In the past two months, CMBS delinquencies for multifamily loans have skyrocketed to over $6 billion, according to Bloomberg. As distressed-asset investors are stockpiling cash at the ready, many smaller building owners are at risk.
Local courts should be prepared for an influx of filings as the federal eviction moratorium under the CARES Act officially expires on Friday.
In late March, the national stimulus legislation put in place a moratorium of 120 days on specific types of properties, including those with federally backed mortgage loans. According to the Urban Institute, over 12.3 million units were protected, amounting to 28.1% of the total rental housing stock nationwide.
The federal moratorium represented a good step to keep Americans in their homes, as jobless claims during the pandemic surged, reaching 50 million earlier this month. Many states are maintaining their own eviction bans after the federal moratorium expires, as seen in the chart below.
It is important for landlords to keep in mind of the state, county, and city regulations that impact each of their properties.
Meanwhile, the legislation’s temporary federal ban on foreclosures also ends on Friday, and a ripple effect will likely ensue. Now unprotected by the law, renters unable to make payments will lead to more evictions and higher vacancies, resulting in lower revenue for landlords to make their loan payments. Apartment owners, also no longer protected by a government stay, will become more exposed to losing their properties.
In the past two months, CMBS delinquencies for multifamily loans have skyrocketed to over $6 billion, according to Bloomberg. As distressed-asset investors are stockpiling cash at the ready, many smaller building owners are at risk. They wrestle with difficult decisions of whether to evict tenants and how to prioritize their cash—weighing payroll to keep property managers and maintenance staff employed against mortgage payments and real estate taxes, which are a significant source of revenue for state and local governments.
Additional pressures on rental housing
Through July 20, the National Multifamily Housing Council’s Rent Payment Tracker reported that 91.3% of households made a full or partial rent payment. This statistic is promising on its face, but some underlying considerations are concerning. First, this metric shows a 2.1 percentage point decline from 2019 results, and is almost a full percentage point lower than the same time last month. Second, the government’s extended unemployment benefits of $600 a week expire July 31; they have been vital to keeping collection rates from collapsing. Lastly, the council’s tracker pulls data from about 11.1 million professionally managed apartment units. It leaves out some 30 million units, typically poorer-quality housing that serves lower-income tenants more exposed to job cuts and who were reliant on the unemployment benefits.
The U.S. Census Bureau Household Pulse Survey has been tracking Americans’ confidence in their ability to make rent in August. With the number of coronavirus cases not slowing, and an extension of the extra $600 weekly benefit still on the table, renters’ confidence is clearly weakening. Sixty percent of Americans are not highly confident they will be able to make rent next month. As lawmakers try to reach agreement on the next stimulus package, millions of Americans continue to worry over whether they will even have a home to sleep in.