June Rent Delinquency Reaches New Record
Alignable ^ | Jun 29th, 2022 | Chuck Casto
Posted on 7/5/2022, 10:55:03
Alignable's June Rent Report reveals that rent delinquency rates in the U.S. have reached record levels for 2022.
This year started with an average national delinquency rate of 26%, but now that rate is up by 9% compared to January, as 35% of small businesses in the U.S. could not pay their rent in full or on time in June.
Not only is this rate 2% higher than it was last month, it’s the highest it has been this entire year.
Most small business owners attribute this worsening situation to record-breaking inflation, which includes escalating gas, labor, and supply costs. Simply put, there’s less money available to pay the rent.
What makes all of this even more challenging, is that rents alone have spiked for 48% of U.S. small businesses this month, as well. Of that group, 32% say rent is over 10% higher, and 14% say it's over 20% more than it was just six months ago.
These latest statistics are all part of the Alignable June Rent Report, released today. The report is based on a poll conducted among 4,382 randomly selected small business owners from 6/11/22 to 6/28/22.
Bad In The U.S., But Worse In Canada..
While it’s troubling that 35% of small businesses in the U.S. couldn’t pay their June rent, the situation is even more severe in Canada.
In all, 43% of small business owners there couldn’t afford to pay their rent (up 4% from 39% in May).
In terms of rent increases, 55% of Canadian small business owners say they’re required to pay more rent now than six months ago.
So, for Canadian small businesses, their rent delinquency rate is 8% higher than it is among their U.S.-based counterparts. And 7% more Canadian small businesses are paying higher rents, compared to their U.S. peers.
SMBs In Transportation Had A VERY ROUGH JUNE..
Looking at rent delinquency rates for various industries, the most alarming statistic of this entire study emerged among companies in the transportation sector, largely because of the cumulative effects of higher gas prices over the past few months.
In May, most of the taxi and limo services, Uber and Lyft drivers, and trucking companies were getting by, with just 22% saying they couldn’t pay their rent.
But now, a month later, that number has skyrocketed 41% to 63% of SMBs in the transportation industry reporting that they couldn’t afford their rent, as gas prices are too overwhelming for them.
Gas Prices Hurt Businesses In A "Very Significant" Way More than three out of four (76%) business owners in the transportation sector say gas prices have hurt their companies in “very significant” ways, as expenses surge and revenue recedes.
Beyond that, the cost of gas and other supplies for 66% of these businesses was more than 25% higher than it was prior to COVID. However, only 31% of those polled could pass along all of those costs to their customers. So, 35% can't charge what's needed to break even.
Similar scenarios are occurring across other industries this month, as the chart above shows.
The majority of small businesses in the education sector are really feeling the pinch right now, including tutors who need to travel long distances to see students. In fact, 58% of the educators in our poll said they couldn’t make rent in June, due to inflationary trends.
Musicians (50%) and artists (43%) are right behind them, as they’re also having trouble passing along increasing costs to their clients.
In several of these cases, hiring a musician to entertain at an event or paying for a piece of art are considered luxuries among cash-strapped consumers, so these creative entrepreneurs are also having more trouble earning more money. In a related poll, 64% of B2C business owners said consumers are spending less than they did even last month.
Charities & Mortgage Brokers Have More Trouble, Too It's the same story for 45% of nonprofits (up 12% from 33%), as they’re reporting fewer people are contributing to causes, as they have less disposable income. As fund-raising efforts falter, the ability to pay the rent (and other expenses) naturally becomes more challenging, too.
And as the chart below shows, 36% of mortgage lenders couldn’t pay their rent this month, which is a dramatic increase over last month where only 7% reported rent issues.
As interest rates go up and prices of homes become unaffordable for many, many mortgage lenders are having a harder time making ends meet. They've been flying high for years, but not so much this June. Perhaps that’s because 48% of the small businesses polled believe a recession is already upon us.
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Other industries that had higher rent delinquency rates in June included construction (35% up a bit from 34%), automotive (35% up from 30%) and manufacturing (35% up from 24%).
However, there were a few silver linings this month, as rent delinquency decreased for restaurants (38% down from 41%), retailers (35% down from 40%), salons (25% down from 40%), and those in travel/lodging (24% down from 36%).
What’s The Rent Situation Geographically? Examining the data in terms of states and provinces, a few trends stand out. Before we talk about the U.S., let’s address Canada.
Rent delinquency in Alberta actually declined from May to June, which was a welcome sign. (Let’s see if that continues in July). In May, 49% of AB-based small business owners said they couldn’t pay their rent in full. But in June, that number dropped 11% to 38%.
However, some other provinces slipped deeper into rent delinquency problems.
In June, 40% of Ontario businesses couldn’t afford the rent, whereas 39% had rent issues in May. However, a more dramatic change happened in British Columbia, as only 35% of small businesses there couldn’t pay May rent, but in June, that number jumped 10% to 45%.
Even more dramatic increases in rent delinquency were found in certain U.S. states, as this chart indicates.
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Topping the list with a high rent delinquency rate of 44%, Illinois and Texas small businesses are having the toughest time economically in this poll.
Illinois jumped a startling 17% from just 27% in May.
In Texas, the increase was 9%, from 35% to 44%.
And New Jersey also saw a 10% increase from 29% in May to 39% in June.
However, we did see some improvement with businesses in New York (down 2% to 34%), Georgia (down 3% to 37%), Massachusetts (down 7% to 35%), California (down 2% to 33%) and Florida (down 5% to 28%) in June.
To see other specific poll data related to industries, states or provinces, please contact me at chuck@alignable.com. To review past poll results, go to the Alignable Research Center.
About The Alignable Research Center Alignable is the largest online referral network for small businesses with 7 million+ members across North America.
We established our research center in early March 2020, to track and report the impact of the Coronavirus on small businesses, and to monitor recovery efforts, informing the media, policymakers, and our members.
