Missed Rent Payments Cascade Across the Real Estate Industry
Everyone wants help from the government. The question is: Will a rescue be big enough and come fast enough?
The swelling ranks of unemployed Americans and images of shuttered shops and empty streets have begun to tell the grim tale of the economic destruction caused by the Covid-19 pandemic. They also presage a brewing real estate crisis. About $81 billion in commercial rent comes due in a typical month in the U.S. The delay of a sizable portion of that will put an enormous strain on the complex systems for financing real estate and highlight how quickly the pain caused by social distancing has spread.
Just 69% of renters paid their rent by April 5, according to data from 13 million units published by the National Multifamily Housing Council, compared with 81% who paid by March 5, providing an early look at how bad things could get if job cuts continue and households blow through savings. In one scenario, renters would need $96 billion in payment assistance over the next six months, according to an analysis from the Urban Institute. It won’t be much better for homeowners. Roughly 15 million households—about 30% of mortgage borrowers—could miss payments if the economy stays shuttered through the summer, according to Mark Zandi, chief economist at Moody’s Analytics.