JP Morgan Chase Institute released “How did landlords fare during COVID?,” which used administrative data to examine how small- and medium-scale landlords fared financially during the pandemic. While landlords lost rental revenues, particularly in early 2020, they cut expenses by more, resulting in higher cash balances. This trend varied across the nation. Landlords with properties in New York, Miami, and San Francisco saw the greatest declines in rental revenues, while landlords with properties in Phoenix, Houston, and Dallas collected the same or more in rental incomes in 2020 compared to 2019. The analysis estimates that roughly 7% of landlords missed mortgage payments. The researchers argue that increased flexibilities in emergency rental assistance documentation is critical to accelerate assistance to tenants and landlords, helping preserve the supply of affordable housing.
The analysis utilized small business, personal deposit account, and mortgage servicing data to generate two samples: 1) 17,646 landlord business owners: small business owners who utilize a business account and self-identify as landlords of residential buildings; and 2) 32,152 rental property owners who hold a Chase mortgage on a multifamily or investment property and utilize a personal account for deposits. Most of the analysis utilized data from the landlord business owners as revenues and expenses were easy to isolate in their business account. The second group was used for the analysis on missed mortgages. The median landlord in the first sample received 4 to 5 rent checks per month, with each check being approximately $1,300. The median landlord in the second sample received 2 rent checks per month with each check being approximately $1,200.
Based on the data from landlord business owners, landlord revenues fell by approximately 20% in April and May 2020. Landlords cut expenses, however, by about 25% resulting in higher cash balances. Both expenses and revenues recovered throughout the summer of 2020, although both remained volatile. The median landlord ended 2020 with 3.3% less in total rental revenue and 6.6% less in total expenses than in 2019. As of May 2021, revenues were down 3.6% and expenses were down 5.5%. The data did not allow the researchers to determine what type of expenses were cut. The researchers caution that while higher balances often indicate a sign of financial health, landlords likely deferred expenses like mortgage payments and maintenance that will need to be paid eventually. Researchers posit that unprecedented government support likely enabled many renters to keep making partial rent payments.
Landlords with properties in New York, Miami, and San Francisco saw higher levels of revenue decline in 2020 relative to 2019. Furthermore, landlords in the core cities saw larger rent revenue declines than those in the surrounding areas. Two possible explanations are that residents temporarily relocating from core cities like New York and San Francisco to surrounding areas or higher levels of unpaid rent (such as in Miami) may have caused rents to decline. Landlords in Phoenix, Houston, and Dallas did not see as steep of a revenue decline in early 2020 and ended the year with the same or even slightly higher levels of revenue as in 2019. The authors conjecture this could be due to less restrictive lockdown measures and less impact from a decline in tourism. Landlords across all observed cities cut their expenses.
Concurrent with the drop in rental income, some landlords entered mortgage forbearance or missed mortgage payments. Ten percent of landlords requested mortgage forbearance in June 2020 and 7% missed mortgage payments in May 2020, which is higher than pre-pandemic levels. Participation in mortgage forbearance contributed to a drop in expenses and increased cash balances.
Read the report at: https://bit.ly/3mooIvy