Ellen Calmas is Co-Founder/EVP at Boston-based Neighborhood Pay Services, creator of the NPS Rent Assurance Rent From Payroll platform.
Let’s agree that 2022 is off to a mixed start in general, and in particular as it relates to the multifamily rental industry.
Pluses And Minuses
On the plus side, the tsunami of evictions predicted a year ago was tamed by government intervention that helped residents keep a roof overhead but also hamstrung even the most well-intentioned property owners from operating normally. Today, while eviction courts have opened, and far too many families are facing financial and housing hardship, property operators have banded together to find positive solutions to help hundreds of thousands of residents get caught up on outstanding rent balances and avoid blemishes on their rental and credit reports that can follow them for years to come. Free-market solutions that provide increased discipline to the rent delivery process have made these achievements possible without adding friction for either renter or landlord. (I’m proud to say that my company provides one such solution, rent from payroll.)
Rents returning to pre-pandemic levels is another achievement for property operators, though not welcomed by prospective residents. In fact, according to the January 2022 Apartment Guide Rent Report , rents have increased in most major markets at a rate that was certainly not expected when cities like New York, San Francisco and Boston (some of the highest-rent markets in the country) saw an exodus of residents looking to take cover from Covid-19. Supply-side realities once again impact rental pricing in markets where there simply isn’t enough workforce housing to meet demand. In high-end rental housing, the ability to capitalize on consumer desires to return to normal—whatever that may now mean—has also enabled rental operators to capitalize on market demand.
So what can we expect in the year ahead?
Predictions For 2022
Like just about every other industry today, multifamily will continue to be impaired by supply chain issues that are delaying construction projects as well as operators’ ability to bring new inventory to market. In turn, renters will continue to shoulder the burden of rising rents where rental inventories have been maxed out. As a result, rental operators who want to work with their residents to stay current on rent will turn to more disciplined payment compliance tools to help all parties achieve their financial objectives. Advances in “proptech” will play a large part in achieving these goals. Funding for these advances totaled $9.5 billion by mid-November 2021 and are expected to maintain that level of investment in 2022. (It is important to note that many property technology innovations target smaller landlords who own and/or manage fewer than 50 rental units. Innovations for property companies whose portfolios range from 2,500 units to more than 50,000 units will continue to require platforms that link to management enterprise systems in order to come out ahead.)
Although many who fled big cities are returning, the exodus from 9-to-5 working practices will continue in the year ahead along with migration to smaller, more affordable sub-markets where the balance between work and healthy living can be more easily achieved. Look no further than offers from secondary and tertiary markets to pay consumers to set up residency for a clear indication that modest population increases will occur outside of the top 20 metro areas. As populations shift, so too will housing, though the lag time on supply to meet increased demand in these markets may have contrary effects on rental pricing.PLAY Forbes Small Business About Connatix Read More Read More Read More Read More Read More Read More
Renter psyche will also play into innovations in the year ahead. The need to feel safe and cared for has risen to the top of the amenity list. Renters will expect so much more than treadmills in buildings and easy access to bicycle storage (though those should continue). Today, properties are expected to have private delivery storage lockers, hand sanitizers all around, increased cleaning protocols and mechanisms for automated rent delivery that can be accessed 24/7. Convenience and added value will continue as watchwords for the year ahead.
In the mid-level rental category where rent increases are more stablized, operators will continue to seek out opportunities for ancillary revenue. Efforts to enforce resident compliance fall into the ancillary revenue category, especially related to lease requirements regarding renters' insurance and rental payments. Although the industry is still very much "in the game," operators join other professions in being exhausted from the demands of the past 20+ months. Expectations for residents to fulfill their lease obligations will be enforced, including increased costs to residents who fall behind. While avoidable by residents who have adequate financial resources, these costs represent fair market compensation to operators and significant potential ancillary revenue.
I’m not certain we can ever really know what the future will bring, especially amid new variants and the brave new world of rental housing. What we can be certain of, however, is that people will continue to need housing and the multifamily housing industry will continue its best efforts to meet market demand.
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