Based on responses to the survey, Chicago housing providers are facing more than $1.1 billion in rental payment arrearages, or approximately 9% of their annual rental income, much of which may not be recoverable.
More than half of area housing providers (51%) are facing historically high levels of unpaid rent (greater than 5%). Before COVID, healthy rental buildings would have less than 0.5% back rent, and it would be rare for a building to have a level exceeding 1%. Now, 31% have of respondents have arrearages of more than 10%, and 8% of respondents are facing crushing levels above 30% unpaid rent.
With emergency rental assistance programs at the State and City levels yet to launch, many housing providers are losing money at an unsustainable rate, especially in poorer neighborhoods. 27% of respondents report collections below the industry standard for healthy operations (85% collection). Roughly half of housing providers (49%) have tenants more than 180 days in arrears. This arrearage is making it increasingly difficult for housing providers to meet their financial obligations and maintain a quality level of services for their tenants.
If this trend continues unabated, many Chicago-area rental buildings will face foreclosure, resulting in instability for the buildings and housing insecurity for the tenants. The disinvestment reported by housing providers portends dire consequences for the stability and economic vitality of our neighborhoods as rental buildings fall into disrepair and property values decline. The problem of serious rent arrearage is most pronounced in Chicago’s south side and south suburbs, where half of the respondents report having tenants who are more than six months behind in rent.
Apartment vacancy rates and falling rents further exacerbate the fragility of the housing market, making it more difficult for housing providers to generate revenue to pay for their buildings’ expenses, such as mortgage payments, property taxes, payroll, building maintenance, utilities and capital improvements.
Unpaid rent totals are historically large, topping $1 billion.
More than half of area housing providers (51%) are facing historically high levels of unpaid rent. Before COVID, it would be rare for a building to have more than 1% delinquent rent. Now, 31% of local housing providers have arrearages of more than 10%, and 8% are facing crushing levels above 30%.
Our calculations indicate that the total dollar value of back rent approaches $1.1 billion for the 575,998 apartment units in the city of Chicago.
Many housing providers are not generating enough money to cover costs.
The housing industry considers 85% a minimum level of rent collection, albeit one that cannot be sustained. More than one in four housing providers (27%) is collecting less than that level. Collections were worse on the south and west sides, where 36% of housing providers were collecting less and 85%.
Only 16% collected full rent in March 2021. 31% reported collecting 80–88% of rent. On average, 91¢ of each dollar goes out the door in hard costs (staff, maintenances, repairs, utilities, supplies, insurance, mortgage, property taxes and the like).
Housing providers are facing rent arrearages of more than 180 days.
The survey also measured the degree to which renters are behind in their rent. Nearly half (49%) of housing providers reported having at least one tenant who was more than 180 days (six months) in arrears. Almost one in six housing providers (15%) reported having more than a quarter of their tenants more than 180 days in arrears. Of those tenants who are in arrears, a startling 22% of housing providers report more that than 5% of their tenants have been in arrears since before COVID began in March 2020—a full year ago.
Housing providers are continuing to experience above-average vacancies.
The survey also measured the availability of vacant units, finding that 37% of housing providers reported a vacancy rate of 6% or more (a vacancy rate of 6% or less is considered stable). Alarmingly, 21% of respondents continue to have a vacancy rate of 11% or higher. This number is unchanged since December, when 22% reported this level of vacancy. At this level, housing providers face the additional financial burden of units that produce no rental income (in addition to those units occupied by tenants paying reduced or no rent). The reported vacancy rate is consistent with the findings in the December, 2020 survey.
Housing Providers are pessimistic about having enough cash on hand to meet coming obligations.
When asked how their anticipated rent collection will affect their ability to manage their buildings, housing providers’ responses suggested that disinvestment in local housing is a continuing concern. 65% indicated they expect to make fewer capital improvements. 46% indicated they expect to cut their repairs and maintenance budget.
About the Survey
The Neighborhood Building Owners Alliance (NBOA) ), and Essex Realty Group, Inc., in cooperation with its affiliate members, conducted a third quarterly online survey of roughly 350 Chicago housing providers to determine the effect of COVID-19 on the stability of the City’s (and surrounding metropolitan area) rental housing market. The survey of March, 2021 rental market conditions was conducted April 9 through April 19, 2021.
As with our previous quarterly surveys, this survey focused on rent collections and the challenges facing housing providers. By surveying the same audience and repeating key questions, the results provide an excellent indication of how housing providers have been faring.
Profile of Survey Respondents
The survey asked housing providers to indicate the type of buildings they owned, the size of their portfolio (by number of housing units) and the location of their buildings. Those responding to the survey own a combined total of approximately 60,000 rental units throughout Chicagoland. Roughly three quarters (approximately 74%) of the respondents are small and mid-sized housing providers who own or manage fewer than 100 rental units and/or own ten or fewer buildings. Further, roughly half the respondents (47%) reported owning or managing 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 area’s rental housing stock.