Why is unpaid rent so high?

[Nathan Gesner]

I've read news reports that say up to 20% of rent has gone unpaid in the last couple of months. I manage 350 units and all but one has paid (we extended grace far longer than normal but now we're in the process of eviction). I network with hundreds of property managers around the country and almost all of them are in the same boat as me.

My only thought is that the higher percentage of unpaid rent must be with private Landlords. Maybe they don't run a tight ship and Tenants are taking advantage of the situation?

What's your experience? What are you hearing in your market?

And do you expect it to get better now that COVID restrictions are being lifted, or will it continue to worsen?

[Corby Goade]

I manage around 100 units in my market. When the quarantine hit, we proactively reached out to every tenant and listed all kinds of community resources, everything from food pantries to childcare help to rent assistance. We asked any tenants who were expecting to have trouble paying rent in May to contact us and work on a plan together. We had about 10 do so, and we came up with payment plans for each, and we had a couple meals delivered to those tenants as well. Every one of them paid ahead of the agreed upon schedule. So- we had about 10% pay late, but nothing went unpaid. 

I am wondering if either lower income pockets were hit especially hard or if HUD basically giving a pass to all subsidized housing skewed the numbers that way.

[Theresa Harris]

I only have a 4 rentals and they've all been paying.  One was a bit late, but let me know and paid about a week late.

I don't believe the news as they tend to exaggerate things.

[Karl B.]

*I haven't posted for a week because I'm tired of BP deleting entire threads after I take the time to post on a thread. It's annoying and wasting mine/the time of others who attempt to be active/semi-active on the forums.

All my tenants have been paying on time and I'm a self-managing landlord. 

I'm sure in some areas there are people who raise the average- especially cities where they push the rent strike narrative and aren't evicting for months giving non-payers fuel to be negligent. 

I think the numbers will improve as the eviction ban is lifted (I'm convinced some renters will pay their back rent and late fees) and those who legitimately lost their jobs and/or didn't receive enough stimulus money will get back to work and begin to pay down their back rent.

Of course there are some who will continue to not pay and will be evicted but I see a significant number of people going back to work whether with their old jobs or finding new jobs due to their place of employment closing its doors.

[Nathan Gesner]

As I mentioned, only one of my 350 tenants has not paid. She was problematic before COVID so we suspect she's just taking advantage of the situation. She applied for unemployment back in April. I don't know of anyone in my area that hasn't received payments by now, to include the $600 weekly boost. Her $1,200 stimulus check was mailed (according to her) and expected before May yet she claims to have not received it. She started two new jobs in early May but claims to only be making enough to pay for food and utilities.

i predicted at the onset that many renters would use take advantage of the situation. I'm surprised I've only had on so far.

[Wesley W.]

The messaging from elected officials here in NY implies "you don't have to pay rent."  Many of my colleagues are having tenants not pay rent even though they have the financial means to do so, because the state has made it so without any consequence until at least August 20th.  At that point, some will pay up in full (without fees), but many will not have the money that was given via stimulus/unemployment because they spent it.

The data from my landlord group showed a 38% delinquency for May, and I believe this is because it is a popular sentiment among renters that an "eviction moratorium" means that rent is no longer due.

I personally have not had that problem because I got out in front of this early with a proactive letter, and for the most part my tenants are very ethical.

[Juan Pardo]

Originally posted by @Nathan Gesner:

I've read news reports that say up to 20% of rent has gone unpaid in the last couple of months. I manage 350 units and all but one has paid (we extended grace far longer than normal but now we're in the process of eviction). I network with hundreds of property managers around the country and almost all of them are in the same boat as me.

My only thought is that the higher percentage of unpaid rent must be with private Landlords. Maybe they don't run a tight ship and Tenants are taking advantage of the situation?

What's your experience? What are you hearing in your market?

And do you expect it to get better now that COVID restrictions are being lifted, or will it continue to worsen?

In Spain the government has forced the REITs (SOCIMIs) to take the hit of COVID either giving the tenants a rent discount, a 6-month rent break, or the option of just not paying rent. Underlying this is a hidden threat from the government to REITs, that would mean paying more taxes if they don't agree with this veiled blackmailing (not receiving rent for a few months, or getting just 50% of rent).

Also, private landlords are having a hard time to collect rent, and I know people whose tenants stopped paying rent in March. Tenants heard the "good news" from the government and they made their own interpretation of them. As a result, many landlords are getting just half the rent stated in the lease agreement, or the tenants are not paying at all, hoping that there will be some kind of public subsidy to cover this. 

Mostly landlords owning more than 10 properties are getting hit by non payment. Also, companies owning more than 15 properties are at risk in some areas of Spain, as some governments (like the one in Catalonia), tries to force them to offer a discounted rent to "disadvantaged" social groups. Some politians are even trying to force owners to negotiate with squatters.

[Satyam Mistry]

@Nathan Gesner That is great collection rate on that many units considering the spike in unemployment over the last few months. I am curious to know what class neighborhood was most heavily affected by non collection of rent as I would assume it would be the lower income C/D class areas that got hit the hardest.

Nearly all the posts I have read on BP have had great collection rates during this pandemic. I think this ties back to the strength of this community and all the resources that help aid investors during uncertain times.

[Russell Brazil]

I collected 100% rent in March, 96% in April and May, and 100% in June. The 4% I did not collect in April and May, I also forgave that rent, so one might consider it 100% still.  

Ive seen certain Retail REITs with as low as 30% collected rents....which makes me wonder if the 20% you mention, if that also includes commercial. 

[Reginald Ross]

@Nathan G.

I can’t speak for the media reports but my collection rates have been better than ever.

The only tenant I had to work with was ironically the one with the highest income out of all my tenants.

[Sylvia B.]

We own 12 houses. All of our tenants have paid on time every month this year. 

[Account Closed]

I think most tenants are very aware that they need to protect their credit if they want to find another place to rent or buy a house, etc.  When we suffered the crash in the 2008 years, 25% of my tenants lost their jobs and they handled everything very responsibly.  They gave me notice to move, maybe asked if they could move without 30 days notice, and they moved back with family, usually out of state.  

I just think there aren't that many tenants taking advantage of the situation and not caring if their references and credit gets trashed.

[Joseph A.]

I am a private landlord and I've received 100% of my rents, I guess that's not really saying much since I only have 3 tenants. I was proactive in reaching out to the tenants early on and they all happened to be essential workers that didn't lose any income

[Karen F.]

Private LL, a little over 30 units, virtually 100% collection rate, although a few were late.  I reached out in mid March, as soon as it hit, advising tenants about how to apply for unemployment, SNAP, Medicaid, other help, and told them to contact us if they were in trouble.  Most were fine, a few were not.  We gave one tenant work (deferred landscaping), and another we did an emergency delivery of food and pet food (partner abandoned her at onset pandemic, suffered major depresssive episode and job loss), but the fact is, everyone is paying.  We're fully rented, and getting all rents in, although not all on time - a few are running a little late, but not much.  This is in C/D multifamily housing.

[Mary M.]

Not sure your sources, but the stats I am  seeing says about 93% of rent is being paid. 

You can track it here https://www.nmhc.org/research-...

ps - i am in the middle of a 1031, but before I closed on my downleg I was at 100% collection in my 10 units 

[Account Closed]

Originally posted by @Nathan Gesner:

My only thought is that the higher percentage of unpaid rent must be with private Landlords. Maybe they don't run a tight ship and Tenants are taking advantage of the situation?

What's your experience? What are you hearing in your market?

And do you expect it to get better now that COVID restrictions are being lifted, or will it continue to worsen?

Being evicted for nonpayment of rent won’t really be a thing for Seattle tenants in 2020–at least if tenants assert the rights they won at city council today.

Council President M. Lorena González introduced the emergency ordinance extending the eviction moratorium, which Governor Jay Inslee enacted and Mayor Jenny Durkan affirmed, a further six months past its June 4th expiration date. As an emergency ordinance, it needed seven votes, and it passed unanimously with nine.

Councilmember Alex Pedersen attempted to add a series of amendments, most notably a small landlord exemption, but was decisively repelled by his colleagues in a 8-1 vote.

*************

Rent non-payment is WAYYY UP in Seattle. By the way, it's against the law in Seattle to ask someone if they've paid rent. So it's anyone's guess how many people are taking advantage but reportedly it's a lot.

[Account Closed]

Originally posted by @Mary M.:

Not sure your sources, but the stats I am  seeing says about 93% of rent is being paid. 

You can track it here https://www.nmhc.org/research-...

ps - i am in the middle of a 1031, but before I closed on my downleg I was at 100% collection in my 10 units 

A third of U.S. renters didn't pay the rent on time this month

https://www.cbsnews.com/news/a...

By Khristopher J. Brooks  April 8, 2020 / 4:50 PM / MoneyWatch

Exhibit A: As of April 5, some 31% of the U.S. households that rent hadn't paid it for the month, the National Multifamily Housing Council said in a report Wednesday that tracks how the pandemic is affecting the housing market.

"The COVID-19 outbreak has resulted in significant health and financial challenges for apartment residents and multifamily owners, operators and employees in communities across the country," NMHC President Doug Bibby said in a statement.

Although 69% of renting households were able to pay the April rent, that was down from 81% the prior month, according to the group, whose data cover 40 million renters. Renters in Louisiana and New York saw the biggest increase of unpaid April rent.

Those financial struggles come as millions of workers around the country are being laid off

[Mary M.]

The link you provided says 93% :) its the same link i posted. Obviously some folks paid late... its all there for anyone who wants the numbers 

[Ben Clark]

@Nathan G. I live in upstate NY which is extremely renter friendly/Landlord hating and all rent has been paid. I tried to get out in front of things early talking to tenants about what their situations were. My parents also live close by with 5 units and they haven't had any problems either.

[Mike D.]

@Nathan Gesner I think these "news reports" are just media propaganda to spread more fear about the virus. Did they go to the Detroit ghetto and do a study on housing vacancy? All 24 of my units paid up on time except 1 who was 4 days late due to a job loss. With all the stimulus and UE help I don't see how good tenants don't find a way to pay the rent. 

[Wesley W.]

Originally posted by @Account Closed:

Rent non-payment is WAYYY UP in Seattle. By the way, it's against the law in Seattle to ask someone if they've paid rent. So it's anyone's guess how many people are taking advantage but reportedly it's a lot.

This is Human Nature 101.  The ONLY way to compel people to do something is to levy that directive with a consequence.  Our entire society is based on this paradigm.  No one should be surprised that, in these liberal areas, many tenants are not paying rent.  There is literally no downside to them not paying.  Why would they?  All carrot, no stick.

The 38% delinquency I reported from Upstate NY landlords were not published data from over-hyping media, it was based on surveys that member landlords filled out and the results were reported back to the group.

If there is a similar survey in June, I will convey those results, too.

[Aigo Pyles]

With my rentals, all are still paying.

[Nathan Gesner]

Originally posted by @Mary M.:

Not sure your sources, but the stats I am  seeing says about 93% of rent is being paid. 

You can track it here https://www.nmhc.org/research-...
ps - i am in the middle of a 1031, but before I closed on my downleg I was at 100% collection in my 10 units 

I'm referring to news articles that cite numbers like 20% or even as high as 30% of renters not paying.

nmhc shows almost 20% haven't paid rent by the 16th of the month so maybe journalists write the stories early in the month and never follow through to the end when tenants catch up.

[Michelle Fenn]

The great majority are paying, responsible tenants are still responsible.  What I do see is that the problem tenants are taking advantage of the pandemic.   Cleveland is tenant friendly.  Landlords are often seen as social service agencies.  I had a tenant call me last month and ask that I post a 3 day notice on his door.   He explained to me that he wanted it to obtain free rent assistance from the county.   I told him that the county had declared a rent moratorium and I was prohibited from posting any notices.   He paid his rent the next day.  

[Theresa Harris]

Originally posted by @Nathan Gesner:

 Her $1,200 stimulus check was mailed (according to her) and expected before May yet she claims to have not received it. She started two new jobs in early May but claims to only be making enough to pay for food and utilities.

 Wow she must have expensive tastes for food and high utility bills...or she's full of it.

[Joe Splitrock]

Originally posted by @Nathan Gesner:

As I mentioned, only one of my 350 tenants has not paid. She was problematic before COVID so we suspect she's just taking advantage of the situation. She applied for unemployment back in April. I don't know of anyone in my area that hasn't received payments by now, to include the $600 weekly boost. Her $1,200 stimulus check was mailed (according to her) and expected before May yet she claims to have not received it. She started two new jobs in early May but claims to only be making enough to pay for food and utilities.

i predicted at the onset that many renters would use take advantage of the situation. I'm surprised I've only had on so far.

 Keep in mind you are from a state with a low population (as am I) and COVID is hitting different areas differently, with low population areas having way less trouble. It makes sense, less population = more social distancing. My point is your situation is different than other parts of the country.

Unemployment is state run. In my state there are still people who were unemployed in April who are waiting for unemployment, including myself. I was furloughed, but I am back at work. They have not paid anyone the $600 weekly bonus yet. The official update is that it is "coming soon". As far as stimulus checks, people who did not provide direct deposit information are still waiting for checks to be mailed.

As far as my rents, I have one tenant who works in the restaurant industry and he is struggling. No unemployment or stimulus yet, but he received community outreach assistance, so is currently caught up. I am sure some areas have more trouble than others, but I also believe it is generally over hyped by the media.