Vacancy rates for urban apartments stand at or near record levels around the U.S., while millions of low-income earners have stopped paying rent but remain in their homes under state and federal eviction bans.
Those factors are jeopardizing the future of the $1.2-trillion market in mortgage-backed securities, which bundle individual mortgages into packages sold to investors.
Research firm Trepp has found at least 50 mortgages on multi-family properties that have balances totaling $1.5 trillion in which occupancy has shrunk 15 percentage points in 2020.
Occupancy of flats in San Francisco’s luxury NEMA apartments, across 10th Street from Twitter’s corporate headquarters, fell to 70 percent last year; New York’s Chelsea29 building, with a fitness center and roof terrace, is 25 percent empty.
Dwindling occupancy has affected only 4 percent of loans that reported occupancy rates by late 2020.
“The number of loans struggling with low occupancy rates has to go up,” Manus Clancy, Trepp’s research director, commented to the Financial Times.
“In big cities, we’re seeing occupancy sinking,” he said. “It’s expensive to live in these places…You can’t do anything with the amenities and you’re not going to the office. Those were often the reasons people stayed in their apartments. It’s not surprising” that people are absconding to cheaper, more spacious homes farther away from city centers.
TREND FORECAST: As we have noted, with remaining low-income tenants continuing to be jobless and not being evicted, landlords are increasingly unable to pay their mortgages and taxes. Thus, bankruptcies will escalate during the coming winter months as the economy falls into the “Greatest Depression.”
And, considering the flight from urban areas, even if tenants could be evicted, it would be difficult to find renters.
