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Housing and Economic Insights Report – February 2022

Data Science team • February 8, 2022

At Esusu, we’re closely following what is happening in the economy and how it impacts renters as well as property owners and operators. These are the findings that we’re keeping an eye on in February.

 

Key findings

  1. Omicron is impacting the labor markets. Between December 29 and January 10, 8.7 million people reported that they weren’t working due to COVID-19 illness, symptoms, or caretaking. This had the biggest impact on hourly workers now that many federal support programs have expired.
  2. High inflation is eroding purchasing power. As food and transportation costs climb with inflation, other expenses may continue to go by the wayside, including on-time rent and utility payments.
  3. Pandemic-related migration changes are causing rent price increases, and many still aren’t paying rent on time. Comparing December 2021 to December 2019, NMHC saw a decrease in on-time rent payments from 95.9% to 92%.
  4. Esusu Rent Relief distributed 0% interest loans to hundreds of residents in December. We expect an increase in applicants this year as the eviction moratoriums come to an end.

 

Renters are facing several concurrent challenges that are making it difficult to afford housing.

The Omicron variant is already showing its impact on labor markets as well as on the livelihood of renters. Weekly US jobless claims jumped to 286,000 the week ending on January 15, the highest since October and well above both the median forecast and the prior reading (231,000).  Jobless claims for the weeks ending in January 22 and January 29 have come down but still remain elevated relative to November and December.

 

Source: U.S. Department of Labor

 

The Census Bureau’s recent Household Pulse Survey indicated 8.7 million people in the December 29 – January 10 survey reported that they weren’t working because they either had COVID symptoms or were caring for someone who did. Another 5.3 million people weren’t working because they were caring for children not in school or daycare. These numbers are higher than any previous COVID wave and will adversely impact worker’s incomes. Low-wage workers (defined by Brookings as workers who make two-thirds of the median hourly wage for full-time, full-year male workers) that were hit hardest by the onset of the pandemic are particularly vulnerable now that many federal support programs, including enhanced unemployment benefits and more recently the beefed-up child tax credit, have expired.

High inflation is also eroding the purchasing power for workers. US consumer prices continued to rise in December, taking the annual inflation rate to 7%, the highest since 1982. Inflation will continue to hit low-income households particularly hard with surging food and gas prices taking a big chunk from household budgets. 

 

Source: Bureau of Labor Statistics

 

While these challenges add up, so is the cost of housing.

Housing costs outside of student housing, hotels and vacation rentals jumped as well. The owners’ equivalent rent component of the CPI, which approximates rents for housing, increased at the fastest rate in about 5 years. Zumper’s 2021 Annual Rent Report also showed an increase of 11.6% in the median one-bedroom price and a rise of 13.6% in the median two-bedroom apartment. These trends were driven by rents in large cities rebounding to where they were before the pandemic, as well as continued demographic shifts to the sunbelt. In some cities, such as Miami, Boise and Nashville, the rental price increases were above 20%. Most forecasts expect that rental prices will continue to rise in 2022.  

Realtor.com’s 2022 Housing Market Forecast and Predictions predicts that national rents will continue to rise by 7.1% over the next year.

Wages are also increasing, but not as quickly as inflation for many segments of the population. The Atlanta Fed Wage Tracker shows changes in wages by different types of workers. Over the last two years, real wages are up for workers in the bottom income quartile (as nominal wage gains outpaced inflation), but down for other quartiles. Nominal wage growth is also lowest for workers over 55.

All of these factors are being reflected in the data for rental payments. The National Multifamily Housing Council’s Rent Payment Tracker shows a decrease in on-time rent payments from 95.9% to 92% when comparing December 2019 to December 2021.

 

Source: National Multifamily Housing Council

 

Our rent relief data is showing where renters need help most.

Esusu is directly helping renters who are having difficulty making their rent payments in our enrolled properties through Esusu Rent Relief. As of right now, the program has helped more than 1,300 residents avoid evictions by deploying over 2 million dollars in loans. 

Analyzing Esusu’s portfolio distribution directionally by ethnicity and education level, we see a significant proportion of our applicants are African American (47%), and we also see a trend towards renters whose highest completed education level is a high school diploma (41%).

 

Source: Esusu Rent Relief Data

 

Geographically, Esusu’s reporting residents predominantly reside in Washington, California, Georgia, Florida, New York, and Texas. Among the top 10 states where rent relief was deployed, New York (-8.9% employment rate from February 2020 to September 2021), California (-5.6%), and Virginia (-4%) were also among the states which were most adversely affected by the pandemic economically. 

Note that, in the coming year, Esusu may observe an increase in applicants as the eviction moratoriums are coming to, or have come to an end and the recently installed $46.55 billion Emergency Rental Assistance Program is bound to end. With this in mind, Esusu has taken steps to scale its rent relief program in order to meet potential demand. Specifically, Esusu has onboarded TurnKey Lender, which provides Esusu with an automated lending application tool to grant applications more efficiently and distribute capital in real-time.

 

Want to prepare your portfolio and help your renters withstand the continuous changes to the economy?  

Learn more about our rent reporting platform for property managers and owners.