Neighborhood Building Owners Alliance (NBOA)
State of Neighborhood Housing Survey Results
As the economic fallout from the COVID-19 pandemic continues, Chicago’s neighborhood housing industry is at risk due to growing shortfalls in rent. Absent federal rental assistance, the percentage of tenants who are more than six months behind in their rent is likely to increase exponentially in the coming months. That will make it increasingly difficult for housing providers to continue providing their service and meeting their financial obligations.
This means that many of Chicago’s rental buildings will face foreclosure, creating instability for the buildings and insecurity for the tenants. This trend will also have larger implications for the surrounding neighborhoods and local businesses as buildings fall into disrepair and property values fall. The problem of serious arrearage is most pronounced in Chicago’s south side and south suburbs, as half of the respondents from those areas reported tenants who are more than six months behind in rent.
The problem is exacerbated by a statewide eviction moratorium that applies to all residents regardless of their individual circumstances or ability to pay. The blanket nature of the moratorium leaves housing providers without any recourse, even for residents who are able to pay but simply choose not to.
Apartment vacancy rates are compounding the fragility of the housing market, making it more difficult for housing providers to generate revenue to pay for their building’s expenses such as capital improvements, mortgage, property taxes, payroll, cleaning and utilities.
- Lower rental collections.
Rent collections in the month of September were significantly lower than usual. The industry standard for a safe level of rental collection is 95% payment of full rent, but the NBOA survey showed that only 54% of respondents had received that amount. Alarmingly, 29% of respondents indicated that their rent collections were below 85%, which is considered the industry threshold for profitability (Note: do we want to say this? It cuts both ways). As such, it is likely that about one-third of respondents are losing money on their buildings.
The problem is worse on the south side of the City of Chicago and in the south suburbs. On the north side of the City, 51% of respondents indicated their rent receipts met the industry standard, but on the south side it was only 34%.
- Tenants more than 180 days in arrears.
The survey also tried to measure just how far renters are behind in their rent. 43% of respondents reported having at least one tenant who was more than 180 days (six months) in arrears. When broken down by region, the survey indicated 48% of respondents with holdings primarily on the south and west side reported having at least one tenant more than 180 days in arrears, while 38% of respondents who own primarily on the north side reported at least one tenant seriously behind in their rent.
- Vacancies on the rise.
The survey also measured the availability of vacant units, finding that 42% of respondents reported a vacancy rate of 6%, which is just at the edge of a safe level. Alarmingly, 21% of respondents indicated a vacancy rate of 11% or higher. At this level, housing providers face additional financial burdens due to non-productive units (which may be on top of units paying reduced or no rent).
- Problems with communication between tenants and housing providers.
Half of respondents said they had residents who were refusing to communicate with them. This lack of communication is a serious problem and hampers housing providers’ ability to manage their buildings. When housing providers are not receiving communications from their tenants, they are neither able to budget for expenses nor negotiate accommodations or payment plans.
About the Survey
The Neighborhood Building Owners Alliance (NBOA), in cooperation with its affiliate members, conducted an online survey of nearly 400 Chicago housing providers to determine the effect of COVID-19 on the stability of the City’s rental housing market. The survey was conducted September 29 through October 2, 2020.
The survey focused primarily on September rent collections, which was a month after the $600 additional federal unemployment benefit expired and when many tenants had exhausted their state unemployment benefits. The survey also asked the respondents to indicate the type of buildings they owned, and where those buildings were located.
About the Respondents
The respondents collectively own approximately 65,000 rental units in the city. Two-thirds of the respondents consisted of small and mid-sized housing providers who own fewer than 100 rental units and/or own ten or fewer buildings. Over half the respondents (52%) reported owning five or fewer properties. As such, this survey is representative of Chicago’s smaller to medium-sized housing providers who make up the bulk of the City’s rental housing stock.