Tag: passive-income

The Seasonal Multifamily Leasing Pattern Has Shifted

The rental market tends to follow an established seasonal pattern. More people generally move during the spring and summer, and rent prices normally rise accordingly as multifamily operators increase rents in response to the spike in demand. During the fall and winter months we tend to see the opposite: less moving activity, and operators pulling back on rents to attract the dwindling set of renters still on the market for a new home.

This seasonality results from three practical factors: school, weather, and holidays. The summer is more favorable for all three: if you are a student or have young children, you don’t need to juggle school schedules; weather is generally more temperate; and moving expenses aren’t being eaten up by holiday spending. Renters who have the flexibility and means to relocate during the winter will generally find lower prices and more wiggle room for negotiating lease terms.

Over the past three years, we’ve seen a noticeable shift in the timing of this seasonality. Since 2022, rental activity is more evenly distributed throughout the calendar year, annual rent declines exceed annual rent increases, and peak rent growth has moved up earlier in the year. 

From 2017-2019, the typical seasonal pattern was this: nationwide rents would rise for seven months from February through August, with peak rent growth (+1.0 percent) occurring in May.

Since 2023, there has only been six months of rent growth each year, from February through July, with peak rent growth down to +0.6% and occurring two months earlier in March.

These shifts are due to a combination of factors including:

  1. The persistent impact of a one-time shock to the timing of moves due to the pandemic
  2. An intentional shift by multifamily operator to spread out lease renewal dates
  3. A supply rich environment offering renters more optionality and flexibility in their moves

Source: ApartmentList

Rapidly Rising Expenses Are Devastating Affordable Multifamily Properties

The affordable (rent restricted) multifamily sector is facing unprecedented margin pressure as operators confront a structural mismatch between revenue and costs.

Expenses at affordable communities have risen 38% since 2019, while income has only increased 32% over that same period.The six-point spread is not just a financial statistic but a lived reality on the ground, visible in tightening margins, deferred maintenance, and growing vulnerability to even modest external shocks.

Actual transaction data confirms NOI growth has been under acute pressure over the last several years, a phenomenon not seen with the same intensity on the market-rate side. While property-level revenues have trended upward in step with increases in area median income, expense growth has been less forgiving, driven primarily by surging payroll, maintenance, and utility costs. In many jurisdictions, these line items are up four to five percent year over year—a rate much higher on the affordable [side]…than on the market rate world.

The gravity of this trend becomes starker at the market and even sub-market level. In cities like Charlotte, operators have reported particularly acute challenges, where the expense load has been extremely difficult.

Some limited relief has come from a recent slowdown in insurance cost spikes, but this is far from enough to offset broad-based expense inflation.

The squeeze challenges the notion that affordable housing provides stability for both residents and owners. Turnover, typically much lower in affordable communities than in market-rate ones, has in some cases reached parity—a worrisome trend that may signal growing instability. Operators are forced to operate leaner, often delaying both routine and capital-intensive work.

Regulatory complexity itself is both a symptom and driver of higher operating costs, as subsidy layering and compliance requirements add about $20,000 per unit in development cost and significantly extend timelines, further stressing the operational side.

Source: Globe Street