5 Incentives to Increase Multifamily Lease Renewals

Resident retention remains a high priority, and these five incentives can help earn renewals.

5 Incentives to Increase Multifamily Lease Renewals -

It costs a whopping $3,976 to replace one of your residents when they don’t renew their lease, which is up from $3,850 last year, according to Zego’s “The 2022 State of Resident Experience Management Report.”

One of the most valuable assets to any apartment manager is current residents and, as such, resident retention should be one of the highest priorities. To do that, you need exciting apartment renewal incentives to remain competitive. Here are five renewal incentives to try:

1. Free Apartment Upgrade

While it may not be possible to avoid increasing rents in the community, one way to incentivize residents to renew their leases is by offering more value. That value could be presented as an apartment upgrade for the same rate or at a discounted rate from their current apartment.

The upgrade does not always have to be a larger apartment, it could be in a better location at the property or one that includes an in-unit washer/dryers and a balcony or patio. And if you don’t have any available upgrades, you can offer to improve your resident’s current apartment as an incentive. For example, upgrading the appliances is a great way to elevate the apartment and even justify a rent increase.

2. Resident Events

According to Satisfacts, resident events are one of the significant drivers of lease renewals. Resident events can help establish stronger connections and relationships between residents, which can improve a community’s turnover rate.

However, planning a successful resident event is much easier said than done — especially for the busy multifamily marketing professional.

Here are a few resident event ideas:

3. Free Month of Rent

Once you lose a resident, that means you have to start over by building trust and a relationship with the new resident.

Consider incentivizing your best residents because one significant reason someone might not renew their lease is financial concerns. A free or discount on their first month’s rent could mitigate those worries.

4. Invest in Smart Locks

While you can never promise 100% safety and security anywhere, you still want your residents to feel safe and relaxed in their homes. Upgrading your property with smart locks or controlled, gated access can offer them peace of mind (and justify a rent increase, if needed).

5. Concierge Services

Residents value convenience any way they can get it. From partnering with dry cleaners or grocery delivery apps, there are many ways to offer concierge-style services at the community. These added services can help incentivize renewals as well as justify a rent increase, especially if you add multiple services.

For example, consider integrating convenience or property management apps on a resource page on your website, along with discount codes to use the services. Millennials and Gen Z are accustomed to these mobile conveniences, and there’s no reason their multifamily property can’t offer the same.

Add Convenience and Value to Earn Renewals

Ultimately, when it comes to resident retention, convenience is key. Moving out of an apartment is stressful. Nobody wants to move if they can avoid it; avoid providing a reason for residents to not renew their lease. If it’s more convenient for your residents to stay in their apartment, then they will, but it’s up to the property team to earn that renewal.

Source: 5 Incentives to Increase Multifamily Lease Renewals

https://www.creconsult.net/market-trends/5-incentives-to-increase-multifamily-lease-renewals/

Higher-Income Renters Pay the Biggest Rent Hikes and are Least Likely to Miss a Rent Payment

Here’s one of the most widely misunderstood realities of rental affordability: The renters seeing the largest rent hikes are upper-income households in the most expensive rentals, and despite larger rent increases, they’re least likely to miss a rent payment.

On the flip side, rent payments have fallen the most in subsidized affordable housing – where rents have grown the least, since those rents are typically set to a share of income.

So it’s not all about the rent, clearly. Yes, rent growth is a big part of the equation. But its impact tends to be mischaracterized and overstated.

The average renter in market-rate Class A and B units has seen rents increase 14 to 15% since March 2020, according to RealPage Market Analytics. (These are actual in-place rents, not asking rents.) Those renters are paying 96% to 97% of the rent due each month, which is off 1 percentage point from pre-COVID levels.

Why are these renters able to keep paying higher rents at essentially normal levels? Well, it all comes back to income. Class A and B renter households have seen incomes rise nearly as fast as rent (among new lease signers, where income is tracked at signing). A typical Class A renter household (including roommates) now has annual income of $135,000, while a typical Class B renter household is $99,600.

It’s a different story in Class C, also sometimes called “workforce housing.” Household incomes in Class C have grown, too, but annual wages remain lower at $62,000. While Class C in-place rents grew a lesser (but still significant) 10% since March 2020, we’ve seen a bit more distress in this group. Class C rent collections were lower than Class A and B pre-COVID, and that gap has widened a bit more since COVID hit.

And it’s even more challenging in the subsidized Affordable Housing space. Affordable housing typically locks the rent at a level relative to income (specific programs can vary). But that rent stability hasn’t been enough to help all Affordable renters. In fact, rent collections have fallen about 4 percentage points since COVID hit to just under 87%.

Three Takeaways:

1) Renters in Class C and Affordable are most price sensitive, but it’s not all about the rent. When other consumer costs skyrocket (like groceries, up 13%), there’s less money available to pay rent for some households.

2) Renters making the highest incomes tend to pay the largest rent increases. This is why it’s SO CRITICAL to segment the rental market. Too many pundits paint it with a very broad brush that distorts the facts around rental affordability.

3) No matter how you slice it, actual rent collections are significantly higher than what the experimental and tiny Census Household Pulse Survey is showing. The Census itself warns that their rent payment surveys have major statistical holes, yet those warnings are routinely disregarded by those who use their data.

What Does This Mean for the Road Ahead?

Despite headlines to the contrary, rental affordability has been more of a tailwind than a headwind – particularly for the market-rate, professionally managed rental housing sector. We detailed rental affordability in depth in a study released in July examining rents and incomes from 7 million leases – the largest-ever study on rental affordability. In the report, we noted some of the reasons why market-rate renters have outperformed the government’s national averages for wage growth.

But the road ahead is less clear. Rent growth is mitigating to more normal levels. Resident retention rates are moderating back down from all-time highs. Rising mortgage rates, contrary to conventional wisdom, are not boosting demand for rentals. In fact, we’re on track to record net absorption well below the record peaks of 2021 (though still at healthy levels). And eroding consumer sentiment amidst inflation appears to be eating away at household formation and housing demand.

On the positive side, job growth remains strong in most markets – and unemployment very low. Those are strong tailwinds for continued wage growth.

In any scenario, though, it’s unlikely renters will face anything like the COVID-era lockdowns that resulted in 20 million job losses. Even then, rent collections held up much better than expected – long before stimulus and rental assistance programs kicked in (which helped later on). And while consumer costs are much higher now due to inflation, that recent history of renter resilience is a good indicator should the economy sputter again.

 

Source: Higher-Income Renters Pay the Biggest Rent Hikes and are Least Likely to Miss a Rent Payment

https://www.creconsult.net/market-trends/higher-income-renters-pay-the-biggest-rent-hikes-and-are-least-likely-to-miss-a-rent-payment/

HUD Announces Increased Payment Standards, More Vouchers | National Apartment Association

On September 1, 2022, the U.S. Department of Housing and Urban Development (HUD) released its updated fair market rents (FMRs) for fiscal year 2023. Each year, HUD updates the FMRs to, among other things, set a reasonable payment standard for public housing agency (PHA) payments to housing providers participating in the Section 8 Housing Choice Voucher (HCV) program. Nationally, the average FMR increased by about 10 percent.

This update to payment standards comes at a critical time when pandemic recovery, inflationary pressures, and the massive housing shortage have forced average rents up across the country. For example, FMRs in Phoenix will increase by 33 percent in response to significant demand.

“These new FMRs will make it easier for voucher holders facing this challenge to access affordable housing in most housing markets while expanding the range of housing opportunities available to households,” said HUD Secretary Marcia Fudge in a press release.

Here are some of the key takeaways from the announcement.

New Data sources

Typically, HUD utilizes the Census Bureau’s American Community Survey (ACS) to estimate the 40th percentile gross rents of households that recently moved into an area. This often provides an accurate picture of near-median rents for new leases. Last year, however, the Census Bureau announced that it would not release the estimates from the 2020 ACS because the COVID-19 pandemic had interfered with data collection.

Instead, HUD supplemented private market data to maintain the accuracy of the FMRs, sourcing data from RealPage, Moody’s Analytics, CoStar Group, CoreLogic, Apartment List and Zillow, as examples. Industry groups, including NAA, raised concerns about the use of this data. Using private data precludes stakeholders from checking to see if the data are consistent across time and location, and if they are representative of the population in question rather than collected based on the company’s anticipated ability to sell them. HUD is expected to use solely once again the ACS data in the following years.

New Vouchers

In addition to higher rates, HUD will award approximately 19,700 new Housing Choice Vouchers to PHAs. This increase is made available by the Consolidated Appropriations Act of 2022 which was signed into law on March 15, 2022. HUD has sent a notification to eligible PHAs informing them of the new vouchers providing a deadline of September 2 to accept or decline the increase.

Policy Outlook

The National Apartment Association (NAA) urges policymakers to adopt responsible and sustainable housing policies. Additional vouchers and FMR increases are desperately needed for low- and moderate-income households and housing providers who have been thrust into financial uncertainty amid economic turmoil due to the pandemic.

 

Nevertheless, there is more to be done. The HCV Program is fraught with payment delays, impractical inspection requirements and administrative red tape which makes housing provider participation infeasible in countless markets. To help address the industry’s concerns, NAA continue to prioritize and encourage support for the Choice in Affordable Housing Act (S. 1820/H.R. 6880), introduced by Senators Chris Coons (D-DE) and Kevin Cramer (R-ND) in the Senate, and by Representatives Emmanuel Cleaver (D-MO-05) and John Katko (R-NY-24) in the House.

 

NAA worked closely with the bill’s sponsors to include several industry priorities, which were formulated with NAA member feedback, in the legislation to speed up tenancy approval processes, reduce duplicative inspections requirements and provide better ongoing support for housing provider participants. We look forward to continuing this work with Congress and the Administration to advance the industry’s advocacy goals and responsibly and sustainably address the nation’s housing affordability challenges.

 

For more information on Housing Choice Voucher Program policy, please contact Ben Harrold, NAA’s Manager of Public Policy.

 

Source: HUD Announces Increased Payment Standards, More Vouchers | National Apartment Association

https://www.creconsult.net/market-trends/hud-announces-increased-payment-standards-more-vouchers-national-apartment-association/

Record-low vacancy rates mean a good second half of 2022 for multifamily

Resilient. That’s how a new report from The Laramar Group describes the multifamily market across the nation and the Midwest.

According to the Laramar Group’s Mid-Year Multifamily Review, record-low vacancy rates and double-digit rent growth will continue to fuel the multifamily market across the United States.

This doesn’t mean that this sector won’t face challenges throughout the rest of 2022 and into next year.

Interest rates remain a major concern. Laramar Group says that rising interest rates during the second quarter of this year have already had an effect on capital markets, resulting in lower loan-to-value ratios, increased borrowing costs, and an uneven transaction market.

“We are expecting a continued upward trajectory for rents in the multifamily sector, especially in the Southeast and Mountain states where demand drivers such as job and population growth are strong,” said Bennett Neuman, a chief investment officer with Laramar. “At the same time, the recent dislocation in the capital markets may present interesting acquisition opportunities on a selective basis.”

According to Laramar, investment volume will remain elevated but may decrease from recent record levels. The multifamily market saw $63 billion in sales in the first quarter of 2022, a year-over-year increase of 56%.

This was the strongest first quarter on record for overall multifamily activity, according to CBRE research. But rising interest rates will have an impact on investment activity and pricing through the remainder of 2022.

Laramar predicts that multifamily construction will continue at a steady pace. Given population shifts and housing demand, Gateway and Texas markets are leading the way for new supply.

During the first quarter of 2022, the multifamily market saw the highest absorption in more than 20 years. New York topped the list for absorption in the first quarter, with 105,600 units.

Among the other top 15 markets noted by CBRE are high-population growth markets such as Denver, which ranked ninth, and Orlando, which ranked 12th, as well as mature markets such as Chicago, which ranked fifth, and Washington, D.C. which ranked sixth.

Another study, commissioned by the National Multifamily Housing Council and the National Apartment Association, said that the United States needs 4.3 million new apartments by 2035.

In the Midwest, markets such as Indianapolis and Columbus will each need 3,000 additional units annually by 2035 to meet market demand. Apartment construction represents a notable segment of the economy, generating $984 million for the local economy in Columbus and $779.5 million in Indianapolis, according to the NMHC/NAA study.

CBRE research from the first quarter of this year shows several Midwest markets with 10% or higher yearly rent growth, including Detroit (10.4%), St. Louis (10.4%), Kansas City (10.5%), Cincinnati (10.6%) and Indianapolis (13.0%).

 

Source: Laramar Group: Record-low vacancy rates mean a good second half of 2022 for multifamily

https://www.creconsult.net/market-trends/laramar-group-record-low-vacancy-rates-mean-a-good-second-half-of-2022-for-multifamily/

Apartment rental rates drop for first time in two years

The spike in rental property rates across much of the United States is finally starting to level out, according to a September analysis by data company CoStar Group.

The fall is good news for millions of renters who have seen prices jump 23% to record highs over the past two years. CoStar reported that August month-to-month asking prices fell 0.1% from July — the first decrease in the multifamily market since the pandemic began.

COVID-19 coupled with the boom in home sales boosted the rental market demand, which pushed prices to new highs. However, increases in new apartment construction and shifts in consumer sentiment have prevented renters from signing pricey multiyear leases, contributing to lower rent prices, the Wall Street Journal reported.

“After a 20-month run of positive monthly growth dating back to December 2020, the market finally witnessed negative asking rent growth on a monthly sequential basis from July to August, with rents down 0.1% in July,” said Jay Lybik, the national director of multifamily analytics for CoStar Group. “We’re seeing a complete reversal of market conditions in just 12 months, going from demand significantly outstripping available units to now new deliveries outpacing lackluster demand.”

While the slight decrease has some economists cheering, others warn that apartment rents in most of the country are still much higher than they were a year ago.

August 2022 rents were 7.1% higher than the year before, according to CoStar.

How much relief renters will see depends largely on where they live.

For example, Florida's West Palm Beach has seen rental prices go down 0.5%, but in San Diego, rent has continued to climb.

Still, CoStar analysts seem optimistic that more declines may be on the way.

 

Source: Apartment rental rates drop for first time in two years

https://www.creconsult.net/market-trends/apartment-rental-rates-drop-for-first-time-in-two-years/

eXp Commercial Partner O’Connor Focuses on Property Tax Reduction

When asked about the greatest challenges their clients face, real estate agents often mention cash flow and high commercial and residential real estate costs. To provide solutions to these hurdles, the eXp Partners program has partnered with O’Connor, a property tax consulting firm.

 

Through O’Connor, eXp Realty residential and commercial agents can help their clients reduce high costs through property tax reduction, federal tax reduction through cost segregation, and commercial appraisals. O’Connor only charges clients a fee if they successfully reduce their taxes.

eXp real estate agents and their clients have access to the following through eXp Partner O’Connor:

• Residential Property Tax Reduction: O’Connor’s tax consultants provide valuation intelligence and work with the assessor, appraisal review board, and judicial appeal process.
• Commercial Property Tax Reduction: Licensed tax agents help eXp Commercial clients by filing an appeal, reviewing financials, protesting over-assessed property values, and pursuing every legal avenue to lower taxes.
• Federal Tax Reduction: O’Connor helps eXp Commercial clients increase cash flow by reducing taxable income through cost segregation, a tool that allocates property components for federal income tax depreciation calculations.
• Commercial Appraisal: O’Connor’s appraisers gather and analyze data to make informed decisions about real estate values.

To enroll or learn more about services, contact us.

Interested in jump-starting your real estate career? Join Us

 

Source: eXp Commercial Partner O’Connor Focuses on Property Tax Reduction

https://www.creconsult.net/market-trends/exp-commercial-partner-oconnor-focuses-on-property-tax-reduction/

Multifamily great place to be

Multifamily is a great place to be. One of the reasons for that is due to the Agencies, Fannie and Freddie, that provide liquidity to that market. There isn't that liquidity in the other commercial real estate asset classes. As well, apartment buildings across the country are full and they are able to push rents right now. Until we see more supply come online rents will continue to go up. #multifamily #commercialrealestate https://www.cnbc.com/video/2022/10/12/banks-pull-back-loans-from-the-commercial-real-estate-sector.html?