Coronavirus Impact on Multifamily Compared to Other Asset Classes

Coronavirus Impact on Multifamily Compared to Other Asset Classes

When the Coronavirus was first identified and people across the US were required to stay home, there were concerns about how this would affect the housing market. What has happened to the multifamily market, and how has it compared to other asset classes in the country?

Fears Around Multifamily Homes and Coronavirus

When the call to stay home went into effect, this made many developers and landlords nervous. If people were being furloughed or laid off from their jobs, there was a fear that many of them were going to be unable to make mortgage and rent payments. As the situation is so unprecedented in modern times, no one was sure how this was going to play out.

The Effect of Coronavirus on The Multifamily Market

So far, there doesn’t actually seem to be much of a dip in rental payments over the course of the lock down. In April, 84% of renters managed to pay all or part of their rent by the 12th of the month. This is much more than some were predicting, even as many were losing income. In fact, the amount renters making payments is on average the same as this time last year.

This is encouraging news for those in the industry, as it shows that payments are still being made even as the situation is still uncertain. As payments are being processed, multifamily homes are seen as one of the most stable markets right now.

The Effect on The Purchase Market

What is the consensus opinion on how the Coronavirus will affect the purchase market? This is where it appears to be having an impact. Many are finding that with the virus still present, they cannot access the funding to buy their own home so they will need to continue to rent.

This has caused major problems for buyers, because as of now, there is no indication of when the virus will be totally under control. Until then, lenders are placing stricter guidelines on who they can lend too, and how much they can lend out. This will keep them safe for the time being but will tarnish the short-term market. You can expect to see a downturn in profits from mortgage lenders.

It’s not surprising to see that multifamily markets are mostly stable, despite what was predicted. With it being much harder to now buy property, renters are staying put where they are. As the virus stabilizes, they’ll need to stay where they are and wait for lenders to be more willing to help them buy property again.

How Bad Is The Affordable Housing Crisis In The US?

How Bad Is The Affordable Housing Crisis In The US?

There’s no denying that people across the US are facing a housing crisis. As a renter, you may well find yourself paying 30% or more of your income just to keep a roof above your head. If you’re looking to buy a home, you’ll see that house prices are rising at twice the rate of wage growth. Just how bad is the housing crisis, and what can be done about it?

Buying Vs. Renting

Ask any renter, and they will tell you that they would love to own their own home someday. The problem is that it’s almost impossible for them to afford a home. In recent studies, a person working 40 hours a week at minimum wage cannot afford a two bedroom home anywhere in the country.

This causes problems, as affordable housing currently favors buyers over renters. You can see this in tax deductions, as they essentially subsidize middle- and upper-class homes, rather than affordable homes. It’s taken the ability to afford a home out of reach of millions of people in the country.

Rising Costs

It’s not just the cost of buying housing that has gone up. To build those homes, the cost of materials has gone up too. Right now, lumber alone makes up 5 to 10% of the cost of building a home. With these costs rising, it’s getting harder to build affordable housing.

Restrictive Zoning Laws

Zoning laws have created a lot of problems for those trying to create affordable housing. In some areas, such as Los Angeles and San Francisco, put limits on what can be built. These can include limits on how high buildings can go, requiring a certain amount of parking spaces, and so on. These limits have come into place and have restricted developers in their opportunities to create new housing.

What Can Be Done?

There are certainly ways in which the housing crisis can be turned around. Inclusionary zoning laws have been brought into places like New York, allowing for more affordable housing to be built. With more existing properties being turned into affordable housing, this will increase demand too. With around 7.2 million affordable homes being needed across the US, it remains to be seen whether this will help with demand.

It’s clear that many factors have lead to the US housing crisis. If changes are made in how affordable housing is built though, these problems can be mitigated.