Published on Tuesday, December 1, 2020

Losses in rent growth are beginning to widen, particularly in low-income housing, as both landlords and tenants await an additional stimulus package.


At the onset of the pandemic, the government stimulus provided by the CARES Act helped many renter-occupied households and landlords stay solvent. As a result, luxury four- and five-star rated apartments took the initial hit, mostly due to oversupply versus a lack of demand. Now, as provisions from the CARES Act fade, losses in rent growth are beginning to widen—specifically for lower-income households and less expensive rental units, according to an analysis from Joey Biasi, a consultant at CoStar Advisory Services.

Wages and salary disbursements, which are the main source of earnings for low-income households, remain 2.6% below pre-recession levels, and more help is likely needed to bridge the gap in economic activity and keep households and landlords balance sheets strong, he says.

Biasi notes that affordable rental units have underperformed in terms of rent growth, even in suburban areas where demand has been strongest due to layoffs, which have disproportionally impacted low-income households. With renters fleeing urban areas, a weak economy is also expected to dampen demand for high-rent apartments through the first half of 2021.

Another round of financial relief for households would serve the dual purpose of keeping a lot of families in place—particularly through what many are expecting to be a tough winter in terms of the pandemic—and bolstering the economy by keeping the lights and loans in good standing for a lot of landlords, he says.

Unfortunately, the push to pass additional stimulus seems to be dead—at least for now. The Senate is already gone on recess for the holiday break, and little is likely to get done before the inauguration in January. However, President-elect Joe Biden has expressed a desire to get additional stimulus pass swiftly, and many in the CRE community are waiting for a Biden Administration to push much needed relief forward, which will be especially easy if the Democrats take control of the Senate. However, control of the Senate could also mean that Biden will pass sweeping tax reform and changes to the 1031 exchange option.

Ultimately, most experts agree that additional stimulus is coming. In a recent podcast interview, Richard Barkham, global chief economist for CBRE, said, “Our working assumption is that we will get $1 trillion of stimulus. It is perhaps not as much as some people had hoped, but it is enough to see the economy through what is a very nicely developing economic recovery, but it is not enough, importantly, to put upward pressure on the long end of the market."

Another point in favor of another stimulus round: The Real Estate Roundtable is lobbying to have pandemic risk insurance included. Two dozen industries have formed a coalition to create a public-private business continuity insurance program that will enable employers to keep payrolls and supply chains intact, protect jobs and reduce furloughs in the event of a future shutdown.