The recent rise in evictions is becoming a growing concern for landlords.
All across the country, rental landlords are reporting a severe uptick in evictions – and it’s making waves within the multifamily sector. Today’s rise of evictions is threatening occupancy and interrupting returns for property owners.
These challenges are shaking the multifamily sector, and it’s keeping everyone on their toes. CRE professionals and landlords alike need to know what’s coming to stay prepared and pivot as necessary.
Why Are Evictions Rising?
First, let’s cover what exactly is sparking this sudden explosion of evictions. Like many other new issues we’re facing this year, it’s all stemming from COVID.
The pandemic interrupted the income stream of nearly all Americans, initiating a period of widespread economic turbulence. Markets closed, companies defensively let go of staff, and unemployment numbers severely increased. In order to help protect renter tenants, government authorities initiated rent forgiveness policies.
In efforts to help people cope with COVID’s financial disruption, evictions were banned until further notice. Renters were able to miss or only make partial payments to their rent, and landlords could not move forward with evictions.
The subsequent interruption to rental income placed the burden on landlords and property managers, who were left to face mortgage payments without the same level of flexibility their tenants were given.
Emerging from Rent Forgiveness
Over these difficult few months, national rent collection did fare better than expected. But, there are a significant number of tenants who have stacked up months of rent and simply won’t be able to pay.
As states across the country slowly begin to lift these protection measures, these tenants are facing eviction… and their numbers are intimidating landlords. New data reveals evictions have risen 75% since the start of the pandemic. Right now, the national eviction rate is 21%.
3 Things to Watch
As the pandemic-recovery period slowly progresses, the coronavirus remains as an active disruptor for multifamily. This is what landlords should be watching out for regarding the relationship between evictions and COVID:
1. Evictions are Revealing Tenant Deceit
As more and more evictions are being processed, CRE is learning just how common application fraud is. Tenants who lie about finances in order to rent an apartment are being discovered as they face eviction. This situation is causing landlords to understand how important pre-screening and application verifications are for protecting their investments.
2. Rethinking Leases
Adding a pandemic clause is becoming a new normal within CRE leasing. The details vary from deal to deal, but property managers and leasing teams are preparing for future disruptions by sorting out the crisis-payment plan ahead of time. In general, these clauses enable renters to make partial payments or set up a payment plan in the wake of a pandemic.
3.Thinking About the Future
As we approach the future, it’s clear that property managers will need to improve their leasing processes to safeguard their buildings.
Bolstering communication between tenants and landlords also needs to take place to foster collaboration. Working together is a must during a crisis, and multifamily needs to make sure it’s ready to face what’s coming – right alongside tenants.