Update: The Impact of COVID-19

#34 — October 20, 2020

Dominium has been focused on our business and operations during this pandemic crisis. As we move past the critical rent collection part of each month, we will focus our updates on information that we have found useful in the work we are doing. We hope that our friends and partners in affordable housing find it helpful as well and will send other information our way as well. A collection of all previous updates can be found at COVID-19 Impact Update.

Rent Collections—October Rents Continue Decline Started in September

Cumulative total receipts are at 87% as of October 19, 2020. Cumulative total receipts are: down (1%) compared to Sep 2020 through the 19th. down (4%) compared to Aug 2020 through the 19th. down (3%) compared to Jul 2020 through the 19th. down (3%) compared to Aug 2019 through the 19th.

In terms of types of properties or receipts: Resident receipts are at 85.9%, which is up 1% compared to September through the 19th and down (3%) compared to August through the 19th. They are down (4%) compared to August 19th, 2019, the most recent month in which the 1st fell on a Thursday. Subsidy receipts are at 90%, which is down (6%) compared to September through the 19th and down (7%) compared to August through the 19th. They are down (2%) compared to August 19th, 2019. Senior total receipts are 98%, which is up 3% compared to September through the 19th and down (2%) compared to August through the 19th. They are up 2% compared to August 19th, 2019 Family total receipts are 83%, which is flat compared to September through the 19th and down (3%) compared to August through the 19th. They are down (5%) compared to August 19th, 2019

The chart below shows the distribution of properties on their collection performance in October through the 19th. Out of the 207 properties, 22 have collected less than 70% of October charges representing $0.6M remaining to collect while 52 properties have collected over 95% representing $0.1M remaining to collect.  The lowest collection category is primarily made up of Section 8 properties which are impacted by timing with changes between resident and subsidy owed charges. The below distribution excludes these properties and follows the expected trends.

Previous Dominium Rent Reports can be found here. NMHC found that 79.4% of market rate rent was paid in full or partially paid by apartment households from October 1st through the 6th. This amount is up from 76.4% for the first six days of September. The survey included 11.4 million professionally managed units nationwide. NMHC President, Doug Bibby, said “our initial findings for October show that despite ongoing efforts by apartment community owners and operators to help residents facing financial distress through creative and nuanced payment plans, rent relief and other approaches, renters and the broader multifamily industry are confronting growing challenges.”

Housing & Employment News

September job numbers are slowing with job postings falling 0.3% in September from the month before, signaling that the labor market may be losing momentum. According to Glassdoor economist, Daniel Zhao, the slowdown in job postings “reflected a pullback in employer demand across sectors.” Job postings were under 1 million for the first time since April, and household income has also declined. Higher wage jobs in tech or finance have slowed, as many of these companies are waiting to see how the economy recovers. Bloomberg highlights a partnership between Low Income Investment Fund (LIIF) and the Stewards of Affordable Housing for the Future (SAHF) that aims to raise $1 billion over the next five years to preserve affordable housing. President and CEO of SAHF, Andrea Ponsor, said, “the pandemic has laid bare the affordability crisis.” Census Bureau data confirms that 49.7% of all renter households are paying more than 30% of their income towards rent. Housing leaders are looking for ways to weather the current downturn and determine how to preserve the current affordable housing stock. Some cities are considering increasing property taxes to offset the financial issues due to COVID-19. Mansion Global asked real estate tax attorneys if any major real estate markets were considering such a tax hike to offset losses, and it appears that across Canada municipalities are considering doing so as well as in New York. The New York tax increase would affect cities with more than 1 million people, and “apply to homes that are not the primary residence of the owner, or that aren’t inhabited by a child or parent of the owner…. Properties that are rented out full time would also be exempt.” CBRE announced an economic panel discussion on October 22nd with Spencer Levy, CBRE’s Senior Economic Advisor, to discuss the impact of the pandemic on the economy and what 2021 will hold for the affordable housing market. Topics to be discussed include, trends impacting real estate today and going forward, current legislation, business strategy changes caused by the pandemic, and perspectives on investing in 2021. Register here. Big technology companies are allowing employees to work from home and are exploring moving to cheaper cities, thus causing the collapse of San Francisco’s office rental market and The Wall Street Journal says it “[shows] no sign of bottoming.” Only 700,000 square feet were rented in the third quarter of 2020, compared to 3.6 million in 2019. Due to the major decline office workers with only 15% occupancy in the city, the executive director of the Golden Gate Restaurant Association said that the city could lose half of the nearly 3,900 restaurants due to failure during the pandemic. Many companies are allowing work from home to continue and backing out of leases. However, some are optimistic that San Francisco rents will be back, but the question is when?

Pandemic News The CDC updated their guidance confirming that the coronavirus can spread indoors more than 6 feet through the air, especially if there is poor ventilation. However, the CDC clarified saying that this type of spread is uncommon. Some experts contend that the CDC did not go far enough stating that the virus can spread more easily than they are indicating. Wearing a mask, staying 6 feet away from others, washing hands, cleaning high touch surfaces and staying home while sick are still considered some of the best ways to protect oneself. AstraZeneca plans to have an update in the next two weeks on the halted US vaccine trial and believes that the trial will resume this year. The US trial was paused in early September when a participant got ill with unexplained neurological symptoms. Trials in other countries around the world have resumed, but the US trial is still on hold raising questions if there are still safety concerns. As cases around the world continue to increase, more people are suffering from symptoms even after surviving COVID-19. Some estimate that such cases of virus would affect one in three survivors, with symptoms ranging from chest pain, racing heart or severe exhaustion. Often those affected are young and healthy. However, some patients still affected by lingering symptoms are finding it difficult to convince others that they are still impacted. The New York Times interviews four people still affected by these symptoms long after overcoming the virus. COVID-19 cases are rising in the US with 34 states reporting higher seven-day averages than last month. The Midwest and parts of the Northeast are being hit the hardest by these new cases. As temperatures drop and people begin to move indoors and schools reopen, some fear this is only going to get worse. On October 4th, the US reported 41,075 cases. Children and adolescents can spread COVID-19 even if they show minimal to no symptoms, as evidenced by a 13-year-old girl infected 11 family members at a gathering. It now established that children are able to transmit the disease. This article tracks one young girl’s timeline of infection and how she infected so many family members. None of the relatives that visited and stayed outside contracted the virus. This case reiterates the importance of following the known medical guidance. The pandemic has changed our workout habits, with many people moving less than before March. However, a UK study shows that although most of us are moving less, people over the age of 65 are exercising more. Anonymized step count data show that steps declined significantly following lockdowns in March. Those with the steepest decline in activity were those under the age of 40, who were previously very active. eResearchTechnology, a software company in Philadelphia whose software is used in hundreds of clinical trials, was hit by a ransomware attack on September 20th. The company said that patient data was not at risk, but they have not confirmed how many clinical trials were affected across Asia, Europe, and North America. It is still too early to know who is responsible for the attack, but the systems started to go back online within the last week with the remaining systems planned to go back online within the next few days. The October 8th episode of the Osterholm Update: COVID-19 discusses the outbreak at the White House, the newest information from the CDC about airborne transmission, and safely voting during a pandemic. IHME has changed their daily infections and testing to project the trajectory of infections based on easing mandates and closures and universal mask wearing.

Economic News The US jobs report shows fewer added jobs in September than forecasted, as the unemployment rate fell by 0.5% to 7.9%, although some of that improvement to the unemployment rate is due to the labor force participation falling 0.3% to 61.4%, as many discouraged workers stopped searching for jobs. The report also does not include many job cuts in the airline, entertainment, oil and financial services industries announced in recent days. New unemployment claims remain high as the pandemic continues into its seventh month in the US. Last week, the number of initial claims fell slightly from 849,000 to 840,000, with around 25.5 million Americans collecting unemployment insurance in some capacity. Robert Frick, corporate economist at Navy Federal Credit Union said, “We’ve been here so long, and I’m not seeing the kind of job creation that would lead us to believe that these claims are going to fall.” Without aid from Washington, the recovery could continue to deteriorate, according to economists and Federal Reserve policymakers. The Wall Street Journal reviewed the disparity in how quickly and to whom the Paycheck Protection Program loans were distributed during the early weeks of the program in April, leaving many minority businesses waiting for funds. Comparing zip codes in Washington DC of K Street Center and East of the Anacostia, The Wall Street Journal found that only 38% of borrowers in the lower income East of the Anacostia neighborhood received loans approved at the beginning of the program, compared to 80% of companies in K Street Center. Nationally, The Journal found that 92% of loans over $2 million received approval in the first month compared to only 54% of loans under $350,000 during the same period of time. As a new round of the PPP is discussed by Congress, there is bipartisan support to “include funds set aside for businesses with 10 or fewer employees” as well as minority and women owned businesses. Commercial properties are staring down foreclosure as the pandemic continues with major retailers closing in malls across the country leaving owners unable to pay mortgages even after deferments. Initially lenders were happy to extend forbearance, but as the pandemic continues, many are either demanding additional capital for relief extension or are going after properties to collect. Eighty of 278 properties that foreclosed last week were due to COVID-19. Chief executive of NAI Global, Jay Olshonsky, said, “It’s coming… it’s just a question of how bad it is going to be.” He anticipates that it will be much worse than the 2008 recession. Boeing anticipates reducing industry sales by $200 billion or by about 2,000 planes due to COVID-19. Production rates have been cut and Boeing is projecting a 5% demand drop through 2039 since last year’s forecast. Demand is down especially as international air travel is down 90% from prior year at this time, due to quarantine and government restrictions. Hotels are getting creative during the pandemic to figure out how to keep their doors open. Some are turning into the housing for doctors and nurses combating the coronavirus, others are turning into schools or homeless shelters. Financial woes are looming in many major cities as 44 hotel loans are delinquent in New York, whereas 39 are delinquent in Houston, and 29 in Chicago. Keith Thompson, principal at Avison Young, said, “Generally speaking, every hotel in America has lost 20 to 35 percent of its value in the last six months.” China’s economy is starting to recover from COVID-19 with nearly 425 million people traveling domestically during the start of their Golden Week holiday from October 1st through the 5th, which is nearly 80% of last year’s levels. However, there is still a risk of another outbreak as there were no restrictions in place on any travel that recently occurred. Experts see this as “an early exercise in what the rest of the world will have to go through as global travel restarts next year.” Raymond James released their Quarterly Investment Strategy that examines the impact to the markets due to the election, the economic outlook through the pandemic beyond the election, and the impact of the election on European investors. They state that “what happens in 2021 depends on more than who wins the White House.” And that, “the real danger is not doing enough to support the economy in the near term and ending support too soon.”  The pandemic has exacerbated gender inequities, especially for women in academia. Like many women in the workforce, women and caretakers in academia must juggle teaching students and overseeing their own kids’ distance learning. Citing studies that women are already writing fewer papers than their male counterparts, The New York Times states that women faculty “struggle to balance work and family” causing many to leave academia altogether. This summer’s reckoning with racial injustice has added even more of a burden on female faculty of color.

Other Interesting & Helpful Resources

The New York Times has a guide to telling the difference between the symptoms of influenza and COVID-19, given the approaching flu season and the similarities between the two diseases’ symptoms. The first bit of advice they share is to get a flu shot, which will decrease the likelihood of needing to be hospitalized even if one catches the flu.

State-by-State Actions Schools: Education Week Reopening & Closing Status: The New York Times Construction Limits: Architect Magazine

Disney theme parks reported plans to lay off 13% of their workforce, or 28,000 workers in the US, many of whom have been furloughed since April. It is unclear if the company will experience any cost savings. Deutsche Bank analysts state that theme parks in Orlando are still experiencing traffic that is 80% lower than previous year. The Wall Street Journal notes that Disney’s share price is down 14% and is faring better than other theme parks, but they anticipate a 37% drop in revenue for Disney theme parks by the end of the fiscal year. Regal Cinemas is closing all 536 US theaters this week, but the company says the move is temporary. The shut down comes two months after they began to reopen and after the new James Bond No Time to Die postponed its release until 2021. Closing puts nearly 40,000 employees on furlough in the US, and more than 5,000 employees in the UK will also be impacted. Americans are driving less than before the pandemic with studies showing that vehicle miles traveled will be around 90% of pre-pandemic levels. Bloomberg attributes this change to more people working from home and online shopping resulting in increased delivery of items. A University of Chicago study found that Americans are saving 60 million commuter hours a day by working from home. TSA has released per day traveler numbers for 2020 compared to the same weekday in 2019, showing that in April 2020, there was only 5% of the volume of travelers that passed through TSA checkpoints than there were in April 2019. There has been some recovery, and in September 2020 there were 32% as many travelers as in September 2019. [Analysis]

Resident Resources National Low Income Housing Coalition put together a State and Local Rental Assistance guide for COVID-19 Emergency Rental Assistance Programs around the country. Fannie Mae put together a “Here to Help Renters” resource guide. It includes tips for talking to your landlord, top things to know, and options for those in need of financial assistance. Other resources are linked to HUD, CARES Act, and state and local resources. Freddie Mac offers a Renter Helpline, which provides counseling for renters on budgeting, credit improvement and debt management. The attached flyer is available in multiple languages. HUD has put together a guide and FAQ for Renters during the pandemic. The United Way is assisting residents in Minnesota with COVID housing assistance program. Those needing support can call 211 or toll free at 1-800-543-7709.

Dominium Resident Resources Information on filing for unemployment Family Housing Fund has put together resources for households impacted by COVID-19, ranging from legal help, utilities, food, unemployment insurance and more. Housing Link has provided tips for emergency assistance in the Twin Cities with contact information by county. National Alliance on Mental Illness Minnesota also has a list for families of financial and housing resources. You can also search for reduced cost services by zip code on their website.

In an attempt to share what we know and are doing during this crisis, we are publishing a set of periodic updates for our partners and friends in affordable housing. We likely will do this twice a month or as interesting events dictate. Please let us know if you would like to be removed from this list.  Thank you, Paul Sween & Mark Moorhouse

DOMINIUMAPARTMENTS.COM