Home Topics Real Estate Lower loan utilization among tenants signals a recovery in the market: Study

Lower loan utilization among tenants signals a recovery in the market: Study

TransUnion’s financial impact study for rental apartments in 2021 shows that smart financial decisions by tenants help stabilize a volatile market.

At the height of the pandemic, approximately 40 million tenant households were at risk of eviction, with the average renter owing an overdue rent of $ 5,400. Although many tenants are still affected by last year’s events, TransUnion’s latest financial impact study released Tuesday found that most tenants were able to keep their rental payments under control in 2020.

Maitri Johnson

“The latest research from TransUnion enables property managers to make informed decisions at a time when information about the tenant’s financial health and ability to pay rent is still unclear,” said Maitri Johnson, TransUnion vice president for apartment buildings. in a statement. “Macroeconomic indicators such as increased unemployment would point to a challenging rental market, but our study suggests a positive outlook for 2021.”

“This comprehensive investigation will enable more trustworthy interactions between property managers and tenants, and will benefit the industry at a time when incomplete reports could pose very different challenges,” added Johnson.

Based on four-year tenant and property data, the report found that the 60-day crime rate fell 1.6 percent from December 2019 to December 2020, with the tenant’s average total debt falling from $ 31,113 to $ 30,592 over the same period. The crime rate increased slightly (+0.9 percent) from the fourth quarter of 2020 to the first quarter of 2021, but TransUnion expects the rate to “remain within historical norms”.

To compensate, the tenants have redirected the discretionary income to necessities such as rent or debt repayment. These measures boosted tenants’ average credit scores by seven points to 668 – a trend that the report says will continue through 2021 as tenants reduce their credit card usage (-4.6 percent).

“When tenants use credit cards to pay rent more often, they have either greatly reduced their overall discretionary spending or are consistently paying off their credit card debt,” said Johnson. “We haven’t seen a disproportionate increase in the number of new credit card accounts opened. Therefore, the decrease in credit card usage is most likely not due to increased available credit.”

According to the report, tenant loan usage trends point to a stronger rental market in 2021, although 31 percent of tenants said they were concerned about their solvency. Similar to 2020, the report says tenants continue to cut their budgets and use loan deferral or forbearance plans (3.6 percent) to meet housing needs.

Although these statistics are worrying, Johnson said the use of reprieve or forbearance plans has fallen from its pandemic high (7.3 percent), signaling that tenants’ financial prospects are improving.

“There is no doubt that many Americans, including renters, have been negatively affected, directly or indirectly, by COVID-19,” Johnson said. “When key metrics are looked at in a vacuum, much of the information available would support a bleak outlook for future tenants.”

“However, our credit metrics and studies show that renters are generally well positioned to end the pandemic, but there are still a tremendous number of unknowns right now,” Johnson concluded. “We believe the rental market is poised for growth even as new development inventory emerges that will benefit both tenants and property managers.”

Email Marian McPherson

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