The volume of registrations and the performance of rental income in the area of affordable housing and public housing continued to increase in September.
After months of underperformance, the volume of approvals for affordable housing rebounded in September, according to MRI Software, which reports that the volume for affordable housing in September 2020 was 95% year-over-year, but public housing was only 68%.
While approval for affordable housing rebounded, rent collecting was still a challenge, falling below 80% year-on-year rates for the third straight month. The rate for September 2020 was 78% for affordable housing and 98% for public housing.
The MRT report compiled data from more than 1.5 million affordable and public housing units in the United States from January through September 2020 and January through September 2019.
"Some people summarize affordable and public housing, but as our data shows, the sectors react very differently to economic, political and social pressures," says Brian Zrimsek, head of industry at MRI Software, in prepared remarks.
“Public housing is more cushioned due to its larger rental subsidies. This is why collection rates tend to be higher than affordable housing, and also why social housing residents are more likely to stay in place. "
The case for affordable housing
Still, some affordable operators do well during the recession. At Avanath Capital Management, for example Rental collections have held on.
“Affordable housing is an asset class that has continued to develop despite the pandemic. Our occupancy rates remain strong, property valuations are high and we have seen minimal rental delays, ”said John Williams, President and CIO of Avanath Capital Management, in an earlier interview with GlobeSt.com. “Affordable housing also tends to hold its own in times of economic prosperity and economic uncertainty. In times of economic uncertainty, demand even increases. During the pandemic, we had over 800 new leases and 2,000 lease renewals, all of which we were able to complete virtually. "
Another positive feature of affordable housing is the strong position of the Low Income Housing Tax Credit Market [LIHTC] properties in the recession.
Before the pandemic LIHTC real estate revenues increasedThis led to increased expenses for operating costs, according to a report from Novogradac. Revenue in 2019 rose 8.5% in 2019, following in the footsteps of 2018 when rental income rose 4.1%. After years of tight budgets caused by the Great Recession, the owners appear to have run out of funds. Operating costs rose 6.8% last year and, according to Novogradac, saw the largest increase in ten years.