The COVID-19 pandemic has wreaked havoc on our global economies. Some populations, though, including renters, have been particularly hard-hit. TransUnion has conducted an intensive analysis to better understand the impact of shutdowns, illness, and quarantines on the financial health of renters. The results, published in November 2020, offer valuable insight for rental property owners and operators.
Understanding renters:
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 November 2020. Here’s a snapshot:
- More renters than homeowners own no vehicles or own only one
- 27% of apartments are rented by single females, with 23% rented by single males
- 11% of renters are married, 9% are married with children, and 13% are single parents
- The highest percentage of renters (49%) are under 30 years old
- 42% of renters telecommute, working from home at least a few times a month
- Most renters (26%) make less than $20,000 per year
Paying the rent
Perhaps the most significant impact of the COVID-19 pandemic is your renters’ ability to pay on time and in full. However, according to the NMHC’s Rent Tracker, most renters are still making their payments. Only 2.1% fewer renters paid rent in August 2021 than paid in August 2019. This gap has decreased in May and June, as well. Looking at June, the gap still holds at 0.3% (96.0% in 2019 vs. 95.6% in 2021). This 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 stimulus payments and enhanced unemployment benefits, the act provided special credit reporting allowances.
Tools like deferred payments and forbearance have always been options creditors could offer debtors. However, before April 2020, 99.6% 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.
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Renters’ spending trends
After the shocking 14.3% decline in April 2020, employment has recovered, with reports from June 2021 showing employment gains of an average of around 1% a month in 13 months since then. With the economy predicted to gain momentum, the labor market will continue to benefit from the pre-pandemic level as employment remained 4.5 percent lower in May 2021 compared to February 2020, a month before the pandemic hit. Many consumers may also save significantly as economic and health conditions further improve. Researchers estimate that consumers have saved roughly $1.6 trillion more than if no pandemic had occurred.
With the help of government stimulus policies, vaccine efforts and increased consumer confidence, expenditures continued to increase in 2021, reaching levels in June 2021 that were 6.8% higher than in January 2020, pre-pandemic. While spending on products promptly recovered from the first fall in early 2020 and resumed economic growth in June 2020, consumer expenditure for services required 12 more months to eventually reach pre-pandemic levels as it did in June 2021.
With the recent fallout of the new Delta variant, there seems to be no reason to worry, as these figures indicate renters are likely to spend more conservatively, saving money where possible. TransUnion’s survey from May 2020 found that 60% of renters cut back on discretionary spending, 30% canceled subscriptions or memberships, and 23% cut back on retirement savings after Covid-19 rocked the economy.
The bottom line for property owners
So what does this data mean to you as a property owner or operator? Well, despite the continued ongoing Covid-19 pandemic, things may not be as bad as they seem — at least for renters.
Renters are continuing to make their payments on time. 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.
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