Ed. note: The original article has been edited for space. To read the full article, visit https://www.apartmentlist.com/rentonomics/many-americans-couldnt-pay-april-rent/
As the COVID-19 pandemic spread over the course of March, Americans increasingly adopted a new normal. Social distancing became not just a new buzzword, but a new way of life as shelter-in-place guidelines grew to cover most of the country.
The new quarantine economy has frozen much of the country’s activity, and ten million workers have filed for unemployment insurance in just the past two weeks. In the midst of this public health and economic crisis, most Americans’ rent and mortgage checks came due on April 1.
To understand the pandemic’s immediate impact on the housing market, we designed a national survey to collect data on Americans’ ability to afford their April rent and mortgage payments. The 4,000+ survey responses, collected between April 3 and April 5 at Apartment List, reflect a dire economic reality: in the span of just a month, the pandemic has already left tens of millions struggling to pay for housing.
To understand the pandemic’s immediate impact on the housing market, we designed a national survey to collect data on Americans’ ability to afford their April rent and mortgage payments. The 4,000+ survey responses, collected between April 3 and April 5, reflect a dire economic reality: in the span of just a month, the pandemic has already left tens of millions struggling to pay for housing.
To put it more bluntly — nearly one in four Americans did not pay their Full Housing Costs in April.
The ability to comfortably afford housing — already an issue that many struggle with — has plummeted during the COVID-19 pandemic. Half of those respondents were able to make a partial payment to their lender or landlord; the other half made no payment at all. Strikingly, one in eight Americans who had a housing payment due this month has not yet paid any portion of it.
Despite the fact that homeowners have higher incomes and more assets than renters, April’s delinquency rate does not differ dramatically between the two. Thirteen percent of renters were only able to pay a portion of their April rent, while another twelve percent sent no rent check whatsoever. Among homeowners that hold a mortgage, eleven percent made a partial mortgage payment for April. Twelve percent did not pay their mortgage bill.
Needless to say, these rates are far outside the norm. Data from the most recent American Housing Survey collected in 2017 show that in an average month, 3.9 percent of renters will fail to pay full rent. In April 2020, we saw this delinquency rate skyrocket 550 percent, as over one-quarter of renters failed to pay their entire rent on time. Typical delinquency rates among mortgaged homeowners are even lower, and this month over 23 percent did not make a full payment on time.
Responses indicate that landlords and lenders recognize the financial difficulty that many are facing in these turbulent times, and have in many cases been willing to accommodate flexibility with payments. In some cases, these concessions are even being offered proactively by property owners and banks.
Eleven percent of all renters indicated that their landlord proactively lowered their April rent. Seven percent of renters asked their landlord for a rent reduction that was approved. Six percent of renters requested to delay their rent payments and had their request approved. Among those who were not able to pay their full April rent, 45 percent received some sort of concession, having agreed to a reduced or deferred rent payment ahead of time.
At this point, we do not know when or how the shelter-in-place ordinances and social distancing guidelines will be lifted. Current projections show that peak COVID-19 mortality is still ahead of us. Many Americans will continue to feel the economic consequences well into the summer months, and the longer-term economic outlook is even less clear.
Even though we do not yet know when the light at the end of the tunnel will appear, the rebate checks that will be issued as a part of the CARES Act promise some much needed relief in the near future. Americans filing as individuals or heads of households expect to receive as much as $1,200 in the coming weeks, while joint filers will receive $2,400 if they make less than $150,000 per year. Additional rebates will be added for dependents of those meeting income eligibility requirements.
Housing was at the core of the last recession, and today’s economic crisis is quickly disrupting the industry once again. But this time, the sacrifices we must make to protect public health are creating a unique set of challenges for the housing market.
As we look forward to recovery, it is already clear that the COVID-19 pandemic and the new “quarantine economy” will have lasting effects on the housing market.
Igor Popov is the chief economist at Apartment List, where he leads the Rentonomics team in publishing original housing market research.
Chris Salviati is a housing economist at Apartment List, where he conducts research on economic trends in the housing market.
Rob Warnock is a research associate at Apartment List, where he examines trends in the housing and rental markets.