Operators, Developers Adjust to 2021 Pandemic Realities
By Paul Bergeron
Nearly one-quarter of the way into the new year, apartment operators’ focus continues to be on the pandemic. COVID-19 has made dents in companies’ bottom lines, but it also has led to shifts in how they operate, a trend they expect to continue in 2021.
Multifamily Florida spoke to several leading Florida companies to get their views on hopes and challenges for this year.
“Resolving the pandemic will be the biggest challenge -- and likely accomplishment -- of 2021,” Paula Prahl, vice president of public affairs with Dominium, said.
“Managing the significant backlog of overdue rent continues to be a point of emphasis. We have been working with residents throughout the pandemic and have been gratified that so many have prioritized their home and have been willing to work with us through their economic challenges. But how the nation will handle the huge numbers of delinquent rent payments is still a question.”
She said Dominium has seen a consistent reduction of rent collections, especially after the first CARES Act expired.
“For the most part, occupancy levels and lease-ups have remained constant,” Prahl said. “There has been a slight reduction at our senior living sites, but we are also seeing fewer turns at those sites. We anticipate that the effect on rents and leasing will continue through 2021.
“Rent receipts are depressed and costs have escalated. While a hit to the bottom line, we’ve been able to manage it. We have attempted relatively few evictions – at least in the markets where they are possible; most jurisdictions have some kind of moratoria in place.
“We limit any such action to those residents who have significant [health and safety] violations and the few who have been unwilling to work with us on payment plans. Keeping people safe and in homes has been our focus.”
Scott Zimmerman, AGPM, of Banyan Development Group in Orlando, said his focus for 2021 is on whether more jobs come back and if there will be opportunities for residents to find stable, good work and what will happen with the economy.
“We want the residents to have good jobs, work, and pay, and if that’s the case, everything else seems to work itself out,” he said.
Zimmerman said the inability to rightfully evict residents and to collect late fees if rent is not paid has hurt the company’s revenue to some degree. Economic occupancy has been affected at Banyan.
“We did not increase rents for existing residents during most of 2020, and we did not collect late fees,” Zimmerman said. “Fortunately, most residents have either found alternate work or our communities worked with state, city, and local nonprofits to find financial resources for most of our residents who were in need,” he said. “We have a surprisingly small number of residents who we expect to evict for nonpayment of rent – those who we were not able to assist with finding financial resources.”
Prahl said Dominium has needed to spend more to keep properties and staff members safe. “Employees at affordable housing operations were deemed essential workers in most states, among other safety needs,” she said. “We’ve been proud of the dedication shown by our staff to the residents in their communities as we battle the pandemic’s circumstances.”
With the current unprecedented low interest rates, she said, Dominium has seen increased interest in property sales, which is helping cash flow and liquidity.
Meanwhile, she also is trying to get access to vaccinations. “Of course, we want to help our employees and our residents access vaccines because a significant part of our portfolio is in senior living, so we have been advocating for adding those living situations to the early-vaccine schedules.”
COVID-Driven Operational Changes
For Banyan, Zimmerman said the pandemic has caused shifts in how his teams operate and use technology – and the results have been positive and lasting. It’s something he says will carry into 2021.
“In March 2020, we began focusing on doing more online and paperless office work,” he said. “We learned how to work smarter and with less personal contact. Given COVID-19, for the first time, all of the states in which we have affordable housing are now allowing us to handle all paperwork electronically. This has been a big saver for us when it comes to time, paper, and process. Hopefully, it will continue because it has made the paperwork and processes much simpler for our staff, which certainly benefits our residents.”
Zimmerman said any current processes that allow his team to work smarter, greener, and more efficiently he hopes to continue and improve upon “once things become more normal.”
For example, Banyan’s maintenance staff has adapted to smartphone technology and apps to communicate with the office, residents, and vendors. “We have seen a decline in maintenance calls unless it is an emergency,” Zimmerman said. “People want to stay safe. We anticipate a backlog once the country reaches herd immunity. In the beginning, we were not entering apartments. Once we resumed entering apartments a few months ago, we certainly followed proper protocols, and it’s been very busy with playing catch-up ever since.”
Zimmerman said his staff members’ fine-tuning of office procedures has helped the company to reduce time and work for everyone, resulting in needing fewer office staff at several locations. “We have been able to allow some office staff to work remotely on select days,” he said.
Banyan also has updated its community websites to allow rent payment, work orders, applications, and renewals all to be online 24-7. Virtual walk-throughs of available apartment homes are offered to prospective residents. Zimmerman said Banyan has turned its marketing more to social media and online marketing, helping it to maintain near 100 percent occupancy.
Developers Adjust Strategies
Florida development has seen its own set of challenges as it works through the pandemic. Devon Quist, senior development associate with Dominium in Tampa, recognizes consumers’ greater emphasis on home life. His business faces hikes in materials prices, and it has not struggled with hiring workers.
“The health crisis has really put an emphasis on ‘home,’” he said. “People are sacrificing so much right now, but stable housing is one compromise people won’t make. There’s been a big emphasis federally and locally to bolster affordable housing laws, leading to really good housing policies.”
Quist said the 4% floor is one policy that has been floating around for so many years.
“It’s great to finally get that done,” he said.
Legislation signed into law on Dec. 27, 2020, fixed the rate for the 30% present value low-income housing tax credit (LIHTC) to 4%. The rate had dropped to a historic low of 3.07% in 2020. Congress hopes that the 4% floor will increase the supply of affordable rental housing in 2021 and beyond by reducing the need for other types of financing and subsidies for qualified LIHTC projects.
“Dominium is optimistic that legislators will keep focusing on adding to affordable housing now that everyone has seen its importance,” Quist said.
Lumber prices have been very volatile lately, Quist said. “Projects under construction that are beginning the framing stage are impacted most directly,” he said. “For at-risk projects, our team has tried to purchase lumber intermittently to avoid buying high. If we can buy only a portion of our wall panels ahead of time, we will do that.”
He says panelizing ahead of time and waiting to purchase the fire-rated lumber has led to some success. “But it is always difficult to time the market,” he added.
Hiring hasn’t been a challenge, Quist said, “because Dominium’s development partners have been very reliable. Dominium has a reputation for treating people fairly in the marketplace. This is an example of where us having integrity over a long period of time goes a long way toward our success.”
Keri Walker Pfeifer, senior vice president of Bozzuto Management Co., said there has been no lack of cranes in the air in downtown Miami. “Construction was well underway with the units scheduled for delivery before COVID,” she said. “All of South Florida is alive and well from a development standpoint. We’re thrilled to see that approximately half of our weekly tours recently are looking to relocate to South Florida from the North and from the West Coast.”
There’s been some slowdown in construction starts, she said, as some have paused to reevaluate programming throughout South Florida, but these planned projects are still going to happen.
“But the investments are there and the dollars are there,” she said. “It’s important for developers to wait a minute, see what consumers are going to look for and whether that represents changes in their strategy, and adjust so that their buildings are as well programmed and designed as can be.
“We are excited for the Miami, Fort Lauderdale, and Palm Beach markets. We are hearing and expect a large boom in garden-style projects and a lot of continued interest in the urban core, but starting to really spread to be suburban.
“It’s okay to build smaller, more efficient units if they are programmed well. Smaller-sized homes are more affordable. Some residents [who] originally moved into larger units, have opted to downsize during the pandemic, but also, we’ve seen the reverse happen, too. Given the work from home component, some need more space – they want to be able to close a door and feel like they aren’t just working in their living room.”