Where Will COVID-19 Have Most Impact on Multifamily Rents?

GeoPhy Neighborhoods identifies communities where residents may struggle to pay rent due to a high concentration of employees in industries impacted by COVID-19 and high rent-to-income ratios.

Using our new GeoPhy Neighborhoods tool, we have pinpointed individual neighborhoods with a majority of tenants in multifamily properties who are at high risk to layoffs and furloughs as a result of COVID-19. 

We originally developed GeoPhyNeighborhoods to help commercial real estate (CRE) investors and lenders mitigate risk and capitalize on opportunities. Back in January, understanding the effect of mass layoffs in particular industries was not part of our original plan for the product. Recent government-imposed shutdowns of businesses, however, have led to historic increases in unemployment – affecting rent payments.

Several recent reports have noted the impact of COVID-19-related layoffs at the metropolitan area level. Those broad-stroke analyses, however, hide risk concentrations within those markets — and potentially within real estate portfolios. GeoPhy Neighborhoods enables the granular analyses needed to identify these pockets of risk among the more than 90,000 neighborhoods identified by GeoPhy across the US.

Because GeoPhy Neighborhoods uses US Census Bureau’s American Community Survey data as one of its inputs, we were able to identify the prevalence of professions within those neighborhoods. We first looked at neighborhoods where 10% of more of the population works in professions most likely to be negatively impacted by COVID-19-related business closures (i.e., hospitality, transportation, and artists). We then look at those neighborhoods with a high ratio of median rent to median income.

Our analyses show that individually neither factor is likely to indicate significant risk. Neighborhoods with high values of both measures, however, are most likely to see the first wave of missed rent payments

Only 2.3% of our 90,000+ neighborhoods score high on both criteria – a large fraction of the population employed in COVD-19-affected industries and a high rent to income ratio. However, those that do have a whopping 37% of their population living in multifamily housing. The neighborhoods that don’t score highly in both categories average just 10% of their populations in multifamily housing. (See chart below.)

Taking our analysis a step further, we identify those areas that are at high risk. Because some multifamily units can be in owner-occupied condominiums or co-operative apartments, we first screened our dataset for communities where at least 50% of their residents rent.

Rolling back up to a metropolitan area level, we then looked at which of the top 50 US markets have the highest percent of their multifamily rental neighborhoods in the high risk category. Perhaps unsurprisingly, Las Vegas leads the list with 100% of its multifamily rental neighborhoods at risk. The top five list also includes smaller metro areas such as Gainesville, FL.

New York (#12) has the largest total number of units in at-risk neighborhoods: 1.3 million. Silicon Valley (22%) has the lowest percent of multifamily rental neighborhoods at risk from COVID-19-induced layoffs in the top 50 metros.

Here are the five metro areas with the greatest percent of its multifamily rental neighborhoods at risk, followed by those least at risk in the top 50 US metropolitan areas:

To learn more about GeoPhy Neighborhoods or to order a report for your portfolio, please visit www.geophy.com/neighborhoods.

You may also like
May 7, 2020 | by Luke Fitzpatrick

Assessing Multifamily Risk (and Opportunity)

GeoPhy Neighborhoods’ quantitative scores highlight hidden risks and opportunities that otherwise go unnoticed – unless your analysis taps our proprietary granular level of detail  In recent weeks, we’ve shown you...
Learn more
April 22, 2020 | by Luke Fitzpatrick

COVID-19 Risks in CMBS Markets

Co-authored by Nils Kok GeoPhy’s Neighborhoods tool turns up hidden risks in Freddie Mac’s K-Series CMBS offerings Freddie Mac recently announced an extension of its multifamily forbearance program, meant to...
Learn more