Businesses around the world continue to grapple with the impact of the pandemic and how to best respond. While many reports are tracking the impact on consumers and delinquency rates, TransUnion has evaluated the effects through a slightly different lens.
The TransUnion Rental Housing Financial Impact Study is focused solely on the multifamily industry. Our goal is to help you make informed decisions at a time when information on renter financial health and the impacts on the rental housing industry are still emerging. The analysis includes insights from more than 2.4 million renters in our database.
Concerns about paying rent
Record job losses are having an impact on how individuals view their finances, and renters are no different. For the time being, rent payments are being made at only modestly lower levels versus prior years — a 1.5%-point drop, from 96.6% in May 2019 to 95.1% in May 2020, according to the National Multifamily Housing Council (NMHC) rental payment tracker.
Although renters are currently making rent payments, they express concerns about their ability to pay in the future.
One-third of consumers surveyed who had been financially impacted by COVID-19 say they are concerned about paying rent. Property managers should brace for potential delinquencies, or consider putting into place some type of forbearance program.
Looking at the numbers by generation, boomers have the least concerns about their rental payments (only 16%).
Are renters using their credit cards more?
The study shows that renters are being very prudent in their debt spending. Existing renter debt levels have remained relatively flat, and renters are using less of their total available credit on credit cards.
Currently, renters aren't relying on credit cards to engage in spending behaviors.
Are renters opening new trade lines?
The percentage of renters who opened a new tradeline in the past six months went down by 1.1% month-over-month and only just a slight increase over April of last year. In fact, we're also seeing that same trend when it comes to debt obligations, which are experiencing a slight decrease as well.
Financial hardship: Is the worst yet to come?
Renters may not be increasing debt, but we wanted to know if they are beginning to fall behind on their lines of credit. The results were surprising. In May 2020, more than 1 in 4 renters (25.5%) had at least one account that's 30 days or more past due. However, the news isn't all bad. The rate fell slightly from April when that number was just over 26%. Compared to last year, there's only a .7% increase.
The numbers also show that renters have brought their accounts into good standing before becoming 90 or more past due. This could be due to the relief programs and payment suspensions offered by lenders.
Tradelines in acute relief
Traditionally, less than 0.5% of all renters have an account (excluding mortgages and student loans) in Acute Relief status — which represents any credit line in a status of deferment or forbearance or payment suspension due to natural disaster. From March to May of this year the number of renters with at least one account in acute relief jumped an astounding 2,122%, representing 7% of renters.
This could mean the ability to pay rent could take a hit in the coming months. It will be critical to see what happens when next month's renter financial impact study comes out.
Navigating through difficult times
Moving into the summer months, the impact of the pandemic remains to be seen. We'll continue to keep you updated on the latest numbers, trends and what they could mean for you.
Take charge of how hard your properties will be hit
No matter where the next few months take us, the key to off-setting the damage of the pandemic is to reduce your risk. It starts with doing your homework. If you keep bad renters out, eviction-related costs will be lower. To verify applicant identity and mitigate fraud, TransUnion ResidentVisionSM provides you with easy-to-use tools and advanced analytics required to make smarter decisions. The result: a positive impact on preventing fraud, evictions, vacancies and reputation.