Covid-19 Impact on Multifamily
Q&A with Reid Bennett, CCIM, National Council Chair of Multifamily
What’s going on, in general, in the multifamily asset class as a result of Covid-19?
Besides the obvious health and safety concerns associated with larger groups of people within close proximity, the multifamily industry is facing the immediate short term concern of tenants ability to pay rent in the coming months. Much of the service industry as well as hourly wage earners represent a significant portion of the renter pool, many of which are living paycheck to paycheck. The inability to work due to the shutdowns and shelter-in-place rules across most of the nation will have a profound impact on the renters ability to meet their rental obligations. Long term, should the tenants be able to pay current rents they will likely be unable to absorb rent increases.
As of March 23rd, Fannie and Freddie provided mortgage forbearance options to those multifamily property owners who suspend evictions. The eviction suspensions are in place for the entire duration that a property owner remains in forbearance. The forbearance is available to all multifamily properties with an Enterprise-backed performing multifamily mortgage negatively affected by the COVID-19 national emergency. This is a huge step by Fannie and Freddie to help mitigate the immediate negative impact mass evictions would have on society in the multifamily world.
From a multifamily management standpoint, all common areas including exercise rooms, business centers, pools, etc. are now closed. Tours of the property to prospective tenants should be done virtually as to avoid placing onsite staff and the prospective tenant in harm’s way. This most likely will result in reduced traffic to the site and potentially delayed rentals. There will be significant liability for owners and management teams to keep tenants and staff safe.
On the brokerage end, property tours to investors and potential purchasers have drastically been halted by many owners and operators. With many people now in their units working (or not working) from home, the practice of social distancing will not make property inspections and tours possible. The need for virtual tours and video marketing will be extremely important during this uncertain time period. Virtual tours and videos are not going to satisfy many of the prospective buyers and their investors in the market thus resulting in much longer marketing campaigns.
Beyond the initial site tour, third party reviews of the asset will be drastically affected by the social distancing requirements. Examples would include surveys, inspections, environmental studies and architectural reviews which all involve access to a percentage of the individual apartment units (both occupied and unoccupied). Not to mention the challenge of onsite staff exposing themselves with the interaction between these third party vendors and the tenants.
Resources
With the drastically changing day to day environment, staying on top of the news and recent trends is extremely important to the Multifamily community. As such, below you will find a list of essential multifamily and other health and data related resources and websites.
JCHS Harvard: The Joint Center for Housing Studies at Harvard University has put together a fantastic resource with links to government resources, and housing & news links related to the current situation of the COVID-19 within the housing sector.
NAA: National Apartment Association has put out a COVID-19 Guidance For Property Management.
CDC: Centers for Disease Control has provided a guide on how to effectively to protect yourself and apartment communities during this outbreak.
NMHC: The National Multifamily Housing Council (NMHC)is actively working with the US Government and CDC to make the most pertinent policy guidance available to members of the multifamily industry. The NMHC has also made this guide available to members of the apartment industry to help develop and implement preparedness strategies for responding to the evolving COVID-19 threat.
Moody’s Economics: The Moody’s Corporation is making research data and analysis related to the economic impact of COVID-19 available to the public, free of charge, via a dedicated website. This resource will be updated on a regular basis and collects insights from across the company’s deep network of financial experts. Information provided by Moody’s will help our clients to better understand the financial implications of market disruptions caused by both a short- and long-term health care crisis.