The share of properties with rental hardships is up to 5 percentage points lower for buildings with five or more units, analysis by the Harvard University Joint Center for Housing Studies shows.
The finding in the center’s annual report on the state of the nation’s housing market, which shows hardship rates were 12% for five-plus-unit buildings compared to 14%-17% for small rental properties, reveals the extent to which larger multi-unit properties are insulated from distress.
This may be one reason for the mixed outlook in the rental sector.
Some multifamily mortgage executives, including Fannie Mae Senior Vice President and Chief Credit Officer Charles Ostroff, have been relatively optimistic about performance amid broader concerns about tenants’ ability to pay rent. However, Ostroff said that in his case, it is because the five-plus-unit market tends to outperform
While on one hand the Census Bureau data shows that buildings with a bigger number of units do have a lower share of distressed renters, it also reveals that the relative difference is limited.
Concerns are mounting regarding multifamily and single-family mortgage performance given the expiration of certain federal programs and some holes that exist in the safety net they currently provide.
“I do worry about the fact that 12 million people are going to run out of unemployment insurance the day after Christmas,” Chris Herbert, managing director at the Harvard Joint Center for Housing Studies, said at a virtual event held in conjunction with the release of the report.
Even if unemployment insurance, eviction bans, forbearance and the paycheck protection program were all to be extended, issues will remain given that these programs have been imperfect, said Marietta Rodriguez, president and CEO of community development nonprofit NeighborWorks America.
Moratoria on evictions have been a great help to renters in the short term, but landlords may be in trouble if the amount of rent in abeyance isn’t offset by the forbearance that is available on government-related loans.
“We need to think about how the landlords and owners maintain that,” Rodriguez said. “That is particularly true for small landlords with smaller portfolios or one or two rental units. We worry about them.”
A broad lack of awareness of forbearance options available to some borrowers is another point of concern, she added.
“I think many people have taken advantage of it, but we see that many have not, and they don’t even know about it,” said Rodriguez.
In response to this concern, the
While the number of uncertainties regarding government programs suggest the housing market may not fare as well in 2021, there’s still a chance the outlook could improve, Herbert said.
“It’s like the Christmas story. It’s the future that could be,” he said. “I think we still have opportunities to take steps so that that doesn’t happen. I think that’s just a call to say we need to take action. There’s still time.”
