Terner Center Examines Impact of Pandemic on Small Rental Property Owners and Implications for Tenants

The Terner Center released a report, “The Uneven Impact of the Pandemic on the Tenants and Owners of Small Rental Properties,” documenting the results of a survey of 1,690 owners of one- to four-unit rental properties nationwide to better understand their and their tenants’ economic situation during the pandemic. The survey, conducted between mid-February and mid-April 2021, found that 1 in 5 tenants fell behind on rent since March 2020.

Small rental properties (SPRs) (i.e., properties with one to four units) comprise 48% of rental units in metro areas. The author sent surveys to 93,000 small rental property owners in large and mid-sized US cities. Out of those, 1,690 responded, and 40 agreed to follow-up interviews. These surveys focused on the owner and rental property characteristics, the impact of the pandemic on specific properties, and the impact of the pandemic on owners’ portfolios and financial management and decision making.

Owners of small rental properties are diverse, and 33% make less than $85,000 per year. Many of these properties were not profitable even before the pandemic; in 2019, 35% of properties were reported as not making a profit and 19% were reported as having a rent delinquency.

Tenants in small rental properties are more likely to work in industries disrupted by the pandemic shutdowns. The survey found that 21% of tenants in SRPs reported falling behind on rent during the pandemic. Of these, 25% caught up, and 20% were only a month behind at the time of the survey. However, 40% were one to six months behind and 15% were more than six months behind. While median arrears were $2,200, 33.9% of households were behind by $4,000 or more.

Thirty percent of owners of SRPs reported declines in rent revenue of 10% or more during the pandemic. Owners of one to two units were also the most likely to report a 25% or larger decline. However, large-scale owners, who own more than 25 units, saw the greatest losses; they are more likely to own properties in neighborhoods with lower rents and are more likely to rent to lower-income tenants. If they feel pressure to sell, this can affect rental market dynamics for tenants in these neighborhoods.

Forty percent of owners changed their rent collection policies as a result of the pandemic, with many making the date for rent collection much more flexible. While this policy change alone is expected to help many tenants with one or less months in arrears become current, for tenants with moderate arrears (2-6 months), owners expect to have to forgive some portion of the rent in order for the tenant to become current. Owners with tenants who have arrears of 6 months or more expect that they will have to evict, either formally or informally.

Variations in portfolio size and technological literacy among owners of properties have affected tenants’ ability to apply for rental assistance. Owners with no technological tools and reported losses in 2019 were less likely to have accessed rent relief funds during the pandemic. Of the SRP owners reporting a delinquency due to COVID-19, 68% had not examined any emergency rental assistance programs, while 7% examined the relief programs and chose not to participate.

Using these results, the author estimates that between 229,000 and 1.2 million households in small rental properties could be at risk of eviction after the end of the CDC eviction moratorium. If landlords sell small rental properties due to a loss of income, this could further tighten a market for affordable housing that already lacks enough properties.

Read the report at: https://bit.ly/2U701Zi