With rising costs and less money due to inflation, people are struggling to pay their rent more than ever.
A rent report by Alignable for August has just been released, reflecting the highest rent delinquency rate among small businesses (SMBs) so far this year: 40% in the U.S., up 6% over July’s rate of 34%.
The last time this rate was this high was in March 2021, nearly 18 months ago — in the middle of the pandemic.
These findings emerged from a poll of 7,331 randomly selected small business owners from 8/13/22 to 8/23/22. For Canada, August’s delinquency rate among small business owners was even higher at 48%, up 11% from 37 % in July.
Cumulative Obstacles Collide & Rent Costs Are Up
Many taking the poll blamed their rent issues on a combination of mounting, negative trends in the economy, which include:
- rent spikes
- higher-than-normal gas prices
- increases in the cost of supplies and labor
- elevated interest rates
- reduced consumer spending
- and other emerging recessionary trends.
Regarding rent increases, 45% of poll takers said their rent is at least 50% higher today than it was before COVID with 24% saying it’s at least twice as high.
Even more alarming, 12% noted their rent is more than three times higher than it was before the pandemic.
While several landlords were able to defer rent requests during the worst months of COVID, over the past few months, many have had to ask for rent payments. In many cases, they’re small business owners, too, and they’ve gone without much of their income for over two years.
Among key demographic groups, rent delinquency rates increased across the board.
However, in August, minorities report suffering the most, as 53% of minority-owned businesses could not pay their rent in full and on time (up 4% from July).
Similarly, 42% of women-0wned firms couldn’t cover the rent (up 7% from last month).
The increase in rent delinquency among veterans represented the highest month-over-month change. Back in July, only 28% couldn’t afford their full rent. But now, that figure is 12 percentage points higher, landing at 40%.
And 41% of nonminority business owners couldn’t make August rent, up 8% from last month.
Leading the pack are SMBs in agriculture (50%), nonprofits (46%), and restaurants (46%). Not far behind with a 44% delinquency rate are small businesses in the automotive, education, and travel/lodging sectors.
Meanwhile, 43% of gyms, 41% of transportation companies, and 40% of construction and real estate firms couldn’t pay their rent on time in August. And four out of 10 retailers couldn’t cover their rent, either.
As the rent situation facing small business owners since the pandemic started, it’s important to look at some of the most recent fluctuations for key categories.
And just look at what’s happening among Travel Agents, as well as Bed & Breakfast and Hotel owners. They’ve been flying high on a major upswing in terms of how well their rent delinquency and overall revenues were improving, as COVID regulations have eased or ceased completely.
Except for April, they were in the rent delinquency range of 24% to 36% since December.
But now travel and lodging professionals have seen their rent delinquency rates skyrocket 16 percentage points from 28% in July to 44% in August.
In their poll comments, many note that some of their clients are cutting back on vacations, as those are deemed luxuries. As stifling inflation continues, people simply have less money to spend on trips.