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?

[Mike Mocek]

We manage about 400 properties, when the stay at home order was issued for the State of Ohio we immediately reached out to all of our tenants with a laundry list of resources.  Including Unemployment, food pantries, even day cares.  Including that, we also offered rental assistance to our tenants as well, we gave them two different options.  Surprisingly enough, our tenants pulled through and have been amazing through the process.  Sure we have a few apples in the bunch, but we saw great cooperation from our tenants.  I believe it has a lot to do with the approach, we made sure our tenants were taken care of and that provided support from our tenants.  

[Don O'Grady]

We have not had any changes in payment rate or timing in Ohio or Arkansas. Tenant turnover seems to be consistent with prior years, and viewings are trending strong over the last 2 weeks.

[Josh Nigh]

@Russell Brazil

Exactly Russell commercial has to make up a large margin of that %

[Brian Briscoe]

@Nathan Gesner

Just curious -- are the articles specifically multifamily?  Also, what are their cut-offs for reporting?  Our rent collections to be on par with prior months over 88 units in SC.  We're in secondary markets with B and C class assets.

[Calvin Thomas]

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?

We have over 600+ units and the tenants are playing games due to the ban on evictions.  The only one's who seem to care are the one's with good credit.  We've already informed them that evictions will be filled on the day the ban is lifted unless a payment plan is setup.  Some have agreed, a few are still saying they can't afford to pay the rent, but show no proof of hardship.  Welcome to the new normal.

[Calvin Thomas]

Originally posted by @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.

Yes, we have some that are feeling the same way.  We did some inspections, with proper notification, and found other ways they were in violation of their leases.  We are looking into going through the NY Supreme Court route to get rid of them earlier.  It's a little more expensive, but they are in pricey units so the expense is justified.

[Account Closed]

Our management company has done well with rent collection. As soon as this began we were proactive and put policies into place overnight.  We immediately communicated with our tenants and continued to do so on a consistent basis regarding Covid-19 and how we were all in this together. We provided tenants the opportunity to let us know if they felt they would have issues paying rent so that we could assist them and also provided a large list of resources to tap into should they need outside help.  We also made sure our tenants knew that our goal was to help them avoid LARGE balances that they would have a hard time recovering from and potential evictions down the road.

There may have been many factors that have played a role as to why some landlords had issues collecting rent, while others did not.  Geographical location (high virus infection rate/low virus infection rate), did the majority of their tenants have essential jobs with no loss of income or vise versa, were the tenants that didn't pay have issues paying rent prior to Covid-19, did the landlord not show enough compassion or did they show too much compassion, was there a lack of communication, etc.  

[Michael Duguet]

@Nathan G.

All my tenants have paid here in PA.

I think the stats might also depends on when is the rent considered unpaid. I heard some stats are based on rent collected as 1st day of the month while many leases allows rents to be paid later let’s say on the 5th. As always stats can be manipulated to fit a certain narrative.

[Nathan Gesner]

Originally posted by @Brian Briscoe:

@Nathan Gesner

Just curious -- are the articles specifically multifamily?  Also, what are their cut-offs for reporting?  Our rent collections to be on par with prior months over 88 units in SC.  We're in secondary markets with B and C class assets.

I've read a few articles over the last month and I don't recall any of them referencing commercial property, but I also don't recall them providing any kind of breakdown. I assume they're basing it off a compilation of data or just talking to large developments.

[Michael Robbins]

I agree that the higher rate on unpaid rent is from the private landlords.  I have 100% collection at the moment.  But I have a listing in Las Vegas right now that is tenant occupied and the owner (my client) self manages.  This owner has not been able to collect rent in almost three months.  

[Sean McCluskey]

@Nathan G. These articles tend to be from multifamily council press releases, and they are as of a certain date. Then they end up collecting more over the rest of the month when tenants get their checks from work/unemployment.

Large multifamily has also had the most people move out, to get out of the small boxes, and tenants are able to talk to each other about not paying, etc.

[Bill B.]

I assume they are just making the numbers up. I have yet to hear from anyone that their collections are down. The closest I’ve heard to this being the truth was some large property manager on a podcast was talking about having 80% rent paid on the first (85% by the first was normal) but they were around 95% by the 5th when late penalties kicked in (97%) was normal.  (So maybe they are only reporting paid by the first rent and it’s 70% instead of the normal 80% but everyone Still pays by the 5th.)

Speaking as a small landlord. I have one tenant out of 15 that paid 1/2 her rent for April (she works in the entertainment industry) but has paid full rent for May and June. So I’m owed about 3% of one month’s total  rent or 1% of the 3 month pandemic’s total rent. Nobody else has even brought it up. 

[Nathan Gesner]

Originally posted by @Sean McCluskey:

@Nathan G. These articles tend to be from multifamily council press releases, and they are as of a certain date. Then they end up collecting more over the rest of the month when tenants get their checks from work/unemployment.

Large multifamily has also had the most people move out, to get out of the small boxes, and tenants are able to talk to each other about not paying, etc.

That's what I expected. I'm a member of NARPM and they've been surveying property managers around the country. Our numbers are significantly higher that what I've seen publicly.

[Ryan Evans]

I have come across a few studies by real estate focused media agencies that report stats not even close to what the general media is saying. It's more along the lines of the experiences people in this forum are having. It seems rents are still getting paid for the most part.

Not to get political, but part of the confusion is because news reports don't have to be based on any kind of data or facts whatsoever. Their job is to make up stories that get clicked on. That's why they use the word "report" instead of wording they can be held accountable to. 

[Maria Bocanegra]

@Nathan G.

I am in chicago and here the reality is that unpaid rents have soared and that is primarily for folks who are low-moderate income and/or already rent burdened. Those are the folks not paying and therefore raising that percentage. At least here. I am guessing here but I think that fact is at least in part attributable to lost income from lost work or lost work due to inability to find adequate childcare and therefore these families need to stay home, lost income from illness related to COVID. There are probably myriad of other reasons.

[Nathan Gesner]

Originally posted by @Maria Bocanegra:

@Nathan G.

I am in chicago and here the reality is that unpaid rents have soared and that is primarily for folks who are low-moderate income and/or already rent burdened. Those are the folks not paying and therefore raising that percentage. At least here. I am guessing here but I think that fact is at least in part attributable to lost income from lost work or lost work due to inability to find adequate childcare and therefore these families need to stay home, lost income from illness related to COVID. There are probably myriad of other reasons.

Interested how the markets are so different. Even during the height of the social-distance measure, with all the businesses closed, I still had apartments and small houses flying off the shelves. 

[Bill B.]

Thanks for the update Maria. You are the first person I've heard actually in the business to say they are having trouble. These are your actual tenants? Not just a "report" or a "study"? How many "doors" do you have and how many haven't paid? I know in Mpls many of the unemployed tenants I talk to are actually making more than they did while employed and have no problem making rent. I have almost the same experience in Las Vegas which I would have assumed would be hit harder than Chicago but hasn't suffered at all, at least in the SFR market.

Do you have any ideas why Chicago would be different? Is it possible they are taking the extra money and just pocketing it with the idea they will move when forced? I mean it can only people well off enough to not be on section 8, and also well off enough that $2400/mo Extra in unemployment Per person doesn’t make ends meet. You’d think that $5,000/mo for a couple plus State unemployment benefits would be enough. 

[Dan H.]

All of our LTR rents have been paid on time every month (STR are unrented). Most of our units are in Class C area.

Two of our units (class C area) are in a cluster of units (12 units) that are owned by 3 different owners.  One of the owners (he owns 5 of the units), the one who collects the water bill, is a nice guy but the stereotypical slumlord.  He does not screen well, does not do timely repairs, does not inspect his units, does not address tenant issues, but charges significantly below market rent (which is why the tenants tolerate the lack of repairs).  He indicated to us that his collected rents are insufficient to pay his mortgage payments (We have 100% LTR rent collection).  I suspect his rent collection to be ~50% if he is not collecting enough to make his mortgage payments.  I suspect the difference between him and us is a combination of his poor screening and not addressing issues in a timely manner that is the difference.  If you are willing to have a tarp on the roof for a year instead of fix the roof leak, why would the tenants feel compelled to pay their rent when there are no repercussions for not paying the rent?  If the tenants already have subpar credit reports, why would they care if another blemish is added?  If they have been evicted before, why would they care if they get evicted again?

The wife indicated she felt sorry for the LL (and he is a nice guy).  I told her I did not feel sorry for him as he does not sufficiently screen tenants and does not take care of his units.  I indicated that he created a situation that was more likely to have issues collecting rent due to basically being a lazy LL.

[Account Closed]

Our tenants have paid on time. I was talking to my property management co in Santa Clara who manage 90+ properties, they said except for 1 rest have paid. 

Also I was listening online that April nos were really skewed as April 5th was a Sunday & a lot of renters paid on on April 6th. However the agency who reports nos reported based on rents paid as of April 5th and this was completely blown out of proportion by the media. Some renter were late and by the end of April a large portion of the renters paid rent. 

[Kevin M.]

I see the overwhelming consensus here is that tenants are paying rent. This is very encouraging to me but I wonder if there is a selection bias that those collecting rent are more likely to share this impressive news?

My small management company currently has a few dozen units under control and even with this small sample size we are seeing the direct affects of local Philadelphia climate which through City Council and local news outlets seems to be begging tenants not to pay rent. We have dipped steadily from 100% collection in March to 94% in April and 91% in May and June. 

In Philadelphia, new evictions will not be processed until the end of September at the EARLIEST. City Council is looking to delay this even further. Tenants are catching wind of the "free pass" and beginning to withhold despite bolstered unemployment benefits. I feel like property owners are becoming the local punching bag to take out wider economic and social frustrations.

[Greg M.]

I'm fairly sure that these "journalists" just pull the numbers out of their ***. Do a quick search of "how many people didn't pay their rent" and you will see links to articles on the first page stating anywhere from 4% to 40% didn't pay.

The rooting-for-disaster NY Times says that 31% of people didn't pay rent by the 5th of April of this year. That was higher than the 18% that didn't pay during the same time last year. Does that even take into account the people whose rent is due on a day after the 5th? What about those people who have a grace period that extends past the 5th? What about people who paid partial rent? If I got $1500 out of the $2000, do I consider them paying rent or not? Every organization is using different criteria. 

If you want to look at how many people didn't pay rent, just look at these forums. Most people reported that near everyone paid. Those that didn't pay set up payment plans. Very few people just didn't pay anything and ignored the landlord. Most renters seem to understand that if they don't pay, at some point they will be evicted and it will be extremely hard to find another place to rent. 

[Kenneth Kussman]

@Nathan G.

If they lost their job because of the pandemic, where are they going after you evict them?

Or do you care?

[Kenneth Kussman]

@Nathan G.

I thought you said you were starting the eviction process now?

[David Pere]

@Nathan Gesner May was the best month I have ever had, and throughout this mess I've fair just as good, if not better, than usual with my rentals!

[Nathan Gesner]

@Kenneth Kussman I'll answer both questions.

Yes, I started the eviction process. I filed a 3-day Pay or Quit last week and suspect it was served by the Sheriff that same day.

The tenant came to our office at 3pm and dropped off the keys and told us she is out. I drove by and confirmed she's gone. It's not clean, but it's not bad and there are no damages.

Where are they going after they move out? None of my business but I know she has plenty of family in the area and quite a few friends because the neighbors complained about the "traffic" to her unit and suspected she was dealing drugs. The fact that she managed to move out in three days tells me she wasn't struggling for a place to live.

Do I care? Absolutely. We gave her a list of resources and spoke with her weekly for 2+ months. She told us she had several sources of assistance and that she had two new jobs. After a month of telling us that her unemployment checks, stimulus checks, tax refund, and paychecks were "coming any day now" I finally gave up and realized she wasn't going to pay. I not only waived late fees and eviction for over 60 days, I also offered to set up a payment plan to help her catch up. She refused to turn that in.

When someone is drowning, I throw them a rope. When they refuse the rope because it's not made of the right material or they would rather have a paddle board or they tell me a friend is on the way to save them, I eventually tire of the game and move on. Is that wrong?