There is an old question designed to help us think about tackling a big task. It goes like this: how do you eat an elephant? Answer: one bite at a time. That is the concept behind flexible rent payments.
Amid rising inflation, coming up with a lump sum to pay rent can be one of the biggest elephants in a family’s budget.
How Flexible Rent Payments Work
Several companies, such as JettyRent, Splitrent, Circa, and more have sprung up to help tenants and landlords balance rental payments.
Flexible rent payments carve the rent elephant into smaller bites. Some plans set up a weekly schedule to make rent payments. Others split the payment in two. The idea is that renters can make payments on a schedule that fits their cash flow.
Landlords still get a monthly rent check. It just comes from the payment companies.
In addition to getting payments on time, landlords save time. They no longer have to chase tenets for late payments. In addition, flex payment companies may be able to incorporate the collection of delinquent funds in their plans.
According to the White House, 44 million households rent their homes. That is over one-third of the population. In addition, an increasing percentage of income from those households is going to pay rent.
Rent Taking More From Income
The rent-to-income ratio hit 30 percent last year, according to Moody’s Analytics. That is the first time the ratio has been that high in the over 20 years Moody’s has tracked it. However, some places are much higher. The rent-to-income ratio in New York City, for instance, is over 68 percent.
Spending more for rent means cutting back on other expenditures, such as clothing, medical care, school supplies, and food.
The economy suffers as well. As tenants allocate a larger percentage of their incomes to paying for a place to live, they have less money to spend in shops and restaurants.
Rents Rising Again
Rents nationwide increased an average of .3 percent in February, according to Apartment List. That marks the first increase after five months of decline. However, rents usually increase slightly in February.
Apartment List’s report notes that “the extent to which prices ticked up was right in line with the average February increase of pre-pandemic years.”
Going forward, the Federal Reserve Bank of Dallas sees rents increasing until Summer. From that point, the Dallas Fed expects rents to “moderate”. Specifically, the bank sees rental inflation rising from 5.8 percent in June 2022 to 8.4 percent in May 2023.
Living Paycheck-to-Paycheck
Rising rents combined with budgets stretched to the limit put many tenants in jeopardy.
The majority of Americans (63 percent) live paycheck-to-paycheck, according to a report in the publication PYMNTS. The rate was 76 percent for those earning under $50,000 a year.
“Unfortunately, in more than a decade as an owner and manager of hundreds of residential properties, I’ve seen multiple occasions where households living paycheck to paycheck decide to pay a utility bill or even a cable bill before they pay their rent,” Atticus LeBlanc, founder and CEO of PadSplit wrote in a Forbes post.
LeBlanc recounts that he realized some renters prioritized paying other bills over rent because they were being pressured by collections agents.
That is when LeBlanc began offering tenants the option of paying rent weekly. As a result, his cash flow improved and evictions declined.
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