Keith Chennault has heard about blocks of empty apartments in new, high-end complexes in Center City. But from his West Philadelphia real estate office, Chennault sees the rental landscape differently. When some clients reach out looking for affordable rents, the options remain slim, even if they’re flexible about location.
Apartment and house rentals about $1,000 a month, he said, “are pretty tough to get.”
The coronavirus has uprooted nearly every industry, including the rental market, and is primed to make already hard-to-find affordable housing even more challenging to secure. For now, many renters are staying put, halting moving plans indefinitely or opting for short-term leases due to uncertainty surrounding the pandemic and its economic fallout. As restrictions are relaxed, many are going to be looking to save money on rent.
“The economic instability that’s resulted from the pandemic is something that’s going to have a longer-term impact on the market than the shelter-in-place period,” said Christopher Salviati, a housing economist for Apartment List, an online marketplace for millions of units across the country. “We are getting a sense the more affordable segment of the market is going to remain a bit tighter. The luxury end of the market is going to see a bit of cooling off.”
More expensive apartments in downtown Philadelphia are often desirable for their proximity to restaurants, bars, and shops, which now have an uncertain future after being closed for months amid the pandemic. Another selling point for complexes can be luxurious common spaces and shared amenities, many of which are temporarily closed or operating with restrictions to reduce the risk of spreading the virus.
Even people who are still able to afford the rents at high-end places may not be able to justify the cost, especially given the possibility of a second wave of the virus that could again grind the economy to a halt.
Some city residents may flock to the suburbs for a variety of reasons. They might no longer see the value of the urban location, or they might want more space to spread out — perhaps a yard for outdoor social distancing.
It’s too early to tell how many will migrate.
Amid stay-at-home orders, people who didn’t urgently need to move hunkered down, concerned about their health and their finances.
As metropolitan areas begin to open up again, don’t expect cities such as Philadelphia to suddenly become ghost towns. Some people will stay, Salviati noted, and ride out the pandemic and the economic instability.
“A lot of people who enjoy city living are taking this as more of a temporary obstacle,” he said.
At the same time, however, people who were already thinking about leaving the city pre-pandemic may now expedite the process, Salviati said.
Regardless of when and where they move, “a lot of people are going to be looking to make downgrades,” he said, making it even more difficult to snag affordable places.
Nearly half of Americans have changed their moving plans due to the pandemic, many for financial reasons, according to a recent Apartment List survey of of 3,872 renters and homeowners. Of those whose plans changed, 30% said they were less likely to move and 17% said they were more likely to do so.
Of those less likely to move, 37% said they don’t think it’s safe, and 26% said they are no longer in a financial position to do so. Of those more likely to move, 32% said they need to find cheaper housing, and 31% said they want to take advantage of declining rents or home prices.
Chennault — whose company, Chennault Real Estate, handles apartment rentals at a wide variety of price points in Philadelphia, as well as Montgomery and Delaware Counties — has already seen the toll of economic uncertainty.
While many people are putting moving plans on hold indefinitely, others who need to move are anxious. It’s common for Chennault to talk with couples who must wait until one of them is called back to work, so they can show proof of income on a rental application and feel comfortable committing to a unit, he said.
Many tenants of high-end apartments also seem tentative, said real estate developer Ori Feibush, whose company OCF Realty was part of the development boom in Point Breeze, Bella Vista, and other neighborhoods in the city.
“We have a lot of short-term rentals, which we almost never have,” he said. Tenants “are trying to figure out up from down, [and] whether they want to stay in the city.”
Unless it was necessary, people in the cities and suburbs generally stayed put amid the pandemic.
About 75% of OCF tenants renewed leases for the short or long term during the last few months, Feibush said. Usually, closer to two-thirds of tenants renew, he said. In the suburbs, Berger Rental Communities — a Wayne-based company with complexes in Pennsylvania, Delaware, and Maryland — said it has also seen more lease renewals than usual.
Feibush said the slowest period for OCF was the first half of June, as antiracism protests were held across the city for weeks in response to the death of George Floyd, an unarmed black man who was killed when a white Minneapolis police officer knelt on his neck for nearly nine minutes. As officials tried to gain control after a disorganized initial response, they shut down Center City streets and implemented a curfew.
During those two weeks, Feibush said, he usually rents about 10 apartments a day, but this year the number was closer to one or two.
“It was like flipping a switch,” he said. “I don’t know what to compare it to. … COVID was a nonevent relative to the protests for our business.”
Now, as June turns to July, protests have become less common across the city. While the pandemic remains, the suburbs on Friday were to enter the least-restrictive green phase of Pennsylvania’s phased reopening. The city entered a modified green, taking a more gradual approach.
Property managers and industry experts are curious to see what happens next for the rental market.
Salviati, the Apartment List analyst, said he’s keeping a close eye on the future of remote work, which companies and employees have gotten used to during the pandemic.