COVID-19 Economic Impact

Here’s a question for you. Was it Adam Smith (the patron saint of free-market capitalism) or Karl Marx (the founding father of Communism) that said, “Landlords, like all other men, love to reap where they have never sowed”? Would you be surprised to learn that it was Adam Smith who made this assertion in his most famous work, The Wealth of Nations?

Misunderstandings, false narratives, and outright fantasy has always surrounded landlords’ wealth. The public perceives landlords as 1) uber-rich, greedy, and cold-hearted; or 2) merely the provider of a basic human need or social service; thereby, subject to extensive government regulation.

The truth is somewhere in between. Multifamily housing owners are businesses that provide shelter and homes to more than 130 million U.S. citizens, including more than 750,000 Tarrant County residents. Tarrant County multifamily property is worth more than $1.8 billion. From job creation and payroll and construction to purchases, AATC members are a major economic force.

While our members’ assets generate substantial monthly revenue (rent), these are offset by significant fixed expenses (mortgage, payroll, taxes, management fees, insurance, etc.) and variable costs (marketing, repairs, utilities, training, etc.). If you have ever looked at a typical Tarrant County property’s net operating income (NOI), you know that the profit margins are small.

To help understand how an economic shock like COVID-19 impacts an apartment property, NAA created an outstanding graphic that illustrates how $1 of rent is allocated:

  • $.39 – pays for the mortgage on the property.
  • $.27 – payroll
  • $.14 – property taxes
  • $.10 – maintenance and repair
  • $.09 – profit

Surprisingly, only 9 cents of every $1 are returned to owners, including the many apartment owners who are themselves small businesses and rely on this revenue to make ends meet; and investors, which include public pensions and 401ks, on which many Americans rely—whether or not they reside in rental housing.