In Affordable Housing, Rent Collection Trends Mirror Market-Rate Apartments

There are two common knocks on the National Multifamily Housing Council’s Rent Payment Tracker monitoring actual rent collections in more than 11 million units.

First, skeptics argued the methodology was flawed, and that partial payments were propping up the collections rate. We debunked that myth by analyzing actual rent paid versus the amount due in RealPage’s vast collections dataset, and found the story didn’t change at all.

Another common criticism – and a very fair one – is that the NMHC Rent Tracker looks at only market-rate, professionally managed apartments. There are many other rental housing segments excluded. A key one is the stock of designated affordable housing. Market-rate apartments tend to draw households with incomes at or above their local medians, so it’s important to look at those with lower incomes.

To do that, RealPage analyzed rent paid versus rent due in professionally managed apartments attached to an affordable housing program such as HUD subsidies, tax credits or rural housing assistance, among others. We looked only at the amount due from the renter and excluded the subsidized portion of rent.

The results, perhaps surprisingly, were similar to what we saw in market-rate apartments. Designated affordable apartments in the COVID-19 era are collecting rents at a rate 1 to 2 percentage points below the 2019 norms. The key difference between market-rate and affordable is that the latter tends to have a lower collections rate even in more normal times. In July 2020, affordable apartments collected 87.9% of rent due, versus 88.9% one year earlier. Collections in affordable apartments consistently came in around the 89% mark prior to COVID-19.

Interestingly, rent collections have improved every month since coming in at low point of 86.4% in April. That trend shows a clear correlation to expanded unemployment benefits kicking in from the CARES Act – suggesting the affordable housing sector is much more dependent on federal aid than are market-rate renters. However, those benefits expired at the end of July and will likely lead to declining payment rates for August and September.

Looking at collections trends by program, tax credit properties tend to see the highest rates – and that continued through July, with 90.9% paid. HUD properties typically see the lowest collection rates, and that also held true in July with 84.8% collected. Rural housing programs have consistently come in around the middle and have shown the least impact from COVID-19.

Among large states, Florida was the surprise leader in July 2020 with 93.9% of rent due getting collected at affordable apartments – in spite of its tourism sector getting hit by COVID-19. Texas and Arizona both reported affordable housing collection rates around 93%. In total, 21 states reported collections rates around 90% or better. Others included Nevada, Massachusetts, Michigan, Georgia, Missouri and both the Carolinas.

On the flip side, a handful of pockets struggled with rent collection at designated affordable properties in July 2020. In particular, Virginia, Oregon and New York all collected only around 80% of rent due. However, the numbers weren’t meaningfully off from July 2019, indicating lower collections rates are more typical in those areas.

More concerning, a few spots recorded meaningful declines in rent collection among affordable apartments in July 2020 compared to July 2019. Washington, DC saw a 6.5 percentage point drop in rent collection, and neighboring Maryland came in 3.5 percentage points under last year. Both areas were likely impacted by shutdowns in the District due to COVID-19.

Among other key states, year-over-year declines of around 3 percentage points were seen in Washington state, Colorado and Massachusetts. Sun Belt states generally saw the smallest impact in rent collection, mirroring trends seen in market-rate data.