July 6, 2021
Better World Team, Clients and Friends,
We’re celebrating independence through multifamily investment and management!
This past weekend we celebrated our nation’s 245th birthday and the semi-official end of an extraordinary era. I thought this a fitting time to check the scoreboard to see how well we accomplished our priorities – especially number six – Better the World.
We house nearly 10,000 people from all walks of life in about 4,000 apartments in two dozen communities across Southeast Texas. For the 15 months between April 2020 and June 2021 we examined data on 3,009 of our occupied units in 22, mostly conventional, workforce apartments. Throughout the pandemic, we:
The American free market system continues to prevail.
Along the way, delinquency increased nearly 600% at the peak of the crisis and bad debt write-offs soared.
Our eviction rate is normally about 1% of all renters per month. Over the 15 months of COVID, the rate dropped 45% to 0.6%. Many delinquent residents qualified for both moratorium protection and assistance. Some adjusted to life changes by departing on their own (for which we did not penalize). Those that were evicted generally fell into the category of irresponsible. They chose to check out, live in the moment and ignore reality – despite our exhortations to let us assist. Because such mendicants are also unqualified for protection, the recent extension of the CDC moratorium program through July has minimal consequence for us. Its larger impact is on the mentality of the less informed. Some continue to believe eviction is not possible and paying rent is an option.
Of the assistance money offered, we returned almost 2% – mostly because of program duplication, and occasionally because rent had already been paid. We have made a few judgement calls, but always from the perspective that we must be responsible stewards of the public’s money. Lately, some have figured that since assistance is available for up to three months in the future, they can qualify by purposely not paying rent today.
We estimate our owners and investors have collectively incurred $1.1 million in pandemic losses. About 60% of this was covered by PPP money as intended. The hope and expectation is that much of the remaining shortfall will ultimately be covered by assistance programs which have been challenged to send checks as fast as we process applications – even though less than half of appropriated and available funds are likely to ever be needed.
What we continue to not expect is any eviction tsunami.
No question there is much to be learned from the past 15 months. We trust the academics and advocates will do more of this math to better understand and guide responses to future shutdown events.
What Better World has learned is that sharing information, responsibility and an optimistic outlook is invaluable.
We continue to be mystified by reports that renters are excessively cost burdened, living in substandard conditions, and are in desperate need of protection from fees and eviction. Recently, advocates have even suggested that past behavior should not considered in rental criteria, that everyone should be given at least a month to pay rent, and that race may be a controllable factor when it comes to who we are forced to evict.
While such views have persisted for years, the pandemic and economic crisis have given a grander platform to all sorts of extreme thinking and allowed all manner of nutty ideas to see the light of day. According to one West Coast renter and writer, the core problem is capitalism.
While a number of politicians and academics have jumped aboard the train of misinformation and misinterpretation, we remain fortunate in Texas that more enlightened thinking continues to prevail. In the recent biennial legislative session just ended, dozens of ill-conceived measures that would have driven up rents, disincentivized landlords and made apartments a less attractive investment were all soundly defeated.
Better World stays on the forefront of all this on behalf of owner/clients and investors by regularly meeting with state representatives, judges, council members and other influencers, contributing to key campaigns and working with our apartment associations in leadership roles to help inform, educate, and guide various governments and policy makers. Lately, we have been able to tell them thank you for keeping Texas a vibrant, welcoming and attractive place to do business.
The combined life lessons of our leadership team are worth their weight in gold. As we look back at a year of turmoil, we saw too many learning hard lessons for the first time and paying a heavy price.
Landlording is hard. Without experienced, professional managers balance is far harder to achieve, especially in uncertain times. Managers get little insight or direction, staff is more likely to turn over, residents are uninformed and respond irrationally, occupancy and rents lag, control is lost and bottom lines suffer. Staying focused on fundamentals, understanding best practices, adapting to the latest developments, and innovating creative solutions are always a winning combination.
"I really appreciate the entire Better World Team. They are working with one of my clients and have been able to steer him through a difficult financial patch when they took over and really turned the property around. Their management style and ability to educate their business partners is very impressive. I would recommend them to anyone seeking property management in the future."
Thomas A. Horton, J.D.
Senior Vice President I Personal Trust Team Lead
BANK OF TEXAS I Private Wealth
Blue collar jobs are plentiful, although a number of residents continue to report being unemployed.
Occupancy and rents are going up, but A/C filters, appliances and pool supplies are in short supply. Paint has doubled in price – if you can find it.
We’re seeing a similar number of fake documents as before – except at one new construction lease-up where over half are forged. Apparently if you’re going to fake it, why not go someplace nice?
According to NMHC, the appetite for multifamily assets across the life cycle is ravenous. Asking prices are spiking and Houston continues to be a major hot spot. Let us know if you would like to hear about two deals that Better World Holdings is setting a hook on currently.
First In-person Leadership Meeting in 15 Months