HOUSTON – (By Dale King, Realty News Report) – The coronavirus pandemic has spared no person, place, or industry. Individuals, businesses, schools, institutions, and neighborhoods alike have all felt its effects.
Every sector of real estate — residential, rental, commercial, manufacturing, and industrial — has been impacted.
Houstonians need not look far to see how the six-month battle against COVID-19 has changed daily life. Many residents of the Bayou City have spent months confined at home, seeing little beyond their walls and masked grocery clerks while relying on virtual visits for many doctor appointments.
A mid-summer surge in hard-hit states such as Texas, Florida, California, and Arizona has raised concerns about renewed restrictions and another wave of local shutdowns.
Recent reports and industry publications have focused on how COVID-19 has affected Houston’s rental market, examining absorption figures, vacancy rates, leasing activity, and how current conditions compare with past trends and future projections.
In a recent piece for the Houston Apartment Association’s magazine Abode, ApartmentData.com President Bruce McClenny framed the outlook in the ironic spirit of the late Yogi Berra, who once observed, “The future ain’t what it used to be.” McClenny referenced a line from the movie Back to the Future II, in which Dr. Brown warns Marty McFly, “Whatever you do, don’t go to the year 2020,” to underscore the unprecedented disruption of the year.
McClenny’s analysis highlights the national and statewide damage inflicted by the pandemic. Nationally, roughly 20.5 million jobs were lost within a matter of weeks after the virus arrived, a dramatic shock to employment and household income.
Historically, April is a strong leasing month in Texas. For example, Houston leased 2,805 units in April 2019 and absorbed 14,066 units for the entire year. By contrast, April 2020 saw only 726 units leased, roughly a quarter of the previous year’s activity, as the pandemic curtailed leasing and moving activity.
That low April total was not unprecedented; in 2016, when oil prices collapsed and the number of active oil rigs fell to a record low of 404, Houston absorbed only 561 apartments in April. Houston recovered from that downturn, and industry observers expect the city to eventually recover from the coronavirus shock as well — though the path back will be slow and difficult.
ApartmentData.com’s MarketLine for Houston presents both numerical data and graphics that reveal the pandemic’s effect on the multifamily market. While individual month-to-month changes may appear modest, the overall trend since mid-2019 shows a steady softening. Occupancy rates in July and August 2019 were at historically high levels — just over 90% — but they have trended downward since then, with March showing a brief uptick. Occupancy for May and June 2020 slipped to just under 89%, the lowest level in several years.
McClenny warns that ongoing job losses do not bode well for the Houston apartment market. Slower absorption and downward pressure on rents are likely outcomes as unemployment persists and demand softens.
Despite the overall softening, some Houston submarkets have performed relatively well over the past three months. ApartmentData.com reports growth in areas such as Richmond/Rosenberg (4.0% change with 1.4% absorption), Beltway 8/I-45 South (3.2% change), Willowbrook/Champions/Ella (3.4% change), Lake Houston/Kingwood (1.5% change), and Braeswood/Fondren SW (4.5% change despite a 0.7% absorption rate). These pockets of resilience reflect localized demand and differing supply dynamics across the metropolitan area.
Most tenants have continued to pay rent, but uncertainty remains. The National Multifamily Housing Council’s Rent Payment Tracker found that 77.4% of professionally managed apartment households made a full or partial rent payment by July 6, 2020, based on a survey of 11.4 million units. That figure represents a 2.3-percentage-point decline from the same date in 2019 and is lower than the 80.8% who had paid by June 6, 2020.
“It is clear that state and federal unemployment assistance benefits have served as a lifeline for renters, making it possible for them to pay their rent,” said Doug Bibby, NMHC president.
However, Bibby and others point to the looming end of enhanced unemployment benefits — a deadline that, at the time of the report, threatened to remove critical support for many households. Without an extension of federal aid or a targeted renter assistance program, the apartment sector could face severe consequences, including rising evictions, increased homelessness, and business failures among property owners and operators, which would in turn worsen both unemployment and housing instability.
July 13, 2020 Realty News Report Copyright 2020
File: Multifamily market softens in the pandemic