To put it bluntly, 2020 was a mess of a year. Challenges facing all industries meant many leaders found themselves figuring things out one step at a time rather than planning ahead for the long term. The rental industry was certainly not immune – landlords and tenants across the country found themselves struggling financially as a result of widespread unemployment and income loss.
While legislation put in place during the pandemic has been critical to protect renters, these regulations and associated decrease in rent payments received have caused a snowball effect of economic fallout as landlords become concerned with their own financial futures.
The state of the industry
While home sale prices and activity have hit record highs in many areas of the country, the rental industry has experienced more uncertainty. Regulations put in place to protect renters have inhibited the natural course of the move-in, move-out and eviction cycle. This disruption, coupled with national eviction moratoriums, are creating inflated occupancy rates, and low vacancy rates are driving up rental prices. My prediction is that this unnatural inflation of housing needs could lead to a crash in the housing market this year.
With eviction moratoriums extended in most places, lack of supply and high demand is causing both rental rates and home prices to climb. When eviction moratoriums are lifted, the rental market will likely be flooded with vacancies as landlords begin to pursue eviction for nonpayment of rent. As supply reenters the market, property values and rental rates could drastically decrease. The rapid fluctuation in supply, demand and value does not exactly pose well for the industry as a whole.
Landlords offering online rent payment options find more success than those who do not
A bright spot in a year full of pain and devastation: while renters across the country have struggled to pay rent on time and in full, tenants with online rent payment options have proven far more likely to pay rent on time, which is good news for landlords. We aggregated data from over 600,000 rental properties in the U.S. shows that the number of online rent payments received on time by landlords and property managers was consistently (and significantly) higher than the total number of rent payments received in 2020.
Of tenants who pay rent electronically, rent payments received were on average 3% higher than online rent payments received for the same period in March (widely considered to be the onset of the pandemic in the U.S. when most shutdowns and stay-at-home orders were implemented). When compared to the average 25% decrease in the total number of rent payments received, it is clear that online rent payment options dramatically increase a tenants likelihood of paying rent on time.
Online rent payments are likely to continue increasing in 2021 – pandemic or not, many renters and landlords have realized the benefits and simplicity of paying rent online. However, data also shows that the pandemic drove many landlords who were not previously offering online rent payment options to reconsider.
Landlords are still signing up for online rent collection
Landlords are frequently taking advantage of property management software offering online rent collection capabilities, and many tend to sign up each month even prior to the pandemic. For example, my property management software company receives an average of about 125 applications each month from users wanting to offer online rent payment options to their tenants. We saw several spikes in this number throughout the year in 2020.
Not surprisingly, we saw a 24% increase in March when many stay-at-home orders were initiated and social distancing measures were put in place. Online rent collection was an easy choice for many landlords looking to avoid unnecessary interaction with tenants. We saw another 16% spike in applications in August, perhaps due to another wave of rising COVID-19 cases across the country, or perhaps from landlords preparing for the winter months and wanting to avoid cash/check collection.
In my opinion, most landlords who were interested in switching to online rent collection directly as a result of the pandemic have probably already done so. I expect the upward trend in online rent collection capabilities to follow more of a natural curve now, based on the benefits of online rent payments more so than anything having to do with the pandemic.
Online rent payments make life easier for tenants and landlords. Landlords looking for stability and reliability during otherwise turbulent times should strongly consider offering online rent payment options, as this method has been proven to increase the likelihood of tenants paying rent on time.