September was a more difficult month for working-class and low-income renters in the Twin Cities.
With a federal assistance in limbo, 85% of people who lived in the oldest, most affordable market-rate rentals (Class C buildings) were able to pay their rent by Oct. 6 when the grace period for late rents typically ends, according to the Minnesota Multi Housing Association’s monthly survey of more than 35,000 market-rate units, most of them in the metro. That’s down from 88% last month and 94% last year, and doesn’t include heavily subsidized and Section 8 rentals.
Cecil Smith, president of the MHA and a Minneapolis-based rental property owner, said the recent “slippage” in those figures is the first meaningful decline since the beginning of the pandemic and a likely sign that many of the lowest income renters were relying on expanded federal benefits, which expired in September.
“That’s all burned off now,” he said. “There’s financial stress.”
Despite the decline, Smith said renters in the Twin Cities are faring better than those in other large metros across the country. On average, rent collections nationwide stood at 79.4% in October, according to a survey by the National Multifamily Housing Council.
Minnesotans who pay higher rents are generally faring much better than those who pay the least. For the newest buildings in the best locations (Class A) rent collections were at 96%. For slightly older buildings, with a mix of renters-by-choice and renters-by-necessity, (Class B) rent collections stood at 93%. Those figures are down only slightly compared with last year.
Smith credits expanded federal aid and unemployment benefits that are now expired, but also property managers who have been proactively working with tenants to make sure they have access to whatever assistance is available. In late March the MHA issued guidance to members recommending they waive late fees, suspend evictions and work out payment plans for cash-strapped renters.
And in July, Gov. Tim Walz signed off on a $100 million relief package aimed at providing housing and rental assistance in the state. In late August the state began accepting applications for the Coronavirus Relief Fund, which is being administered by Minnesota Housing, from renters and homeowners affected by the pandemic. Funds are still available for the program, which expires at the end of the year. Congress has yet to come to agreement on a new federal relief program.
“Clearly there’s concern about the new year,” Smith said. “We’re like so many other industries around the country where we’re watching and hoping.”
The monthly survey was initiated in part by the MHA, a statewide nonprofit trade that represents more than 2,000 members who own and manage more than 400,000 rental units, to establish a baseline to help track the health of the rental market in the Twin Cities.
For rents collected 30 days after they were due, the collection rate was 96% or better across all classes.
“The payment strength illustrates that Minnesota renters value their housing,” said Smith. “Furthermore, there is not one single indicator that would suggest an eviction wave.”
The rental market in the Twin Cities has long been one of the most competitive in the nation. But since the COVID-19 pandemic, demand for rentals has softened in urban areas where there’s been significant construction at a time when offices are still closed and urban amenities are shuttered. Many young professionals have moved home or are sharing space with roommates, and empty nesters that might otherwise have left their single-family homes in the suburbs have put those plans on hold. That’s caused the average vacancy rate in downtown Minneapolis to increase, forcing many property managers to offer rent concessions and some discounts.
On Tuesday, Realtor.com released a national survey that showed rents falling in many of the most expensive urban areas where many workers are now able to work remotely from less-expensive suburbs. That report said the average rent on a one-bedroom apartment in Hennepin County during September was $1,437, down 4.5% compared with last year.
“Renters now have the upper hand over landlords in many of the nation’s most expensive cities,” said Danielle Hale, Realtor.com’s chief economist, in a news release. “As vacant apartments begin to stack up, many landlords are scrambling to lower rents and offer discounts in an effort to entice or keep a shrinking pool of renters.”