How TheGuarantors and their partners are analyzing and managing renter behavior during a period of economic uncertainty
From March 14th to April 29th, the number of COVID-19 cases in the US ballooned from 2,200 to over 1 million. Midway through March, Seattle and San Francisco had already taken measures to shelter in place, while New York was evaluating its options and impact to the public. For landlords, this was two weeks before the April rent was due, and it was uncertain how the virus would impact that month’s rent roll, much less future months.
45 days into the crisis, our Risk Management team at TheGuarantors analyzed data from some of the biggest landlords across the country to better understand delinquency rates in rent payments, and what changes we had seen. The 10,000-renter sample represented would be thought of as a more risky portfolio, made up of a higher proportion of US renters with lower credit scores and international renters with thin credit. Our findings are below.
During any one period, we would expect 76% of delinquent renters to make good on their rent payments, and remedy the situation with their landlords. We surveyed the remaining renters to understand their potential reasons for permanent delinquency.
Within this subgroup of renters who may default, 62% are trying to get out of the lease, in the form of lease termination, surrender agreement or sublease, most often due to (health) concerns about the virus. 24% of the renters are experiencing financial difficulties, because they are furloughed or laid off from their jobs. And 14% of renters won’t pay because they are working out a dispute with their landlords or roommates.
Though landlords have always had processes to mitigate and manage delinquency, many have put in place additional measures during this time. To help bolster your existing mitigation practices, below are a few effective strategies tested by us and our top landlord partners:
Ramp up your remote property management team
Develop clear rent relief and lease break policies
Automate outreach as much as possible
As many in the real estate industry have noted, May could turn out to be the true test for rent rolls across the country. It appears that those who could make the rent this month, did. However, by April 23rd more than 26 million Americans had filed for unemployment, potentially foreshadowing greater impacts to landlords nationwide. We are continuing to monitor the data and will provide updates as we all navigate the changing situation together.