Many Rental Housing Owners Are Under Stress

While the single-family rental market has been strong since the pandemic began, that doesn’t mean there aren’t problems in specific segments of this still-fragmented market characterized by numerous mom-and-pop landlords. 

A new nationwide survey of single-family rental homeowners conducted by Seven Letter Insight on behalf of the National Rental Home Council found that half of America’s individual rental home owners have residents who have missed payments since March 2020. That has caused one-third of owners to dip into personal savings. Additionally, 20% have had to take out loans to cover shortfalls.

While 50% of owners have residents who have missed payments, only 60% who reported receiving less than full rent were provided with a financial hardship declaration from residents. That declaration is required by the CDC order halting residential evictions for nonpayment of rent.

Of those owners who received partial rents, 52% created flexible payment programs for residents. Also, 45% forgave some amount of missed rent.

The eviction moratoriums have been an issue, however, with 30% saying they will be forced to tighten standards when evaluating future rental applications. Eleven percent have been forced to sell some of their properties and 12% have been forced to sell all of their properties. The problems will increase if the eviction moratorium extends beyond March 31, 2021. Twenty percent of respondents stated that they “will have no remaining financial options to cover costs related to their rental property.”

“The financial difficulties encountered by rental home property owners over the past year have created real uncertainty concerning the direction of the rental housing market, uncertainty that has only been exacerbated by myriad local, state, and federal eviction moratoria,” said David Howard, executive director of NRHC. “While rental assistance programs will certainly help, for many property owners it may be too late.”

While smaller single-family rental owners struggle, institutions are swooping in. The most recent example is homebuilder Lennar’s new $4 billion single family rental platform.

The question is whether bigger investors would be interested in the smaller, scattered homes owned by mom and pops.

Much of this money wants to find single-family rental communities, which are much more efficient to manage. Increasingly, build-to-rent is becoming an attractive option for these investors as well. 

“There seems to be so much money chasing these subdivisions with purpose-built for rental communities, whether it be assembling portfolios of single-family homes or actually going out and buying a chunk of land and developing a community just for rental,” Brendan Coleman, senior managing director, Walker & Dunlop, said on a panel discussion during GlobeSt. Apartments Spring 2021 virtual conference.