With Cities Dropping Pandemic Restrictions Rents Are Back On The Rise

We analyze market trends in rent collection, occupancy, and market supply and demand which have heavily influenced property and rent prices.

Landlord Studio: Rental Index Report Q2 2021

Market trends over the last year have been unusually volatile which has affected the way that investors, landlords, and renters have had to think about rentals. COVID-19 led to a complete shutdown early in 2020 resulting in a spike in unemployment and many tenants falling into rent arrears.

There have been dramatic shifts in renter demands with unexpected mass migration from city centers, causing rent prices in locations like New York and San Francisco to drop sharply towards the end of 2020.

In our Q2 2021 rental index report, we take a look at aggregated data from over 12,500 active leases on the Landlord Studio system. We analyze the trends in occupancy rates and the evolution of the rent collection rates over the last year. Additionally, we take a broader perspective of the market as a whole, looking at fluctuations in market supply and demand, which have heavily influenced the availability and prices of houses for both sale and rent.

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US Rental Occupancy Trends

There have been numerous news stories suggesting huge waves of evictions are on the horizon. Having spoken to many of our customers and from looking at our data, we can see that occupancy rates are down in 2021, but only by about 1%. It appears then that the federal rent relief programs, as well as stimulus checks, and additional unemployment benefits have helped many of the most heavily impacted tenants, allowing them to stay ahead of their rent arrears.

For this reason, we haven’t actually seen a noticeable increase in rent arrears. And occupancy trends show only a slight dip in occupancy rates at the end of 2020 falling from 96.23% occupied in October to 95.31% occupied in December.

This drop-in occupancy rates could be explained by the elongated eviction moratorium with many landlords being more selective of new tenants, knowing that they will find it harder to evict should their tenants not be able to pay the rent.

US Rent Collection Trends

The rent collection trends over the last year have aligned with COVID-19 shutdowns and the government stimulus bills. Key amongst these trends was a drop in the total amount of rent collected after 28 days between March and April of 2020.

However, the rent collected on or by the actual rent due date was actually steady over the same time, with noticeable drops, only in March and August, which aligned with the first lockdown and the expiry of the increased unemployment benefits.

We can see a 4% drop in rent collected by the due date if we do a year-on-year comparison of April 2020 vs April 2021. This could be an indication of increased financial strain on tenants as they come towards the ends of their savings and unemployment rates remain high.

One way we at Landlord Studio are looking to help our users is with our new online rent collection feature, which allows tenants to pay easily and quickly online and set up automatic recurring payments, as well as keep track, keep a clear record of rent arrears owed, and help them to set up payment plans.

Record Appreciation And Rent Growth

Despite the more negative trends in occupancy and rent collection rates, an undersupplied market (due to the lockdown and a slowdown in the building of new houses) has led to record appreciation and rent growth in the real estate market.

The rapid home price appreciation which is marked the second quarter of 2021 is not expected to let up anytime soon. In fact, the low inventory that has led to affordability concerns has driven the national median house price to $350,300 in May 2021, up a record 23.6% from May 2020 according to Zillow. Yet despite these high house prices, homes were still selling 33 days faster in the first half of 2021 than they were over the same time in 2020.

On top of this, rents are showing good growth nationally compared to last year. Zumper’s National Rent Report June 2021 saw a 4.9% rise in median one-bedroom rent, year over year, and an astounding 6.5% rise in two-bedroom rents. This is even more significant because 2019 rent appreciation was fairly flat and then of course in 2020 the growth was stunted due to the COVID-19 pandemic.

These trends in appreciation and rent growth make now a particularly good time for landlords to increase the profitability of their current portfolios or to sell existing properties and consolidate assets. However, these trends also, make it a tough time for new home buyers or investors looking to invest in their first rental properties.

Final Word

Unforeseen incidents have impacted the real estate market in unpredictable ways over the last year. However, demand has not slowed down for rentals or sales.

Demand is driven by limited supply which is pushing prices up, and contributing to some affordability concerns. This is paired with the loosening of COVID-19 restrictions, increased stimulus aid, and a massive federal rent relief program which has helped tenants stay afloat and out of the rent arrears.

Rent payment trends and occupancy trends have stayed relatively stable with minor dips at more crucial times during the pandemic, such as the initial lockdown and the expiry of the additional unemployment benefits in October.

Occupancy rates have dipped in the first half of 2021 – potentially because landlords are being more cautious when selecting tenants due to the eviction moratorium. In spite of this, rent growth continues with high demand, and expensive central locations like New York and San Francisco benefitting from the relaxation of the covid-19 precautionary measures.