Early on in the COVID-19 pandemic, many observers had dire predictions about what would happen with apartment rents.
“If you go back to when this started in March, people were thinking by the summer, the situation would implode and rent collections wouldn’t be where they were,” says Evan Blau, a partner at Cassin & Cassin LLP, a NY-based law firm and the leader of the firm’s agency lending and affordable housing practice. “So the can has been kicked down on a positive note continually. Everyone thought this was going to be this catastrophic event.”
While Blau, who represents lenders in the financing of multifamily properties through Fannie Mae and Freddie Mac programs, thinks that rent payments have been better than anyone could have expected, he realizes tenants have gotten some help.
“A lot of things are propping that up,” he says. “Obviously, we had the CARES Act [The Coronavirus Aid, Relief, and Economic Security Act], which subsidized a lot of unemployed folks to some extent. The government has responded through various initiatives, like paycheck protection program [PPP] loans for small businesses. But those things are now starting to go away. From that perspective, I think rent collection will dip.”
When rent collections fall, Blau wonders what the federal response will be. “They’ve done things to help people avoid evicting tenants,” he says. “But if rent collection dips, how are they going to help property owners? So that’s the big one unknown.”
Despite the inability to hammer out a new stimulus deal and Supreme Court fight, Blau remains confident help is on the way if rent collections crash.
With evictions banned, property owners’ hands are tied. Blau thinks policymakers will realize apartment owners need help.
“If there’s a need or a property level or tenant-based issue, the government has responded to that,” Blau says. Right. “When it flips to landlords, what is going to be the government response?”
Blau is concerned that the economic calamity predicted at the beginning of the COVID crisis back in March becomes a reality without federal help.
“If things start to dip and rent collections go down and there’s no response, then they’re going to continue to go down until the economic effect people initially predicted becomes a reality,” Blau says.
With a little more help from Washington, Blau has confidence the economic situation will improve for landlords and renters.
“I think that as long as we have slow gains, you’re going to start to see economic growth,” Blau says. “You’re going to start to see stability in the stock market and different asset classes. People are going to start traveling and going into hotels again. I think that will help spur economic activity in all sectors.”