The lack of a new federal stimulus package has not had a negative impact on rental debts since the end of the CARES Act relief in July – rent back payments to landlords. The rental debt improved slightly in September, with 32% of tenants owing the rent back to the landlord, after 34% in August Apartment list. This improvement came in step with the economic recovery and the addition of lost jobs.
"Despite the phasing out of the federal incentives provided by the CARES Act, the economy has been gradually re-creating jobs, indicating that we are on the path of what is likely to be a protracted recovery." Christopher Salviati, Real Estate Economist at Apartment List, tells GlobeSt.com. "With some Americans back to work, the non-payment rate has not deteriorated. Even so, the rate of missed payments remains elevated and we find that even many of those who are able to pay their rent make significant financial sacrifices in order to do so. "
While the share of rental debt among tenants is improving, it is still high. More than a third of the tenants owe back rent payments. "The fact that so many Americans are struggling to pay their rent puts pressure on rental rates," says Salviati. “We find that among those who say the pandemic made them more likely to move in 2020, the most common reason cited is the need to find more affordable housing. Many of these tenants are likely to move back in with family or friends to ease financial pressures. In particular, high-priced stores and luxury units have seen a decline in demand, leading to stagnating or falling rental growth. "
Eviction moratoria have contributed to increasing payment defaults while reducing the number of evictions. This protection has expired in some areas and in others – including the state of California – the eviction moratoriums were extended until the end of the year. "Eviction moratoriums have been an important tool in maintaining housing security for those struggling in these unprecedented times," says Salviati. “We saw no evidence that this protection resulted in higher missed payment rates. Renters who can afford their rent continue to make payments, and indeed many will go to great lengths to keep their rent updated despite the protection in place. Rent debt is likely to be a problem through the end of the year, with or without eviction moratoriums. "
Not only is rental debt a burden on tenants who struggle to make payments and stay in their homes during a public health crisis, but it is also a burden on landlords. Many landlords are unable to maintain the property with reduced cash flow. “Many landlords operate with relatively low profit margins and rely on full and timely rental payments to pay the mortgages on their rental properties. Widespread problems with non-payment of rent will certainly affect landlords as well, ”says Salviati. "Even so, many lenders offer mortgage forbearance options, which may ease some of that pressure."