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Seattle City Council Votes Down Rent Control

By
John Triplett
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The Seattle rent-control bill failed in committee by a vote of 3-2, but will now go to the full city council in August, according to reports

The Seattle City Council voted down a rent-control bill that would have allowed rent control in the city if the state lifted the ban on rent control, according to reports at King5.com.

The council voted 6-2 against it. One of the two members who voted in favor of the bill is its sponsor Kshama Sawant.

The bill proposed the creation of rent-control provisions, regulations against rent increases, and establishing a board to authorize exceptions. It would have capped the maximum rent increase based on annual inflation rates.

“According to the real estate industry’s own figures, the shortage of apartments is not the problem. The problem is the shortage of affordable housing,” Sawant has said.

Sara Nelson was among the six council members who voted against the proposal.

“I’m concerned that this proposal will decrease existing housing supply because rental revenues won’t keep pace with increasing maintenance costs and property taxes which will result in housing providers either just selling their properties or converting them into condominiums,” Nelson told King5.

Washington state law must be repealed

The bill sponsored by Sawant was a trigger law.

If it had passed, the bill would have gone into effect in Seattle only if the Washington state law RCW 35.21.830 was repealed. The current law prohibits rent-control regulations, stating that “no city or town of any class may enact, maintain, or enforce ordinances…which regulate the amount of rent to be charged.”

The legislature convenes for a new session in January, when it could again consider proposals to allow local rent control measures.

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National Rent Growth Turned Negative Year-Over-Year

By
John Triplett
-

National rent growth turned negative for the first time since early in the pandemic, according to Apartment List’s August rent report.

“This means that on average across the nation, apartments today are renting for less than they did one year ago. This marks a major deceleration from recent years, when annual rent growth neared 18 percent nationally and soared to over 40 percent in a handful of popular cities,” write Apartment List economists in the report.

While some rents in some markets inched up slightly in July, “Rent growth in 2023 has come in at a much slower pace than previous years, thanks to a combination of sluggish demand and increasing supply.”

National rent growth turned negative for the first time since early in the pandemic as apartments today rent for less than one year ago

The Apartment List National Rent Index has proven to be a strong leading indicator of the CPI (Consumer Price Index) housing and rent components, “as we capture price changes in new leases, which eventually trickle down into price changes across all leases (what the CPI measures).

“As the CPI housing component now gradually begins to reflect the cooldown that we’ve long been reporting, it will help to further curb topline inflation in the months ahead,” the report says.

While rent growth turned negative, as mentioned above, some rents inched up in July, 0.3 percent month-over-month, but are down 0.7 percent year-over-year. Rents increased modestly in July in 71 of the nation’s 100 largest cities, but prices are down year-over-year in 67 of those 100 cities thanks to sluggish rent growth throughout the past 12 months,

“July is peak moving season and a month where we typically measure some of the fastest rent growth each calendar year. In pre-pandemic years, July rent growth averaged 0.6 percent. But in 2023, July rent growth came in at just 0.3 percent and is trending down for the season. This stagnation indicates that the market cooldown that started in the second half of 2022 is continuing, even as prices rise modestly month-over-month,” Apartment List economists write.

National rent growth turned negative for the first time since early in the pandemic as apartments today rent for less than one year ago

Seattle, Portland see some of nation’s slowest growth

The Seattle, Portland, and San Francisco metro areas also are experiencing some of the nation’s slowest year-over-year growth, signaling that the market downturn is not limited to just sprawling, high-growth metros.

These denser markets were the ones that slowed first in 2020, and are slowing again today; all three rank in the top 10 for slowest rent growth over the past 12 and 36 months.

San Francisco is the only metropolitan area where rents today are comparable to where they were at the start of the pandemic.

Vacancies continue to climb

“Our vacancy index has reached 7.3 percent, surpassing the peak vacancy rate measured at the height of the COVID-19 pandemic,” the report says.

With a record number of multifamily apartment units currently under construction, this vacancy rate will remain elevated in the near future. For the first time since the early stages of the pandemic, property owners will compete for a smaller pool of tenants instead of the other way around.

Even if the end of this summer brings a resurgence in demand, that strong construction pipeline should temper rent growth for the remainder of the year, Apartment List economists write in the rent report.

National rent growth turned negative for the first time since early in the pandemic as apartments today rent for less than one year ago

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2023 Rent Update: Midsize Markets Grow, Pandemic Boomtowns Struggle

By
John Triplett
-
Rents are behaving as expected so far this year, Yardi Matrix says in a special Multifamily Rent Forecast Update, with some rent deceleration but mid-market is strong

Rents are behaving as expected so far this year, Yardi Matrix says in a special Multifamily Rent Forecast Update, with some rent deceleration happening in two geographic areas.

Yardi Matrix says the decline in asking rents was driven by actual decreases in asking rents in markets that mostly fall into two categories:

  • Florida markets that saw unbelievable growth during the pandemic are now facing major affordability problems. Five of the 10 worst-performing markets were in Florida – Southwest Florida Coast, Miami, Orlando, Jacksonville and West Palm Beach.
  • Some California markets are still struggling to find their post-pandemic footing. Of the remaining markets that saw month-over-month declines, six were in California – as Metro Los Angeles, Sacramento, East Los Angeles County, and the Bay Area: East Bay, Orange County, and the Inland Empire (Riverside).

“While there will always be month-to-month fluctuations and outlier markets, rents so far this year are behaving essentially as expected: Midsize markets, especially in the Midwest and Northeast, are seeing very strong growth in asking rents, while Western, Southwestern and many pandemic boomtown markets are struggling to regain (or gain) traction after the seasonal slowdown last winter,” writes Andrew Semmes, Senior Research Analyst for Yardi Matrix, in the bulletin.

Some struggling markets could still turn around later this year, but there are issues to watch. While the job market is strong, consumer sentiment remains down despite some positive economic news. With pandemic cash gone and student loan payments upcoming due to the recent Supreme Court decision, some renters could be left in a tighter financial situation than they expected.

Some markets will perform

“We have raised our expectations for many midsize markets throughout the Midwest, Northeast and parts of the South,” the report says.

“As affordability continues to be a concern across the country and economic uncertainty prevails, these smaller markets will continue to be more attractive, as they can provide many of the same benefits and amenities their larger siblings do at significantly lower price points.

“Furthermore, federal investments in manufacturing and infrastructure will bring many of these areas good jobs and better economic prospects moving forward,” Semmes writes in the bulletin.

See the full report here.

About Yardi Matrix

Yardi Matrix researches and reports on multifamily, office and self-storage properties across the United States, serving the needs of a variety of industry professionals. Yardi Matrix Multifamily provides accurate data on 18+ million units, covering more than 90 percent of the U.S. population. Contact the company at (480) 663-1149.

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How Property Managers Can Do More with Less

By
By The Editors
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5 ways to maximize financial efficiency so property managers can do more with less and become good at resource management

5 ways to maximize financial efficiency so property managers can do more with less and become good at resource management in the short and long term.

By Allison DiSarro
Enterprise Bank & Trust

Many property management companies have endured challenging issues with managing ongoing expenses — a result of rising costs, competition in the market, and staffing difficulties.

In the quest to do more with less and maintain high levels of service with limited resources, industry leaders have already identified ways to trim costs first. When options are exhausted there, partnership with a financial services provider can help identify proactive strategies to make the most of available assets.

Solutions will take time because increasing operational efficiency and maximizing revenues can seem like competing interests, but there are helpful considerations to address pressures of costs, competition and staffing. Property management continues to be heavily associated with maintenance expenses and advice, but that addresses only a portion of the financial picture when balancing resources. For example, budget and asset review can reveal new opportunities to adapt, targeted marketing can counteract tightening prices and retention strategies can mitigate hiring costs over time.

No matter the size of the management portfolio, there are essential components to consider for efficient resource management in the short and long term. Beyond practical cuts, property management companies should start by reviewing well-rounded approaches to the financial picture of their businesses.

5 ways to maximize financial efficiency

Efficient changes can be a great alternative to having to make extreme cuts, but some of the opportunities likely require smart financial investment to combat inflation and the ever-present talk of recession.

When focused on reducing costs, considering broader investment choices alongside immediate operations choices can seem counterintuitive. However, strategic responses to economic factors can potentially drive higher revenues and strengthen business relationships. How can a business, along with its bank and other financial advisors, partner together to find ways to build financial flexibility both directly and indirectly?

1. Examine workforce costs

The higher prices of goods take a toll on take-home pay, and employees may want to renegotiate compensation based on the current market and outside of the annual review schedule. Prepare for this by revisiting the budget in an effort to have a plan to respond to an influx of requests. Wage pressure can happen at any level, and clear and transparent conversations about what’s being done can make a big difference. This can include talking with a compensation specialist to evaluate the status of the current wage scale and receive objective data to help align compensation levels.

Conversely, there are property management companies struggling to fully staff their organizations that are involuntarily operating with a reduced staff. A solution growing in popularity is hiring remote employees or virtual assistants to fill accounting, maintenance coordination and business development roles. While property managers can recruit remote hires on their own, many are turning to staffing companies that specialize in the property management space to help find top talent across the globe at a lower cost.

Many successful companies have implemented “lean management,” a set of principles created to improve the efficiency of processes and reduce perceived inequities between leadership and associates. Nonessential roles on a team may be taking up too much budget, and clients may not be seeing enough return on investment.

As property managers look to acquire other companies as part of a business growth strategy, a decisive factor is the size of the team they will have to put on the ground as a result of the acquisition. Property management companies making acquisitions where they already have a geographic presence may not need to make as many new hires as a company that is entering a new market through an acquisition. A sound growth strategy should determine a minimum number of units a company needs to acquire in a new city in order to make the purchase a sound investment and scrutinize the accompanying hiring implications, consolidating when possible.

2.  Revisit financial investments

Property management companies with an abundance of cash may consider investing in higher-yield assets with growth potential to keep pace with inflation. Investments in property and equipment assets historically keep pace with rising costs during inflationary periods.

To invest in growth through an acquisition or another expansion strategy, consider a line of credit through a bank that specializes in property management. With higher interest rates, many banks may be willing to lend, but that doesn’t ensure the rate will be consistent. A banking partner established in the property management space can help secure financing that fits a company’s long-term needs.

Both property management companies that are in a financial place to invest in growth and those that are not can explore other avenues to boost financial efficiency. A banking partner should help analyze opportunities to optimize. If a company’s state doesn’t allow property managers to earn interest on trust accounts, their banking partner may be able to help identify potential ways to offset banking and third-party costs through an earnings credit rate program. Banks that specialize in property management work with vendors to do this, and help clients earn credits that lower costs and maximize every dollar.

3. Evaluate pricing and marketing strategies

Remember to consider the big picture when making tactical shifts to business plans as the current economic environment is unlikely to persist long term. Rather than implementing an across-the-board price hike, consider limiting price increases to targeted components or where particularly necessary, potentially within application or other management fees.

Conduct competitor research to gauge the processes of competitors and better align with the marketplace. Rather than paying owners the earliest or charging the lowest fees, consider the financial benefits of maintaining a higher monthly average account balance and the ways to leverage financial credit earned, all while still following a standard payment timeline.

 4. Trim expenses through strategic consolidation

If property managers don’t have the expertise in-house, work with a consultant to find other expenses that can be reduced. A major expense — which affects other operating expenses as well — is a company’s software stack. Consolidating software may not only be more cost-effective, but also more convenient and functional. Consolidating accounting software with a maintenance coordinator is one example of a way to do this. Migrating to a new software provider is not a small undertaking but can be a smart financial decision that pays off in the long run.

 5. Fine-tune communication

Encourage open communication between leadership and employees. Never underestimate the power of transparent and empathetic communication in increasing employee retention. Additionally, many clients and vendors will be reconsidering expenses, and maintaining and strengthening connections during instability is crucial to the bottom line. Consider scheduling meetings to nurture the relationship base, and look into profit-sharing programs with vendors.

Reliable partners are essential during changing phases of a market and can help reduce pressure while operating a business with limited resources. Property managers should tap into their resources and network to build partnerships with specialists — from a banker to an auditing consultant — who can help find additional ways to maximize efficiencies, through deep understanding of an organization and its financial situation, and the industry as a whole. Together, a team of advisors can help property management companies find strategic ways to adapt to new circumstances and set themselves up for future financial success.

About the author:

Allison DiSarro is a senior vice president and specialty banking relationship manager at Enterprise Bank & Trust.

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Overcoming Today’s Economic Obstacles in the Multifamily Sector

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3 Best Practices for Communicating with Residents

4 Ways to Balance the Needs of Pets and Residents in Multifamily Communities

Why Renters Want Smoke-Free Housing

By
By The Editors
-
People increasingly want their living environment to be smoke-free housing to protect their short- and long-term health and safety.

By The Department of Health and Human Services
Tobacco Prevention and Control

People increasingly want their living environment to be smoke-free to protect their short- and long-term health and safety.

If you’re looking to attract new residents and retain your current ones, creating a smoke-free housing policy is essential.

When it comes to ensuring healthy housing, protecting health and preventing fires, renters know that the only sustainable option is to search for properties with a strict no-smoking policy.

Secondhand Smoke Makes for Unhealthy Housing

Renters are aware of the damaging effects of secondhand smoke.

According to a 2019 survey conducted by the American Housing Survey and the U.S. Census Bureau, approximately 43.9 million residences, or 31.4% of housing today, is multifamily.

Of those renters, 1 in 3 nonsmoking renters are exposed to secondhand smoke, and 2 out of 5 children are exposed to secondhand smokers.

The surgeon general has concluded that there is no safe level of secondhand smoke exposure.  Being around secondhand smoke causes heart disease, lung cancer and stroke in adults. It impacts children’s overall developmental health, and imposes health risks such as asthma attacks, lung problems, and even sudden infant death syndrome (SIDS).

The only way to keep nonsmoking residents safe from the effects of secondhand smoke is the full elimination of smoking indoors.

According to the CDC: 

  • About 8 in 10 multiunit housing residents have chosen to make their own homes smoke-free.
  • Approximately 1 in 3 multiunit housing residents are covered by smoke-free building policies.
  • A majority of multiunit housing residents want smoke-free building policies.

The numbers show that renters and property owners are prioritizing health and safety first, making smoke-free policies less of an anomaly and more of a necessity for ensuring community protection.

Smoking Increases Fire Risks and Jeopardizes Resident Safety

Aside from detrimental damages to your residents’ health, smoking on property brings a slew of safety issues, smoking-related fires being among the most concerning.

According to the U.S. Fire Administration: 

  • Properties that allow smoking have an increased risk of fire with an estimated 7,600 smoking-related fires occurring in U.S. residential buildings each year.
  • Fires caused by smoking are the leading cause of residential fire deaths in the U.S.
  • Smoking-related fires affect more than just the smoker: One in 4 casualties are the children, friends and neighbors of the smoker who caused the fire.

Smoking-related fires are preventable. Protecting all residents begins with a smoke-free policy.

Put Health and Safety First 

If you are ready to implement a smoke-free policy and would like resources and support,

visit tobaccofreeutah.org. For free resources to help you quit, visit waytoquit.org.

Sources:

1Multifamily housing. National Association of Home Builders (NAHB) (2019), Accessed September 2022.

2Secondhand Smoke, CDC, Accessed September 2022.

3The Health Consequences of Involuntary Exposure to Tobacco Smoke: A Report of the Surgeon General. U.S. Department of Health and Human Services (2006), Accessed September 2022.

4Going Smokefree Matters, CDC 2014, Accessed September 2022.

5Health Effects of Secondhand Smoke, CDC, Accessed September 2022.

6Smoking-related fires in residential buildings (2008-10), U.S. Fire Administration, Accessed September 2022.

How Smoke-Free Policy In Housing Saves You Money

5 Steps To Going Smoke-Free In Your Multiunit Housing

How Thirdhand Smoke Affects Your Properties

 

Apartment Conversions Stall, but Interest Remains High

By
John Triplett
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Apartment conversions seem to have stalled, as the office market is stuck between the expectation that workers will return and hybrid work

Apartment conversions seem to have stalled, as the office market is stuck between the expectation that workers will return and the increasing popularity of hybrid work, according to a RentCafe report.

Apartment conversions of office buildings or adaptive reuse, emerged after the pandemic as the solution to the increased demand for housing and the rejuvenation of deserted downtown areas. However, after a brief surge in conversions, there was a big drop-off in 2021 and 2022, the report says.

“Even so, interest in converting older buildings into residences remains high. In fact, our analysis of Yardi Matrix data shows that adaptive-reuse apartments are poised for impressive growth in the upcoming years. A whopping 122,000 rental apartments are currently undergoing conversion, 45,000 of which are the result of office repurposing,” the report says.

Apartment conversions seem to have stalled, as the office market is stuck between the expectation that workers will return and hybrid work

Highlights of the apartment-conversions report

  • Office conversions are anticipated to lead the way, representing 37 percent of the total, followed by hotel conversions (23 percent of future projects). Factory conversions come in third place with 14 percent.
  • At the city level, Los Angeles is predicted to continue to ride the adaptive-reuse wave in the future, with 4,566 apartments expected to be created through conversion. New York is set to see the creation of 3,987 apartments, while Chicago follows closely behind with 3,519 apartments.
  • 10,090 new rentals were delivered nationwide in 2022, a decrease of 12 percent compared to one year prior and 25 percent fewer than in 2020. Los Angeles, Kissimmee, Fla., and Alexandria, Va. led the way in the number of repurposed buildings during this period. In these cities alone, the conversions make up 20 percent of the total nationwide. This indicates continued interest in adaptive reuse despite market uncertainties.
  • Despite office conversions slowing down 15 percent, with 3,390 apartments delivered in 2022, they still represent a substantial part of the adaptive-reuse sector. Los Angeles converted the most offices into residential in an effort to revitalize its downtown area. As a result, 692 apartments entered the market. Office-to-apartment conversions made up 100 percent of the adaptive-reuse projects in Alexandria, Va. (435 apartments) and Baltimore (395 apartments).
  • In a significant shift, former hotels experienced a record-breaking 2,954 new apartments resulting from conversion, a 5-year high. This building type’s easier, more straightforward transformation guaranteed a 43 percent increase in 2022 compared to 2021, almost mirroring office conversion.

“Office-to-multifamily conversions target smaller, older properties, yielding limited sector effects. Based on the latest research by real-estate company CBRE, the conversion of office spaces into multifamily units will primarily be restricted to smaller, older office properties due to factors such as construction costs and regulations related to residential construction,” said Doug Ressler, senior analyst and manager of business intelligence for Yardi Matrix.

“Market conditions that favor such projects include significant multifamily demand or government incentives, specifically aimed at promoting historic restoration efforts,” Ressler said.

Apartment conversions seem to have stalled, as the office market is stuck between the expectation that workers will return and hybrid work

 

Read the full report here.

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Should I Renew Tenant’s One-Year Lease Or Go Month-To-Month?

By
Hank Rossi
-
Whether to renew tenant's one-year lease or go month-to-month is the question this week for Ask Landlord Hank who answers landlords questions

Whether to renew tenant’s one-year lease or go month-to-month is the question this week for Ask Landlord Hank. Remember Hank is not an attorney and is not offering legal advice. If you have a question for him please fill out his form below.

Dear Landlord Hank:

My tenants’ first year lease on my rental townhouse expires Oct 1, 2023.

Should I offer them a one-year lease renewal or switch them to month-to-month lease?

What are the pros and cons of yearly lease renewal vs month-to-month?

-Rome

Dear Landlord Rome,

Let me tell you how I look at my rental properties and why I like one-year leases.

I see my rentals as a money tree. I take care of them with regular maintenance, respond to tenant issues promptly and act fairly with tenants and treat them with respect.

I like to have my money trees producing fruit (MONEY) every month, and I know if I have an annual tenant I can count on that money for every month of the coming year because I’ve taken time to do proper background screening of my tenants and I know they are “normal” people who pay their bills and will take care of my property.

If I have a tenant that has fulfilled a 12-month lease and can’t sign for another year due to possible job transfer or maybe they are building a new home and it’s not ready yet, etc., I will extend a lease on a month to month basis BUT I require 60 days notice of the tenants last day so that I have enough time to find a good quality replacement.

If you are thinking about selling the property you might want to go month-month.  Just FYI, my longest lasting tenant moved in in 1998.

Sincerely,

Hank Rossi

Rent Sarasota

Owner/Broker

1000 East Avenue N.

Sarasota, Fl 34237

www.rentsrq.com

Each week I answer questions from landlords and property managers across the country in my “Dear Landlord Hank” blog in the digital magazine Rental Housing Journal.    https://rentalhousingjournal.com/asklandlordhank/

 

Whether to renew tenant's one-year lease or month-to-month lease is the question this week for Ask Landlord Hank who answers landlords questions
Landlord Hank says, “I will extend a lease on a month to month basis BUT I require 60 days notice of the tenants last day so that I have enough time to find a good quality replacement..”

Ask Landlord Hank Your Question

Ask veteran landlord and property manager Hank Rossi your questions from tenant screening to leases to pets and more! He provides answers each week to landlords.

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A Tenant Poured Grease Down Drain Who Is Responsible?

 

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Governor Signs Revised Oregon Rent Control Law

By
John Triplett
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Oregon Gov. Tina Kotek signed a revised rent control law, SB 611, which caps rents and prohibits landlords from charging more than 10 percent
Governor Tina Kotek

Oregon Gov. Tina Kotek has signed a revised rent control law, SB 611, which caps rents and prohibits landlords from charging a rent increase annually of more than 10 percent regardless of inflation.

The new Oregon rent control aw makes key changes to how the maximum-allowable annual rent increase percentage is calculated for residential tenancies.

The bill was passed in the recent legislative session. It was designed to fix the current rent control law that limited rent hikes to seven percent plus inflation. But when the Consumer Price Index showed high inflation, some recent cases resulted in 14 percent rent increases.

SB 611 states that the maximum allowable annual rent increase percentage is calculated as the lesser of:

  1. Ten percent; or
  2. Seven percent plus the September annual 12-month average change in the Consumer Price Index for all urban customers, according to the Portland Housing Bureau Rental Services Office.

SB 611 also clarifies that during any tenancy, other than week-to-week, the landlord may not increase the rent more than once during any 12-month period.

SB 611 takes effect immediately, applying to all notices of rent increase delivered on or after July 7, 2023.

Oregon was the first state in the nation to pass a statewide Oregon rent control law.

While rent control appears to help housing providers in the short run, in the long run it affects their investment and development plans, according to new research by the National Apartment Association (NAA).

“While the notion of rent-control policies may appear as an appealing solution to housing affordability, it is critical to acknowledge their potentially counterproductive and damaging consequences. Rent control has been proven to negatively impact renters, housing providers and even entire communities.

“This research shows that rent control policies can inadvertently lead to reduced housing supply, lower property values and decreased quality of available properties. Additionally, rent control disincentives new construction, which could exacerbate the housing affordability crisis,” the NAA research said.

Portland Update: Changes to FAIR Ordinance Bring (Some) Necessary Changes

Dealing with Habitability issues and Substitute Housing

 

Multifamily Demand Remains Stable As Rent Growth Slows

By
John Triplett
-
Multifamily rents are rising as demand remains stable and healthy, but rent growth is slowing in some markets, Yardi Matrix June report says.

Multifamily rents are rising as demand remains stable and healthy, but rent growth is slowing in some markets, Yardi Matrix says in the June National Multifamily Report.

“While some markets are experiencing slowing growth, multifamily largely continues to perform well, with a solid 95 percent occupancy rate and moderate rent growth in most metros. However, economic uncertainty and high interest rates present ongoing challenges, and the sector is dealing with a refinancing crisis,” Yardi Matrix says in their national report for June.

Highlights of the June report

  • The average U.S. asking rent rose $7 in June to $1,726, while year-over-year growth fell to 1.8 percent, down 70 basis points from May and—outside of the pandemic year—the lowest growth rate since 2011. However multifamily demand remains stable.
  • Readers of the Matrix monthly report might notice that the Top 30 metros have been refreshed to provide a regionally diverse mix that reflects the highest amount of population and multifamily stock, along with the most growth.
  • Single-family rental rates increased $5 in June to $2,103, while year-over-year growth fell 80 basis points to 1.3 percent. Occupancy rates are holding up, reflecting robust demand as home sales sputter.

Multifamily rents are rising as demand remains stable and healthy, but rent growth is slowing in some markets, Yardi Matrix June report says.

“Worries coming into the year about a hard landing for multifamily seem to be unfounded, but the market’s ongoing growth is somewhat fragile, given the Federal Reserve’s attempt to cool the job market,” Yardi Matrix says.

“That effort does not appear to be over, as officials have signaled more rate hikes to come. Thus, the ongoing crisis for properties in need of refinancing is far from over.”

Lease renewal slowing continues

Renewal rent growth is decelerating “but very slowly, reflecting the strength of demand and the large gap between existing residents and asking rents.

Renewal rents, the change for residents that are rolling over existing leases, rose 8.5 percent  year-over-year nationally in April, down from 8.6 percent in March.

National lease renewal rates were 64.4 percent in April, down from 65.9 percent in March.

Multifamily rents are rising as demand remains stable and healthy, but rent growth is slowing in some markets, Yardi Matrix June report says as lease renewals decline

Borrowers Not Interested In high-cost mortgages

Yardi Matrix says the increase in interest rates over the last 15 months “has changed the mortgage market for multifamily. Borrowers have less appetite for debt, and short-term fixed-rate loans are becoming increasingly popular.

  • Lenders, including Fannie Mae and Freddie Mac, have seen mortgage volume plunge as a result of a wide market bid-ask spread.
  • More borrowers prefer five-year fixed-rate loans that can be prepaid after three years to provide flexibility when rates are expected to decline.

Read the full Yardi Matrix report here.

About Yardi Matrix

Yardi Matrix researches and reports on multifamily, office and self-storage properties across the United States, serving the needs of a variety of industry professionals. Yardi Matrix Multifamily provides accurate data on 18+ million units, covering more than 90 percent of the U.S. population. Contact the company at (480) 663-1149.

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The Time Has Come to Rethink and Revamp Lease Renewals

By
By The Editors
-
When operators revamp lease renewals and make them a priority and put the right systems and processes in place, they experience benefits.

When operators revamp lease renewals, make them a priority and put the right systems and processes in place, they will experience a host of operational and financial benefits.

By Rob Hayden

After years of double-digit rent growth and microscopic vacancy rates, the multifamily market has cooled noticeably in the first half of 2023.

With the softening, apartment owners and operators are placing a greater emphasis on resident retention, as they prioritize occupancy and can no longer expect to see an endless stream of prospects willing to pay elevated rents.

The truth is that property managers should always make renewals a priority, regardless of market conditions, because doing so offers a wide array of significant business benefits. To execute renewals efficiently and experience those benefits, operators need to revamp lease renewals and optimize their renewal processes and also think about retention more holistically.

The Traditional Way Isn’t Working

For too long and across too many apartment communities, the renewal process has unfolded largely like this: overextended site teams send out a PDF with a renewal notice 90 days before a lease’s end (and let’s be honest, 90 days is an optimistic estimate).

Due to bandwidth constraints, they often have no choice but to engage in sporadic follow-up. This results in a negative experience for residents and in communities that leave money on the table because they lose roughly 50 percent of their residents each year.

Through this process, operators typically don’t think of offering to move residents into other apartment homes within the same community, and they don’t capture data about the resident experience to inform future strategy.

Use Technology To Automate

Today, multifamily owners and operators can use technology to automate and bring nuance to their renewal process.

Automated systems can collect feedback from residents and gauge their intent to renew; this data provides better occupancy forecasting to help asset managers make rational decisions around pricing. These insights also can create more personalized and effective communications about renewals to residents.

Automated systems also can ensure the timely delivery of renewal offers featuring dynamic pricing that spur quicker decisions from residents. Lastly, automation frees up onsite professionals to contribute to the renewal and retention process in ways that only humans can — by building greater rapport with the residents they serve.

Operators should also think about renewals more holistically, and technology can support this as well.

Stated another way, renewals can be about more than keeping a resident in their current unit. Over the course of a lease, a renter’s needs can change.

Perhaps they want to stay in their current community, but for whatever reason – their roommate is moving out or they’re now working from home – they need a smaller or larger unit. Maybe they need to move to another part of the same metro area, or maybe they have to relocate to another city altogether.

These scenarios could represent a chance to move the resident into another community in the same operator’s portfolio. Technology can help apartment owners and managers identify and facilitate these moves more seamlessly, and it can help incentivize the resident to make these in-portfolio moves, further improving the relationship with the resident.

The Benefits of a Modern Approach

When operators revamp lease renewals, make renewals a priority, put the right systems and processes in place, then they will experience a host of operational and financial benefits. For starters, onsite associates will be freed up to concentrate on their many other responsibilities, and residents will have a much better customer experience.

In addition, an automated and nuanced process can lead to increased resident retention and faster renewal decisions. In turn, this results in reduced vacancy loss, reduced marketing and prospect acquisition costs, improved occupancy forecasting and better real-time pricing decisions.

For too long, renewals have taken a back seat to new leases in multifamily, and operators’ net operating income and bottom lines have suffered as a result. The time to change that is now and, moving forward, operators should always devote the needed time and resources to renewals, regardless of the market for new leases.

Stated simply, a robust and well-executed approach to renewals leads to a better resident experience, greater resident retention, more revenue and increased asset value.

About the author:

Rob Hayden is the co-founder and CEO of Renew. Previously, he was vice president of sales and strategic partnerships for Jetty. He also was a director at New York Life Ventures.

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