Affordable rental collections for residential property continue to struggle with the pandemic. According to a new report from proptech company MRI Software, August accounted for 77% of collections in 2019 and 76% of collections in 2019 in July 2019. The report covers 1.5 million affordable housing units in the US.
Affordable housing has traditionally been a strong performance during a downturn, but rental income is likely to lag in this recession as service workers have been hard hit by the shutdowns and resulting vacations.
The exception was public housing, which undoubtedly had strong rental income thanks to government support. In August, public housing rental collections made up 94% of rental collections in August 2019. In July, public housing rental collections accounted for 96% of the July 2019 collections.
In both segments of the market, both new vehicle registrations and move-out certificates were low in both August and July, suggesting residents will stay in place regardless of rent payments.
Affordable housing is not the only multi-family segment struggling with rental income. According to the National Multifamily Housing Council's Rent Payment Tracker The rental collections for apartments are declining overall. That month, only 86.2% of the housing units made full or partial payment, roughly equivalent to the August rent at the same time. However, in June rental collections hit 89% by the middle of the month, a high for the pandemic and a sign that collections were on the rise. As a rule, rental income is almost 90% by the middle of the month.
While it's too early to say where September will fall in terms of total rental collections, August rental collections fell to 94.5% compared to previous months during the pandemic. Before August, rental income had been over 95% since May and peaked at 95.9% in June.
The market decline in August coincided with the expiry of unemployment benefits, which many landlords feared would put pressure on an already distressed market. This could also explain the discrepancy between affordable and public housing rental collections. According to the report, public housing rental assistance provides tenants with greater rent subsidies compared to affordable housing, which instead of subsidies is below market rents for people earning less than median land income.
Affordable housing traditionally outperforms other areas of multiple families during economic upheavals. In 2008, affordable rental income actually increased by 1.5%. During the last recession, rental income never fell below 95% and after the recovery, rental rates rose through 2019.
While this is a different recession than the financial crisis, affordable housing is likely to follow the same trend in the long run. As the economic turmoil persists, residents of off-market housing will seek cheaper housing options, increasing the demand for affordable housing units. This is the only certainty that, according to MRI's Brian Zrimsek, the demand for affordable housing will not decline.