Tag: real-estate

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

Wall Street Journal: Weaker Job Market Slows Apartment Absorption

Renters across much of the U.S. have enjoyed easing prices and months of free rent this year. Now, this tenant-friendly environment looks poised to extend deep into next year, and perhaps beyond.

Apartment rents nationally are advancing at their slowest pace in years, thanks to the glut of new units that has taken longer than expected to absorb. More recently, job concerns among young people are posing a new threat to the rental market. 

The U.S. unemployment rate for people aged 20 to 24 was 9.2% in August, more than double the overall rate. If a weaker job market continues, it could lead more of these renters to seek roommates or move back with their family, rather than get their own place. 

National rent prices edged slightly higher for part of this year, buoyed by price rises in the Northeast and Midwest where new supply has been limited. But last month, national average rent fell 0.3% from August, the steepest September drop in more than 15 years.

Multifamily owners and analysts anticipated that 2025 would be the year that surplus supply balanced out and they regained their pricing power. Instead, landlords are now betting on the ability to raise rents by the end of 2026, or at least sometime in 2027. 

Even that might be wishful thinking. Yardi Matrix recently lowered their projections for 2027 rent growth. They expect “more tepid” growth that year because of more new apartments coming online than originally expected. 

Previously reliable demand drivers are starting to fizzle. Hiring for entry-level jobs is tightening. Employment growth is decelerating. Apartments are getting leased at record levels. But that is largely because of all the supply and because building owners are offering more tenant incentives. They agreed to concessions such as months of free rent on 37% of rentals in September—a record for that month—according to Zillow. 

Some of the signs emerged this summer. Typically the hottest leasing season of the year, when college graduates start new jobs and rent new apartments, this summer saw national rent growth cool even further.

Source: Wall Street Journal

North & South Carolina New Multifamily Supply

More than 59,400 units are under construction across North and South Carolina with an expected 45,700 of those units coming online in 2025. Virtually all of those units underway across the Carolinas are concentrated in six of the region’s 10 markets:

  1. Charlotte, NC: The largest market in the Carolinas had 25,064 units underway at the end of 2024. No stranger to new apartment supply, Charlotte has grown total inventory nearly 29% over the last five years, well above the national pace of roughly 11%. The 18,863 units expected to deliver to Charlotte in 2025 would set a 29-year high. With those new units, Charlotte’s existing unit base would expand another 7.8%
  2. Raleigh/Durham, NC: 13,799 units under construction in 4th quarter 2024, with 10,353 of those units expected to complete in 2025. Those new units would increase the unit base 5.0% this year. That growth rate comes on the heels of a prolonged supply wave as this market has grown total inventory 25% in the last five years.
  3. Asheville, NC: Punching above its weight in terms of new supply, developers are expected to add 3,509 units this year in Asheville, a small market in western North Carolina’s Blue Ridge Mountains. That would grow the existing unit count (26,745 units) a massive13.1%, notably above the U.S. norm. Over the past five years, the inventory base in Asheville has expanded 19.7%.
  4. Charleston, SC: Jumping to the Atlantic coast of South Carolina, supply is expected to climb with 3,867 units under construction. The majority of those units (3,213 units) are projected to complete in 2025, expanding total inventory 4.2% this year. This market has experienced a much smaller supply wave then neighboring markets as total inventory here has only grown 4.9% in the last five years.
  5. Greensboro, NC: Apartment inventory has expanded roughly 7% over the past five years. At the end of 2024, there were 3,458 units under construction with 2,664 of those units scheduled to complete in 2025. That would expand total inventory another 2.3% this year.
  6. Wilmington, NC: 3,212 units were underway at the end of 2024. This year, 2,438 of those units are expected to complete, growing total inventory 8.0%. In the last five years, this market has grown total inventory a staggering 36%

Four other markets round out the 10 largest apartment markets in North and South Carolina.

  • Myrtle Beach, SC: 2,168 units of new supply in 2025, growing inventory 4.0%. Existing unit count has expanded 31.2% over the last five years.
  • Greenville/Spartanburg, SC: During the past five years, inventory ballooned 20.8%. Another 1,200 units are expected to deliver in 2025, increasing inventory 1.5%.
  • Fayetteville, NC and Columbia, SC: Two smaller markets, both are expected to add roughly 700 units in 2025.

Source: RealPage