Upon reflecting on the pandemic as a landlord, I’ve discovered that renters experienced unexpected gains once lockdowns started.
I’m not discussing those who ceased rent payments, nor those who found ways to reduce their rents. What’s remarkable is how the majority of renters who continued paying their regular rent actually benefited from March 2020 to May 2023, the official span of the pandemic.
While some lamented missing out on the real estate boom, renters received between 14% to 50% more value from their rent over three years.
Increased Utilization at the Same Rent Price
A landlord’s worry is the wear and tear of their property. During the pandemic, the utilization rate, or time a tenant spends inside, increased, thereby raising wear and tear concerns. Typical damages include:
- Wall, appliance, and floor damage
- Plumbing failures
- Door scratches
- Fading paint
- HVAC failures
Moreover, tenants at home more often might cause liability issues, such as increased fire risks.
Pre-pandemic, the average utilization rate was about 58%. Post-pandemic, tenants spending more hours at home received greater shelter value for their rent, while landlords faced lower returns due to increased wear and tear.
A Surge in Tenant Utilization Rate
When the pandemic began, the utilization rate soared to 87.5% in 2020. Even with vaccines becoming available in 2021 and gradual returns to the workplace, utilization rates remained high.
For the same rent, tenants received more value, ranging from 50% more value in 2020 to 14.2% in 2023. This benefit is equivalent to home price appreciation percentages across the country.
Estimating Rental Property Utilization Rates
- 2020: From 14 hours pre-pandemic to 21+ hours, meaning renters got 50%+ more value.
- 2021: Continued high utilization at around 20 hours, giving renters 43% more value.
- 2022: Declined to 18 hours, a 28% increase in value.
- 2023: Further decline to 16 hours, or 14.2% more value.
Calculating personal utilization rates, I found my rate to be around 83% in 2020 and 75% in 2023, contrasting with 71% pre-pandemic. I anticipate reverting to pre-pandemic rates by 2024.
Questions regarding utilization rates for both renters and homeowners can provide insight into individual experiences.
Renters Saved and Invested the Difference
Financially savvy tenants could have invested their savings in various assets during the pandemic, benefiting from risk asset price appreciation. Though most Americans save only around 5% of their income, I believe many renters save and invest more.
Both Homeowners and Renters Won During the Pandemic
Interestingly, both homeowners and renters experienced gains during the pandemic. Renters who maintained their renting situations reaped the benefits.
Renting is not merely spending without returns. It’s about paying for shelter, and with increased utilization, renters received more value for multiple years.
Long-term, rents may rise to cover additional wear and tear costs. But market adjustments may take years, especially with smaller landlords. So if you’re a renter, take heart in the better deal you received.
Homeowners, too, can expect continued benefits from home price appreciation long term, given that work-from-home and hybrid work arrangements appear to be here to stay.