Multifamily rent growth continued to trend downward in May, according to Yardi Matrix, with the sector continuing to feel the negative effects of COVID-19 pandemic during the typically busy spring leasing season.
Rents fell 0.3% nationally month over month, slightly better than the 0.5% decrease in April. Nationally, average rent now sits at $1,460, down $5 from April and $13 over the last two months.
“If rents continue this rapid downward trend,” said Yardi’s May 2020 Multifamily National report, “we could be looking at alarming numbers by the end of the summer.”
Whether or not monthly declines in the near-term continue to be as steep will likely depend on the magnitude and duration of continued social distancing practices across the country, Yardi postulated. And “as some unemployed slowly return to work in the coming months,” the company said, “the fall could become this year’s rental season.”
Annual rent growth showed similar evidence of weakening. Though rents increased 0.8% annually in May, that figure represents the lowest year-over-year gain since February 2011. Compare that, for example, to the 3.5% annual growth seen in May last year, or the 2.9% posted in May 2018, and it’s clear that rent growth has softened.
Gateway markets, many of which have imposed the earliest and most stringent measures to curtail the spread of the novel coronavirus, have been among the first to see year-over-year rents decline. San Francisco and Boston both saw rents drop 1.0% annually in May, while Chicago (down 0.9%) and Los Angeles (0.7%) aren’t far behind.
Other markets with strict lockdowns are among those that have seen rents fall furthest month to month. Examples include San Jose (down 0.9%), California; Orange County, California (0.8%); and Seattle (0.8%), all of which were among the most proactive cities in enacting shelter-in-place orders. Also seeing a severe month-over-month decline was Houston, which even pre-pandemic tends to be one of the nation’s more volatile rental markets; considering Houston’s deep ties to the oil industry, the stark decline in oil prices could mean that the city’s road to rent price recovery may be a longer one.
Meanwhile, national rent collections continued to be strong throughout May, according to the National Multifamily Housing Council (NMHC). According to the organization’s Rent Payment Tracker, 93.3% of apartment households paid full or partial rent by May 27, up from 91.7% that had paid by April 27.
“Each week we see new evidence that Americans are prioritizing rent and that the work apartment firms did to create flexible payment plans is paying dividends,” said Doug Bibby, president of the NMHC. “However, the hardships caused by the outbreak are not ending anytime soon. Accordingly, it is critical that lawmakers come together to support America’s 43 million renter households with a national rental assistance fund as was included in the House-passed HEROES Act, and to protect our housing providers with expanded mortgage forbearance.”
Yardi noted that the extra $600 per week in unemployment benefits enacted to help out-of-work Americans weather the pandemic is set to terminate at the end of July.
“[I]t remains to be seen how renters will fare if the extra assistance is not extended,” Yardi’s report said. “A decline in collections seems imminent, but as of right now, renters are prioritizing their rent payments.”
