19 Has Impacted Rent Collection for Landlords
COVID-19 has caused a lot of uncertainty for landlords and property managers over the past few months, especially with the recent changes to rent collections and evictions. In an attempt to help tenants who may be struggling financially, many states are beginning to restrict evictions during the pandemic. For landlords, this can be scary as it may translate to less rental income with no ability to evict and find a new tenant.
Changes in rent collection during COVID-19 are expected. However, recent rent collection data shows landlords may not be as impacted as they initially expected.
In fact, data shows that rent collection is down by a few percentage points. While new eviction laws may be scary for landlords, the data shows it is not as bad as it seems.
Here’s what you need to know about COVID-19’s impact on rent collection for landlords:
Rent Collection is Down
Understandably, rent collection has dropped – but this was expected. Going into a recession of any kind means people have less money. Sometimes, this even means missing rent payments.
Luckily, rent collection hasn’t been affected as much compared to previous economic downturns. In fact, as of May 2020, rent collection is only down 1.5% from May 2019.
Better yet is that data shows rent is up over 2% from April of 2020, which also indicates landlords may not see a massive decrease in rent collections.
As for rent collection percentages, 80.2% of tenants paid rent by the end of week May 6th, 2020. This is only a 1.5% change from the 81.7% of tenants that paid rent by the end of week May 6th, 2019.
Year to date, rent collection is down a total of roughly 3% from 2019, but this is promising. For the time being, the spread of the virus seems to be slowing down. Additionally, steps are being implemented to get the economy rolling again, meaning in the short-term, the worst may be over.
Of course, we don’t know any of that for a fact yet, though. What we do know is rent collection is down only slightly – a good sign for landlords.
Why is Rent Collection Down So Little? Will it Get Worse?
The obvious reason for this is government stimulus checks are finally hitting bank accounts. With many stimulus checks making their way to citizens towards the end of April, it makes sense tenants are able to pay rent.
Of course, as of now this is the only stimulus check confirmed for Americans. There have been talks from President Trump about distributing a second round of stimulus checks, though. The main reason for this is because data shows that 63% of Americans will require a second stimulus check in order to pay bills within the next three months.
Depending on whether the economy reopens, the next few months could prove to be unstable. The good news is many states are ramping up unemployment help efforts, as nearly 15% of the country is unemployed.
With all the federal and state help citizens are receiving as of currently, it is likely rent collections won’t fluctuate too much. Again though, none of this can be said for certain.
Eviction Routines are Changing
Perhaps more important to know than the current rent collection numbers are the change in evictions laws. While not all states have implemented new evictions laws, many states have – and they are important to know.
Take a recent case in Minnesota, for example, where a landlord was charged for evicting a tenant during the pandemic.
States are beginning to require landlords to allow tenants to live in their property even if they cannot pay rent. As of now, there are 15 states which have suspended or changed eviction laws until further notice. Each state’s new eviction suspension is different, so be sure to stay updated on your current state’s eviction laws.
Most states who have changed their eviction laws require landlords to keep tenants in their homes even if they cannot pay rent. New York, for example, declared an eviction and foreclosure moratorium and prohibited late fees for up to 90 days, even allowing tenants to use their security deposits to pay past rent.
Luckily, these changes have clearly not changed rent collection too much – yet. But it is still something that should be prepared for. At the very least, be willing to work with tenants during this difficult time. Even if you are able to evict tenants, finding new ones during this time may not be easy.
Remember – It’s Temporary
Though we don’t know when, the economy will recover. In fact, real estate investments like apartment investing may even come out of the recession stronger than before.
While rent collections have been slightly affected, it’s nothing too concerning as of now. Just be sure to stay on top of your states’ eviction laws and suspensions during the pandemic and prepare accordingly.
For more reading, c to find out what you can do to help “recession-proof” your real estate investments during a recession.