Why Renters Also Won Big During The Pandemic: Higher Utilization Rates

As a landlord who did a post-mortem pandemic review, I've come to realize renters also won big once the lockdowns began.

I'm not talking about the renters who decided to stop paying rent even though they continued to be gainfully employed. Many mom-and-pop landlords got hurt by these non-paying renters since the landlord's expenses still needed to be paid.

I'm also not talking about the renters who were able to get their rents reduced or find cheaper places during the pandemic. Obviously, these renters also benefited from lower prices.

Rather, I'm talking about the majority of renters who kept on paying the same rent which included normal rent scheduled increases from March 2020 until May 2023, when the pandemic was officially declared over.

If you missed out on the pandemic real estate boom, this post should make you feel better. Renters were able to get 14% – 50% more for the rent they paid for over three years.

Increased Utilization For The Same Rent Price

One of the things a landlord is concerned about is wear and tear. The more occupants staying in a rental property, the greater the wear and tear. The greater the utilization rate, defined as the time a tenant spends inside the rental, the greater the wear and tear as well.

The most common wear and tear issues include:

  • Damaged walls
  • Damaged appliances
  • Chipped countertops
  • Indented floors and damaged carpet
  • Failed plumbing
  • Scratches on doors
  • Faded paint
  • Failed HVAC

In addition to more wear and tear, there might be more frequent liability issues. For example, tenants who are home more might increase the chances of starting a damaging fire given they may be cooking or smoking more. A tenant who stays home longer might also have more people over as well.

Before the pandemic began, most people would wake up by 8 am, go to work by 9 am, and get back by 6 pm. Roughly 14 hours were spent at home and 10 hours were spent outside. Therefore, the pre-pandemic utilization rate was about 58% (14 hours / 24 hours).

In other words, the rent a tenant paid got roughly 14 hours a day of shelter pre-pandemic. Post-pandemic, the average tenant spent more hours a day at home on average. As a result, the average tenant got greater shelter value for the rent they paid.

Conversely, the average landlord received a lower return for the rent they received due to more wear and tear. The only way the landlord could have maintained their profit margin is if they had regularly raised the rent to cover the increased costs.

A Surge In The Utilization Rate By Tenants

Once the pandemic began, the utilization rate for most tenants jumped to 87.5%+ (21 out of 24 hours at home) for the entirety of 2020. With lockdowns, there was nowhere to go for at least three months. Some people never left their houses at all!

It was not until the spring of 2021, a full year later, that there was access to a COVID-19 vaccine. However, even though there was a vaccine, most people couldn't get it. Even then, however, most companies that instituted work-from-home policies in 2020 continued their policies in 2021. The utilization rate for tenants who could work from home likely continued to hover around 83% (20 out of 24 hours).

As boosters were introduced in late 2021, gradually, more people had the confidence to go back to work. However, until this day, many companies still have a work-from-home or hybrid policy. Therefore, the utilization rate for tenants likely stayed above 65% (8.4 hours a day out of the house) in 2021.

In other words, for the same amount of rent a tenant paid, tenants got more value for their money. How much more value do you ask? We can do some simple calculations below.

Estimated Rental Property Utilization Rates By Year

Of course how long every person spends at home is different. However, in general, more people spent more time at home in 2020, 2021, 2022, and 2023 compared to pre-2020.

I'm going to make these rental property utilization rate assumptions based on people who could work-from-home. For those who had to work in the office, the utilization rates were likely still higher, but not as high.

2020: The average utilization rate likely jumped from roughly 14 hours pre-pandemic to 21+ hours a day. Therefore, a typical renter got 50%+ more value for the rent they paid in 2020.

2021: The average utilization rate likely remained elevated at around 20 hours a day compared to 14 hours pre-pandemic. Were you really spending more than 4 hours a day outside the house? Therefore, a renter got 43% more value for the rent they paid in 2021.

2022: The average utilization rate likely declined to roughly 18 hours a day on average compared to 14 hours pre-pandemic. Therefore, a renter got 28% more value for the rent they paid in 2022.

2023: The average utilization rate likely continued to decline to roughly 16 hours a day on average. Therefore, renters are getting 14.2% more value for the rent they are paying in 2023.

In other words, for more than three years, renters were able to get 14.2% to 50% more value for the price they paid for rent. A 14.2% to 50% increase is equivalent to the range in home price appreciation percentages across the country during this time period.

What Is Your Home Utilization Rate?

To get some more concrete data, please estimate what your estimated utilization rate was in 2020/2021 and in 2023. Have a hard think I think you'll be surprised by the results. It will be interesting to see how the utilization rate changed, if any.

As a writer with two kids, my utilization rate in 2020 was around 83% (20 hours a day at home). I'd take the kids to the playground for two hours and I'd go play tennis or softball for another two hours. We cooked our own food or ordered delivery 100% of the time in 2020 and 2021.

In 2023, my utilization rate is closer to 75% (18 hours at home), so not a dramatic difference. I still write and record my podcasts mostly from home because I don't have a day job. The same goes for exercising outdoors year round due to the moderate San Francisco weather.

However, I now spend up to two hours a day shuttling my kids to school, doctors appointments, playdates, and extracurricular activities. Some of that time is just sitting idle as my wife chaperons. But now there are more social events and trips to the mall. On weekends, we are regularly out for three-to-four hours at a time.

Pre-2020, my utilization rate was closer to 71% (17 hours at home) due to more meetups and conferences. I suspect by 2024, I will revert back to my pre-pandemic utilization rate.

What was your 2020 - 2021 average utilization rate (hours you spend at home divided by 24 hours)? Question for both renters and homeowners.

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What is your post-pandemic 2023 utilization rate (hours you spend at home divided by 24 hours)? Question for both renters and homeowners.

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Renters Saved And Invested The Difference

In addition to getting more value for the shelter a tenant pays for more than three years, a financially savvy tenant would have regularly invested their cash flow into the stock market, real estate stocks, private real estate funds, and alternative investments.

If the tenant did regularly invest through the pandemic, then they would have also benefited from risk asset price appreciation. Despite a bear market in 2022, risk assets are mostly up since the beginning of 2020.

Although the data shows most Americans only save about 5% of their household income, thereby investing an even lower percentage, I believe the typical Financial Samurai renter saved much more.

Every single renter who is anti-housing has told me he or she saves and invests the difference. I have no reason not to believe them, despite data saying the average homeowner is 40-44X wealthier than the average renter. Long term, everybody rationally makes decisions to better their situation.

Both Homeowners And Renters Won During The Pandemic

It is rare to have a situation where both homeowners and renters win, but that's exactly what happened for most during the pandemic.

Of course, some renters faced eviction and above-average rent increases. Some homeowners lost their homes or suffered expensive damages. But for the millions who were able to keep renting their same place at a similar price, they benefitted greatly.

Renting is not throwing money away. The money is used to pay for shelter. There just isn't a financial return on rent as compared with owning. With owning, you have the potential to make money on your own, but there are no guarantees. Please discern the difference.

With a higher utilization rate, the value renters got in exchange for rent went way up for multiple years. And for the millions of employees who are able to continue working from home or have a hybrid setup, renting will continue to provide better value at least temporarily.

Long-term, rents will likely increase to cover the additional costs of wear and tear. However, market forces might take years to play out, especially if you rent from a mom-and-pop landlord. If you are a renter, feel good knowing you got a better deal all those years!

As a homeowner, there is likely a permanent shift up in demand for homes given work-from-home and hybrid work is here to stay. Therefore, homeowners should continue to benefit from home price appreciation long term.

Reader Questions and Suggestions

Any renters out there feel good about getting more shelter for the rent that you pay? Any landlords out there notice a significant increase in wear and tear during the pandemic? If so, how do you plan to cover these extra costs going forward?

One way to keep up with real estate prices as a renter is by investing in real estate. Instead of buying a primary residence, you can invest in private real estate funds through Fundrise. Fundrise primarily invests in residential real estate in the Sunbelt, where valuations are cheaper and rental yields are higher.

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14 thoughts on “Why Renters Also Won Big During The Pandemic: Higher Utilization Rates”

  1. Generally, good context…but really stretching for clicks on this one. Utilization isn’t a metric that matters for ones primary housing. No one thinks about utilization, nor should they. Its not as though more dollars would be spent otherwise so incremental utilization does not matter as there is no offset. Utilization matters in a business where there is upside torque with increased utilization leading to pure contribution margin. That is not the case for residential tenants no matter the spin factor.

    1. Thanks. Just trying to look at the positives for renters who did not benefit from real estate price appreciation during the pandemic.

      Usage of a good is completely relevant to the price you pay for a good.

  2. People in prison also have a near 100% utilization rate of their prison cells. I wouldn’t call that winning big. But they aren’t paying for room and board either… so they must be truly winning more than renters and homeowners alike!

    1. That’s actually the wrong type of thinking. It’s all about the marginal increase. The utilization rate for prisoners was more or less the same pre and post pandemic given they didn’t have more or less freedom while they were in prison.

  3. Buddhist Slacker

    Fantastic analysis thank you. Learning more everyday from you. Eventually I will rent my condo out and I feel much more prepared to do it from reading your book and your articles.

  4. We picked up 15 apartments (CASH), in several buildings, from an investor who was facing foreclosure. The Covid Rental Moratorium & his leveraged high rate financing had him simply give up & walk away. (A couple of our investor friends admitted they were out over $30k due to the Covid rental moratorium).
    Every month during Covid his tenants were laughing at him, but we took over, cleaned house & now they are returning 20-30% ROI’s, even after eviction legal fees & several in need of major rehab.
    One $450/month 200 sqft studio tenant facing eviction bailed, so we simply painted it & threw it on Craigslist for $550/month. A local Guvt group approached us to rent it for their ‘clients in need of housing’. Offered us $950/month, we agreed & they completely furnished it & now just send us a monthly check. Obviously our taxes at work!!!
    We have a 7 unit in the same county, with a couple of vacancies, that they are also looking at.
    During Covid our existing tenants did pay & if any vacated we could effectively raise the rents 100-150% without any objection.
    It has been very interesting….

  5. All that value added to residential was sucked out of commercial. In the end do you think it was a net gain, net loss, or breakeven?

          1. Commercial RE isn’t looking to solvent right now. I think initially we’ll see a collapse of commercial RE values, smart money buy up the deals, and an eventual leveling out. If these commercial buildings (particularly office towers) could be rezoned and converted to residential lofts, we might witness an urban renaissance.

  6. Gosh my home utilization rate was definitely in the mid 90s for the pandemic. Now it’s in the 80s-90s as I still work from home but am getting out more often. It should go into to the 70s-80s more often now that summertime is coming. But I’m sure I will still have some days where it’s in the low 90s. Thankfully I’m a happy homebody.

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