Renters Managing Debt Responsibly Despite Rising Financial Hardship
June 15 2020 - 8:00AM
The COVID-19 pandemic continues to demonstrate a broad impact on
consumer finances with a new TransUnion (NYSE: TRU) analysis
highlighting its effect on the rental market. The percentage of
renters that entered “Acute Relief” programs between the months of
March and April increased 25% month-over-month in the wake of
COVID-19. However, enrollment in such programs enabled consumers to
maintain good financial standing on current accounts until they
attain more financial stability.
The Acute Relief metric is defined as a tradeline in
forbearance, deferment or payment suspension due to the impacts of
a natural disaster. These resources allow consumers to suspend
payments with a lender for various credit obligations, and can
offer consumers much needed payment flexibility during periods of
financial uncertainty. For property managers and operators, this
metric may also serve as an early indicator of future financial
hardship during prolonged unfavorable market conditions.
The analysis found that renters are being prudent with new
credit borrowing and are not taking on new forms of debt as a
response to COVID-19. The percentage of renters that opened a new
tradeline in the past six months decreased from 37.8% in March to
36.7% in April and only slightly increased when compared to April
2019 (0.9% year-over-year).
“Forbearance and deferment programs have given renters a leg-up
during this unexpected economic downturn – and it appears many
renters have reduced their immediate debt obligations in the
near-term,” said Maitri Johnson, vice president of TransUnion’s
tenant & employment business. “COVID-19 has had a significant
effect on the financial health and stability of the renter
population. As this situation and the economic landscape continues
to evolve, early financial hardship indicators can help property
owners and operators better understand consumers and make more
informed decisions regarding their portfolio.”
Despite the economic pressures a majority of renters are facing,
credit card utilization rates have been decreasing month-over-month
across the entire portfolio. At the end of 2019 the average renter
was utilizing 45.3% of their available credit line(s). As of the
end of April, utilization rates fell to 39.8%, representing a 13.7%
decrease year to date.
Utilization of Open Credit Cards for
Renters is Declining
Date |
Dec – 2019 |
Jan – 2020 |
Feb – 2020 |
Mar – 2020 |
Apr – 2020 |
Percentage |
45.3% |
45.1% |
44.4% |
42.1% |
39.8% |
This decrease in credit card usage demonstrates renters are
actively controlling balances across all credit obligations and
suggests they are avoiding placing rent payments on their credit
cards. TransUnion’s April Monthly Industry Snapshot Report found
that consumers are paying down their credit card balances to ensure
further liquidity – with the average balance per consumer
decreasing from $5,645 to $5,437 between March and April 2020.
These measures show renters have been managing their debt
responsibly and rent payments have not yet been materially
impacted. The number of consumers continuing to pay rent is largely
on par with 2019, with rent payments being made at a slightly lower
level versus prior years — a 3.1% drop from 97.7% to 94.6%
year-over-year between April 2019 and April 20201. While consumers
have continued to pay rent thus far, that does not necessarily mean
there are not concerns about the continued ability to do so. The
most recent TransUnion Financial Hardship Survey indicated that 30%
of consumers whose income has been impacted by COVID-19 expressed
concerns about their future ability to pay rent.
“Right now there is little indication that renters are
increasing their debt or taking on new lines of credit. The
presence of federal stimulus packages have offered temporary relief
for many consumers, but it is yet to be determined whether this is
merely postponing payment risk increases for renters. If renters
are placed under greater financial strain in the coming months,
property managers should take a deeper dive on resident behaviors
to better forecast the likelihood of future rent payments while
actively building trust with their community,” said Johnson.
For more information on TransUnion’s Rental Housing Financial
Impact Study, please register for the upcoming webinar. To learn
more about resident insights, demographics and behaviors, please
visit https://www.transunion.com/product/residentvision.
About TransUnion (NYSE: TRU)
TransUnion is a global information and insights company that
makes trust possible in the modern economy. We do this by providing
a comprehensive picture of each person so they can be reliably and
safely represented in the marketplace. As a result, businesses and
consumers can transact with confidence and achieve great things. We
call this Information for Good.®
A leading presence in more than 30 countries across five
continents, TransUnion provides solutions that help create economic
opportunity, great experiences and personal empowerment for
hundreds of millions of people.
http://www.transunion.com/business
1 National Multifamily Housing Council (NMHC):
https://www.nmhc.org/rentpaymenttracker
Contact |
Dave
Blumberg |
|
TransUnion |
|
|
E-mail |
dblumberg@transunion.com |
|
|
Telephone |
312-972-6646 |
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