RI’s Coastal Summer Rental Market May Be Devastated by Coronavirus

RI’s Coastal Summer Rental Market May Be Devastated by Coronavirus

Rhode Island is facing an unemployment — and financial — crisis due to the impact of business closures from coronavirus, and it is unclear how long the repercussions will be felt. 

A federal stimulus package approved this week by Congress pledges to get money to businesses and individuals in a matter of weeks — but in Rhode Island, it might not be enough to save a sizable portion of the economy, the coastal summer rental market. 

“Summer 2020 will be a disaster for the summer rental market in the beach communities of Rhode Island,” said Ed Mazze, former dean of the College of Business Administration at the University of Rhode Island. 

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Moreover, Mazze warns that due to the current constraints, there might not be “summer vacation” as people know it. 

“The coronavirus and the requirement and/or habit of social distancing will still be in place. Discretionary income used for summer rentals will be nonexistent or at a low point due to the economic situation of many families. And lastly, people who have been home during the last few weeks will need to go back to work to make up lost time while sheltering at home so there may not be a 2020 summer vacation,” said Mazze. 

Michael Riley, Co-Founder of Beach Street Financial Services in Narragansett, took to Twitter to share his perspective on summer rentals. 

“I’m in a beach community and my summer rentals have been canceled. No bookings now. Loss of rent may cause me to sell rental properties. Look for real estate to collapse,” he Tweeted. 

“I’m only a person with an opinion, [but] I’m always taking the view from the market and where the next disaster will be,” said Riley. “I think the average person can take whatever rental property they have and decrease [income] by 30% in their head.”

“I own a couple of condos on the beach in Narragansett and they rent for $9000 a month. We had 4 out of the 6 potential [summer rental] months rented for the two condos, and now they’re gone,” said Riley. “The 3 month summer period is more than 60% of the annual income for renting. I do the 9 months to students. It’s yet to be seen with URI kids. They’re supposed to be coming back — for now.”

 

RI’s Real Estate in Focus

Overall in the real estate market, Rhode Island housing prices hit record highs in January — a 43% increase of the past decade.

“It is impossible for us to know at this point how short term rentals will be affected.  It will depend on how long this continues,” said Shannon Buss with the Rhode Island Association of Realtors. “We have provided some rental resources for our members on our dedicated site: rirealtors.org/covid19 

“We hope this is a temporary situation,” said Buss. “We continue to work through this along with so many Rhode Islanders and continue to provide updates as they are available.  The RI Realtor community is doing our part. We are balancing our fiduciary responsibilities to our clients and our civic responsibilities to our community, keeping folks safe and working to minimize losses.”

Sally Lapides, Founder of Residential Properties — which focuses primarily on sales but has a sizable rental portfolio — sad the second home market “will be the slower one to come back. “

“People have to be secure enough in their stock portfolio to acquire a second home,” said Lapides. 

“Robin LeClerc (at Residential Properties), who does our rentals, said that 10-15 are canceling right now. That percentage of the business is about 10%,” said Lapides. “Landlords are giving full refunds back. No landlord has asked about selling at this point -- they're looking at it as a loss for the moment.”

 

Duration Will Be Key

Local economists say that the duration of the coronavirus crisis will dictate how much of an impact will be felt in the real estate rental market. 

When asked if the rental market could be devastated this summer by coronavirus, URI’s Len Lardaro said, “It’s certainly a possibility.”

“How great a probability will be determined by the rate of spread of the virus. A state shutdown lasting weeks, or worst case a month or more, could wreak havoc to the rental market for out of staters,” said Lardaro. “Ironically, though, that might then open rentals to in-staters who normally wouldn’t find these affordable.”

Bryant University Professor Ed Tebaldi similarly said it might be too early to make strong predictions.

“The housing market, including the summer rental market, is up for a major disruption that may paralyze the sector for an extended period of time,” said Tebaldi. “The degree of uncertainty about the COVID-19 pandemic and its effects on the economic, however, is  too high to allow anyone to make predictions about the size and duration of the downturn and the effects on the housing market.”

“This could easily be the Summer of staycations rather than vacations,” said Mazze. “Owners of summer rental properties will probably need to deep discount their rents as well as rent their properties for shorter periods of time to attract renters. The small businesses and retailers that serve Summer renters locally will also feel the impact of lost income.”