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Three years after COVID hit the United States, Houston-based property manager Robert Hoop puzzled over a question plaguing investment property owners from Albuquerque, New Mexico to Zion, Illinois.
After keeping rent hikes in check during and after the COVID shutdowns, and with lease renewals coming due, how aggressively should he and property managers like him return to normal operations, including raising rent and initiating eviction proceedings?
It’s a question property managers of all sizes have been grappling with in recent months, and one that provides insight into operating residential buildings for rent during unprecedented times.
Hoop took to an online forum for property managers and building owners to pose his question. The answers unveiled the delicate nature that some managers approach an otherwise difficult subject.
“Most management companies in Houston are offering 6 percent — 14 percent increases,” Hoop wrote. “When you do the math, the actual numbers are pretty steep.”
“Our company is very good to our residents and we keep increases within a very reasonable range,” he wrote. “When I receive calls from prospects telling me about some of their rent increases, it blows me away.”
Leases are oftentimes 12 months long, so renewals made now were signed before the peak of the rental market. If property managers were working with tenants before then, when the country was still coming to grips with living amid an ongoing pandemic, it’s possible market rate rent climbed well above what renters were paying.
Buildings that were offering months off rent or discounts to retain a higher occupancy rate have more recently been figuring out how to keep buildings full while bringing rent back in line with the market.
“Most of our competition, they’re having those large increases,” Hoop said. “They’re playing catch up because they gave the farm away during COVID.”
It’s up to property managers and their clients who own the buildings to decide how they act to catch up. But that’s not all. They also have to decide how to handle tenants who are in arrears.
That goes for independent managers as well as some of the nation’s largest landlords.
After offering leniency through the early years of the pandemic, Blackstone, one of the country’s largest landlords, recently began pursuing evictions at a higher rate in recent months, the Financial Times first reported.
The outlet reported that Blackstone has contacted politicians on the West Coast to let them know they may increase eviction filings as the company looks to increase its cash flow in part through evictions, the outlet reported.
The change would mark a shift from the company’s leniency for tenants during the pandemic, the Financial Times reported, with eviction forbearance and assistance programs starting earlier and lasting longer than other major players.
Other property managers, who are operating a building on behalf of an investor or building owner, are in a difficult position of keeping rent in line with what the market will pay.
Several others told Hoop they should “take as much as the market will allow,” or “whatever the law limits,” noting that some markets have rent control in place that puts restrictions on rent increases.
Valerie M. Sargent, a multifamily expert, added that property managers are tasked with operating a business while being mindful of tenant needs.
“It’s important as owners to care for your residents. That’s one of the most important things,” Sargent said. “We have the gift as multifamily owners of providing a home to people. I just take that very seriously and I think that resident retention is one of the most important things.”
“The cost of turnover is expensive at times — advertising for that, filling that apartment,” she added. “Just because you can raise the rent to market rate doesn’t necessarily mean you should.”