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.
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 December. Here’s a snapshot:
- More renters than homeowners own no vehicles or own only one
- 27% of apartments are rented by single females, with 22% 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 (28%) 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. The May 2020 TransUnion survey of renters whose income had been impacted supported this concern. The results? Thirty-two percent of respondents worried about their ability to pay.
However, according to the NMHC’s Rent Tracker, most renters are still making their payments. Only 3.1% 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% of renters made their payments, and in May 2020, this number was 95.1%, a decrease of 1.5% year over year. In June, the gap shrunk to 0.1% (96.0% in 2019 vs. 95.9% 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.
The TransUnion 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% 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%. More than 4% of those accounts were non-student loans. TransUnion found that 3.8% 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% from January to April. Plus, balances on open credit card accounts actually went down about 13.7%.
Even though personal income went down 2.2% in March, expenditures didn’t increase. In fact, personal expenditures decreased by nearly 7% in March, and nearly 14% in April.
These figures indicate renters are spending more conservatively, saving money where possible. TransUnion’s survey found that 60% of renters cut back on discretionary spending, 30% canceled subscriptions or memberships, and 23% cut back on retirement savings.
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.
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