Even with rental assistance, the multi-family is still at risk

New research from Fitch Ratings raises questions about the extent to which rental aid under the US bailout will keep apartment arrears low.

Fitch analysts say it is difficult to estimate the amount of unpaid rent arrears despite current levels of mortgage default for affordable housing providers which are low and only slightly above pre-COVID levels. And while rent assistance has so far been a mainstay of major federal stimulus packages, the lack of data on overdue rent payments makes it difficult to determine whether the assistance provided will be sufficient to contain delinquencies.

The risk to the affordable housing sector is also high due to higher unemployment rates for low-income households, and while the outlook for a broader economic recovery is encouraging, “sustained high unemployment is likely to lead to a rise. delinquencies and evictions, especially when housing assistance funds run out and eviction moratoria expire, ”Fitch said.

Analysts also point to a recent US Census Bureau household impulse survey, which shows that about 8.4 million households report being behind on rent, with 55% of those surveyed reporting annual income below $ 35,000. . In its most recent rental payment tracking tool, the National Multifamily Housing Council found that 80.4% of apartment renters had paid full or partial rent by March 6, figures much lower (4.1 percentage points) than those posted in March 2020.

The sector can benefit from $ 10 million provided to each state by ARP for community development. Fitch notes that “while it is unclear how states will deploy these funds, it is expected to provide a peripheral boost to affordable housing by supporting housing prices and employment through a helping businesses in low-income communities ”.

End of March, the Centers for Disease Control extended federal moratorium on evictions until June 30, 2021, preventing landlords from evicting tenants unable to pay rent. The federal moratorium on evictions has been the subject of multiple challenges in several federal jurisdictions, the most recent last month when an Ohio federal judge ruled that the CDC did not have the power to enact the latest round moratoriums.

In addition, loan forbearance from the US Department of Housing and Urban Development was recently extended to 18 months until August 31, 2022. Fitch notes that state housing finance agencies may work with borrowers to change loans and ‘equity, accessible to all. within a SHFA, can be used to cover cash flow shortfalls if multi-family homeowners are behind on their mortgage payments. Fitch’s ratings also reflect a 50% reduction in rental income for each loan in a SHFA’s multi-family program.

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