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The Pandemic and Multifamily: Softer Market Faces the Expiration of Renter Assistance

HOUSTON – (By Dale King, Realty News Report) – The coronavirus pandemic is cutting slack to no person, place or thing. No individual, business, institution, school, employment rank, ledger sheet or neighborhood is getting a break.

And no residential, rental, commercial, manufacturing or industrial trade is dodging its influence.

Houstonians needn’t go far to see and feel the impact of the half-year-long struggle between Planet Earth and the invasion of invisible, deadly COVID-19 germs. Many in the Bayou City have seen virtually nothing but their homes’ walls and mask-faced supermarket clerks for months as they practice isolation. Even doctor visits are done with Facetime.

A mid-summer wave builds in hard-hit states such as Texas, Florida, California and Arizona, raising the specter of another exodus into urban lockdown.

Several reports and periodicals published this month have focused on the difficulties wrought by COVID-19 on Houston’s rental community. They point to things like absorption figures, vacancy levels and leasing rates and how they compare with the actualities of the past and the predictions for years ahead.

One recent article by ApartmentData.com President Bruce McClenny, describes the future the way Yogi Berra did in one of his twisted quotes. The famed New York Yankees catcher once said: “The future ain’t what it used to be.”

McClenny’s commentary published in the Houston Apartment Association’s magazine, Abode, re-crafts a scene from the film, Back to the Future II, with Dr. Brown warning Marty McFly: “Whatever you do, don’t go to the year 2020.”

And here’s why.

The article analyzes the troubles inflicted by COVID-19 on the US and the Lone Star State this year. McClenny points out that nationally, 20.5 million people lost their jobs in a scant six weeks due to the arrival of the viral virus.

In April, apartment absorption in Texas is normally rapid, says McClenny.  Houston leased out 2,805 units in April 2019 en route to a total of 14,066 absorbed during the entire year.

In April 2020, just 726 units were leased, thanks to COVID-19 – just a quarter of what was scoffed up by renters a year earlier.

Actually, said McClenny, this wasn’t Houston’s worst showing. In 2016, when oil prices tanked and the number of pumping oil rigs had dropped to a record low of 404, only 561 apartments were absorbed into the market in April.

Houston survived that disaster. And coronavirus will likely give way to better days – eventually — despite a tough go in the meantime.

ApartmentData.com’s Market Line – Houston displays in words and graphics the impact of coronavirus on the rental landscape. And while individual numbers and percentages don’t vary much, the trend is more noticeable as the multifamily market softens in the pandemic

In the summer of 2019, July and August specifically, apartment occupancy rates in Houston were virtually as high as they’ve ever been – just over 90%. Since then, the trend has drifted steadily downward – with a single month-long jump-up this past March.  Occupancy rates for May and June this year have slipped just under 89% — the lowest level in several years.

McClenny’s article says the coronavirus “job loss scenario doesn’t bode well for the Houston apartment market. Absorption will be constrained and rent will move lower.”

Houston, however, has recorded some “hot” submarkets during the past three months. ApartmentData.com says Richmond/Rosenberg has grown 4% with a decent absorption rate of 1.4%. Next is Beltway 8/I-45 South growing 3.2%. Willowbrook/Champions/Ella increased 3.4%; Lake Houston/Kingwood came in at 1.5% and Braeswood/Fondren SW scored a 4.5% growth rate, despite a .7% level of absorption.

Most tenants have been paying rent on time, but uncertainty lies ahead. National Multifamily Housing Council Rent Payment Tracker which found 77.4% of apartment households made a full or partial rent payment by July 6, 2020, according to its survey of 11.4 million units of professionally managed apartment units.

This is a 2.3-percentage point decrease from the share who paid rent through July 6, 2019 and compares to 80.8% that had paid by June 6, 2020.

“It is clear that state and federal unemployment assistance benefits have served as a lifeline for renters, making it possible for them to pay their rent,” said Doug Bibby, NMHC president.

“Unfortunately, there is a looming July 31 deadline when that aid ends. Without an extension or a direct renter assistance program that NMHC has been calling for since the start of the pandemic the U.S. could be headed toward historic dislocations of renters and business failures among apartment firms, exacerbating both unemployment and homelessness.”


July 13, 2020 Realty News Report Copyright 2020


 

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File: Multifamily market softens in the pandemic

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