In First Six Days of April, Full Rent Payments Spiked Before They Tumbled

The first week of April began to uncover the economic burden the coronavirus pandemic is exerting on the country’s 44 million renter households.  

As industry experts anticipated in March, when monthly lease payments came due across the country on April 1, tenants struggled to cover their bills.

“We were actually, unfortunately, surprised by how bad the situation was for renters,” says Laurence Jankelow, co-founder and chief operations officer of Avail, a software company that provides management solutions to over 160,000 mom-and-pop landlords.

In a survey conducted in the week of March 30, Avail found that 54% of renters reported a job loss due to the coronavirus crisis, which triggered 10 million unemployment claims nationwide in the second half of last month.

As of April 3, according to Avail, the share of partially paid rent was 50% higher than usual, while fully paid rent reached only 66% of what the company typically sees for the month.

Avail’s survey is based on the responses of nearly 7,500 renters across the country who lease from landlords owning less than 10 units. Jankelow says that there are about 8 million small-scale property owners who represent 24 million units in the U.S.

Another report, prepared by LeaseLock, which offers lease insurance to some of the country’s largest landlords, contains similar figures for what is usually the April 1 – 6 grace period, when renters can pay without incurring late fees.

Analyzing data from more than 92,000 units, LeaseLock found that the percentage of renters who paid full rent in the first six days of April fell 5% to 40% compared to the average for the same period in January – March. Meanwhile, partly paid rent increased from a little over 55% in March to 60% in April. Both metrics began to trend negatively after February, when they logged their best performance this year, prior to the wide spread of the coronavirus.

What happened on April 1?

Interestingly – and perhaps bucking expectations – full rent payments on April 1 were about 10% higher than the average for the first days of the three preceding months, LeaseLock reported.

“That was surprising just because of the amount of understandable nervousness that renters and operators had going into the first of the month,” says Rochelle Bailis, LeaseLock’s vice president of marketing. “On the first of the month, it is really the people who are proactive renters who pay; either they always pay on the first of every month or they really wanted to make a payment.”

Nonetheless, the very next day, April 2, the share of full payments dropped behind the January – March average, where it stayed for the rest of the six-day grace period.

A rise in concessions

Meanwhile, a little over 7% of renters, most of them living along the country’s coasts, received a COVID-19-related concession during April 1 – 6. The tally might represent a minuscule number of all of the U.S. renters, but it is a significant jump from March, when less than 0.5% of tenants obtained some type of relief from their landlords.

“Landlords are actually taking action and we can see it in the data about deferred rent payment plans,” says Derek Merrill, CEO and Founder of LeaseLock. “They are figuring out ways to preserve that occupancy.”

To secure a concession, however, renters need to first contact their landlords. And yet, Avail found out that 65% of the tenants who had lost their jobs due to COVID-19 had not communicated this to their landlords. In general, renters were more likely to reveal a change in their employment if the landlords reached out first. At the same time, though, 75% of renters in Avail’s survey stated their landlords had yet to get in touch with them regarding the pandemic.

“Communication among landlords and tenants needs to increase dramatically,” Avail’s Jankelow says. “Most landlords are going to be put in a tough position. Renters are already in a tough position and these two parties have to both come in and compromise.”

The hot spots

In Seattle, which was the first U.S. city to grapple with the rapidly spreading coronavirus, the share of full rent payments during April 1 – 6 held steady at 46%. The percentage of partial rent outlays, nonetheless, halved. Paid dollar amounts also dropped.

In April’s grace period, compared to the average for the first quarter, Los Angeles saw the largest decline in full payments – of nearly 10%. Partial payments also slid.

“On April 1, Los Angeles was pretty flat,” Merrill says. “And, then, our most recent analysis showed Los Angeles has actually seen a pretty big dip. Seattle and Los Angeles were maybe a little bit harder hit than another areas.”

LeaseLock does not have data for New York, where an earlier study by StreetEasy estimated that 40% of tenants might not be able to pay rent in April.

In LeaseLock’s report, Detroit exhibited strong performance in terms of both complete and partial payments.    

Most trouble at the bottom

LeaseLock also segmented its findings by three property classes, which roughly denote urban luxury (think high-end in Seattle or Miami), mid-level rentals ($1,000 – $1,500 a month in Phoenix or Las Vegas) and bottom tier (less than $1,000 in the Midwest).

While all three classes saw rent-payment decreases during April’s grace period, the bottom tier – the so called Class C properties – registered the deepest decline of 13%.

April’s numbers provide, at most, an initial insight into tenants’ COVID-19 economic struggles, which Avail’s Jankelow says are only probably to grow worse.

“There’s some foreshadowing for a negative outcome likely to occur in the next month or two, especially around unemployment,” he says. “I think it’s going to increase significantly more than what is happening now.”

This post first appeared on Forbes.com. To see the original, click here.