The COVID-19 pandemic has wreaked havoc on our global economies. Some populations, though, including renters, have been particularly hard-hit. TransUnion recently conducted an intensive analysis to better understand the impact of shutdowns, illness, and quarantines on the financial health of renters. The results, published in June 2020, offer valuable insight for rental-property owners and operators on the pandemic impact on the rental industry.
You most likely have a clear knowledge of your rental demographics. However, it’s good to have a more holistic picture, especially when considering national statistics. The National Multifamily Housing Council (NMHC) updated its rental characteristics in December. Here’s a snapshot:
- More renters than homeowners own no vehicles or own only one
- 27 percent of apartments are rented by single females, with 22 percent rented by single males
- 11 percent of renters are married, 9 percent are married with children, and 13 percent are single parents
- The highest percentage of renters (49 percent) are under 30 years old
- 42 percent of renters telecommute, working from home at least a few times a month
- Many renters (28 percent) make less than $20,000 per year
Paying the rent
Perhaps the most significant impact of the pandemic impact on the rental industry by COVID-19 is your renters’ ability to pay on time and in full. TransUnion’s May 2020 survey of renters whose income had been impacted supported this concern. It found that 32 percent of respondents were worried about their ability to pay.
However, according to the NMHC’s Rent Tracker, most renters are still making their payments. Only 3.1 percent fewer renters paid rent in April 2020 than paid in April 2019. This gap has decreased in May and June, as well. In May 2019, 96.6 percent of renters made their payments; in May 2020, this number was 95.1 percent, a decrease of 1.5 percent year over year. In June, the gap shrunk to 0.1 percent (96.0 percent in 2019 vs. 95.9 percent in 2020). This ever-improving trend is good news for property owners and managers.
CARES Act impact
The Coronavirus Aid, Relief, and Economic Security (CARES) Act offered several forms of financial aid that may have directly impacted your renters. In addition to one-time stimulus payments and enhanced unemployment benefits, the act provides special credit reporting allowances.
TransUnion’s survey asked consumers how they’d use their government stimulus checks. Thirty-eight percent said they’d use the check to pay current bills or loans, including rent. Some of those reported the check would allow them to pay only partial payments to creditors.
Tools like deferred payments and forbearance have always been options creditors could offer debtors. However, before April 2020, 99.6 percent of trades taking advantage of these tools were student loans. The CARES Act encouraged data furnishers to offer these allowances for other types of debt under the “Natural Disaster” code. Accounts with this designation are effectively ignored when calculating credit scores.
The government issued the CARES Act in late March, and in April, accounts reported with a Natural Disaster code grew by more than 1,100 percent. More than 4 percent of those accounts were non-student loans. TransUnion found that 3.8 percent of renters took advantage of these credit allowances on at least one account.
Renters’ spending trends
Another key indicator of renters’ financial stability is credit usage. Some experts believed renters would use debt to finance their expenses during the pandemic. This didn’t happen, though. Renters’ total debt balances decreased nearly 1 percent from January to April. Plus, balances on open credit-card accounts actually went down about 13.7 percent.
Even though personal income went down 2.2 percent in March, expenditures didn’t increase. In fact, personal expenditures decreased by nearly 7 percent in March, and nearly 14 percent in April.
These figures indicate renters are spending more conservatively, saving money where possible. TransUnion’s survey found that 60 percent of renters cut back on discretionary spending, 30 percent canceled subscriptions or memberships, and 23 percent cut back on retirement savings.
Pandemic impact on the rental industry and the bottom line for property owners
So what does this data mean to you as a property owner or operator? Well, despite the constant doom and gloom in the nightly news reports, things may not be as bad as they seem — at least for renters.
The percentage of renters who are making their payments is increasing every month. They’re spending wisely. Lastly, they’re taking advantage of allowances like forbearance and deferred payments. As a data furnisher, you’re not obligated to offer allowances to your renters. However, if you do, remember to add the Natural Disaster codes to these accounts to help your renters out in the long run.
To learn more about reporting your renters’ payment data to the credit bureaus, reach out to Datalinx. We’ve partnered with hundreds of property owners just like you to help them report consumer rental credit. We’d like to help you, too.