NEW RESEARCH by former professors at Harvard and UC-Berkeley answers the question: How do tenant protections like "just cause eviction," right-to-counsel, and source-of-income impact rents?

Answer: They drive up rents -- especially for the lowest-income renters.

Findings: 🧵 1) Eviction mitigation policies -- i.e. "just cause eviction" and "right-to-counsel" -- drive up rents by 6.5% on average, according to the authors' analysis using Census ACS data.

How?

Authors: "These regulations add costs for property owners in the form of longer eviction timelines, additional legal expenses, increased vacancy-related losses and higher amounts of unpaid rent," and those costs are passed along to renters via higher rent.

AvalonBay (nation's largest apartment REIT by market cap) had its earnings call recently. Lots of great color on new development, regulations, affordability, etc. Takeaways:

1) AvalonBay expects to ramp up its apartment construction by 50% in 2025. 1b) REITs represent a very small share of U.S. apartment construction, yet have big advantage over most builders in that they have lower capital costs -- so AVB and its peers want to build while most others can't, and deliver those units into lower-supply years of 2026-27.

Camden (apartment REIT with ~60k units) had its earnings call last week, which kicked off with Tom Petty's "Time to Move On" song playing. Takeaways:

1) Supply peaked, revenue outlook improving, and time to move back into buying and building apartments. 2) Camden likened 2025 to the post-GFC recovery era in early 2010s -- when Camden (and others) started buying and building again. One big priority: Recycle capital, which means selling older properties and buying/building newer ones.

Equity Residential (one of nation's biggest apartment REITs with 80k+ units) has its earnings call today. Some fantastic color on the market. Takeaways:

1) Lowest renter turnover in 30+ year history of the company. (And don't just credit slow for-sale market.) 2) High occupancy rates has helped improve pricing power. Sending out renewal offer letters at ~7%, expecting around 5% renewal rent growth.

I suspect this will likely be top end of market spectrum due to EQR concentration in low-supply markets.

What's going on in Denver's apartment market?

Denver saw far deeper deceleration in rent growth over the second half of 2024 than any major U.S. market.

Year-over-year rent change went from basically flat (-0.1%) in June 2024 to sharply negative (-4.2%) by December 2024. That change in momentum (-410 bps) was nearly 3x deeper than any other U.S. market.

What's driving it? A few thoughts: Well, some people might point to the job market. Denver has shown some odd job numbers, dipping slightly negative on year-over-year job change in the summer. But it's probably not that simple for a couple reasons...

Let's dissect a column in today's @WSJ headlined, "The U.S. Has More Fancy Apartments Than It Is Able to Fill," followed by a sub-headline saying developers "have built a glut of high-end properties instead of badly needed affordable housing."

Is it that simple? Let's jump in. First, let's talk about "fancy apartments."

Here is a recently built apartment by Greystar (nation's biggest developer) in Austin (hottest construction market). This project, called Perch, is very representative of today's new construction.

And it's defined as Class A "luxury."

Camden (apartment REIT w/ 60k units) had its earnings call last week. As usual, Camden offered lots of color -- particularly on the buy-or-build dynamics of today's market. Highlights:

1) It's tough to build b/c "construction costs have NOT come down and rents HAVE come down." 2) That said, Camden plans to start 2-3 projects next year (Denver and Nashville) that still work.

But they've also shelved projects in California, Buckhead/Atlanta and urban Houston -- as CPT works to reduce exposure in all three spots (and in DC, too).

Five leading indicators that we're headed toward a big decline in new apartment supply (regardless who won the election): 🧵

1) Architect billings for multifamily projects has been weak and keeps getting weaker. 2) Apartment developers say new projects do not pencil out. Industry survey blames delayed starts on "economic uncertainty" (92%) and "project is not economically feasible" (67%)-- meaning they can't get rents needed to justify costs of construction.

Some helpful factoids to debunk corporate landlord boogeyman theory.

1) As reported by Bloomberg and @kristoncapps, "institutional investors" with 1k+ houses typically comprise <1% of single-family home sales, and just 0.4% in the most recent period. 2) As Bloomberg points out, the share is larger in markets like Atlanta and Memphis.

But there's no evidence that a higher share = higher rents.

Both Atlanta and Memphis have been underperforming markets for investors (1% or less rent growth most recently).

Additionally, Atlanta has emerged as Ground Zero for leasing fraud -- a very costly hurdle for investors of all types and sizes, and contributing to spike in eviction filings. (Unfortunately, the filings data doesn't break out reason for eviction filing, but a large chunk would likely be cases of identity theft where the renter isn't who they say they are.)

Camden (apartment REIT with ~60k units) had its earnings call last week. They usually offer very most comments on the market, and they didn't disappoint -- opening with a Tom Petty song to remind everyone that:

1) "Everyone in multifamily is waiting for something." 2) Like others, Camden reported that market-rate rental affordability (at least the A/B market where REITs and institutions operate) has materially improved, with a rent-to-income ratio of 19%.

The largest apartment REIT -- MAA -- had its earnings call yesterday. With >100k units at mix of rent levels, MAA has scale to offer fascinating insights on the market, especially in Sun Belt.

1) Big demand, rent-to-income ratios down to 21%.

Avg renter HH income now $91k. 2) But of course, there's even more supply than demand -- especially in the Sun Belt. Supply levels are at record highs (or at least multi-decade highs) nearly everywhere.

So new lease rents are falling more for MAA than for coastal REITs.

Equity Residential (3rd largest apartment REIT by unit count) had its earnings call this morning. LOTS and LOTS of great color. Here are some takeaways:

1) Strong demand -- both for new and renewal leases -- from renters in strong financial position. 2) Move-outs due to rent increase remain below normal (16% vs. 20%), but EQR did see an uptick of move-outs for affordability reasons in parts of SoCal.

Here are some interesting takeaways from Invitation Homes’ earnings call last week.

1) Property taxes spiked 10.3% (especially in Florida and Georgia) – which is a key factor for long-term affordability in those markets – but that’s being "partially offset by lower turnover." 2) Resident turnover is declining not only b/c of low move-outs-to-purchase, but also b/c of improved "bad debt lease compliance" -- which means many long-term nonpayers from COVID era have moved out and now a higher share of residents paying rent each month.

Most balanced, nuanced article ever on evictions.

It’s a story of a large apartment operator partnering with policymakers and tenant advocates on eviction prevention … and coming up with mixed results, and revealing some sad realities that no one really knows how to overcome. It’s a profile of WinnCompanies, which manages 100k+ units. In 2018, Winn sought to cut evictions by 50% and partnered with a notable tenant rights attorney to find a way to do it.

For a while, it worked great, and city of Boston hailed it as example for others to follow.

The White House announced a proposal to install rent control AND stimulate more housing, which is like arguing to cap organic food prices AND produce more of them.

Unlike the President's previous housing plans, this one lacks weight and seriousness. Here's why: 🧵 1) President Obama’s top economist, @jasonfurman, said it best (in Washington Post):

“Rent control has been about as disgraced as any economic policy in the tool kit. The idea we’d be reviving and expanding it will ultimately make our housing supply problems worse, not better.”

Inflation is basically GONE when you exclude the lagged shelter (i.e. rent) data in CPI. Remember: Rent is the biggest variable in the CPI's biggest category (shelter), and there's a known 12-month lag between asking rents and CPI rents.

I'm surprised how little buzz there is… https://t.co/XhxS49ZQtDtwitter.com/i/web/status/1…
Here's the month-over-month change in CPI's rent of primary residence -- lowest since Dec 2021. Remember that rent is the most important variable in shelter... even OER (while weighted heavier) is using this exact same survey of renters.

The month of May is the start of the busy summer leasing season; and as such, it typically delivers LARGER increases in asking rents than any other month.

But 2023 remains the story of "muted seasonality."
(1/x) Apartment rents did increase in May, yes, but at the lowest level in more than a decade outside of the pandemic lockdown period of May 2020.

Same-store effective asking rents nationally (for new leases) increased 0.39% in May 2023.

I'm not a fan of "rent vs own" comparisons b/c they're turning a long-term, life-stage decision into a short-term, oversimplified financial decision.

But nonetheless, it's ironic to see headlines saying rent is unaffordable next to headlines saying it's cheaper to rent than buy. It's a reminder that despite similar supply/demand dynamics from 2020-2022, home prices grew much more and much faster than rents did -- underscoring that home sellers can maximize price through bidding wars, whereas *most* rentals are leased to first qualified applicant.

Fascinating study that concludes what should be obvious: housing ACCESSIBILITY is the problem.

Not ironically, many cities listed as most problematic have rent control. But remember rent control is an untargeted benefit to current renters at expense of all future renters... Market-rate apartments are basically full with renters spending, at median, 23% of income on rent. That isn't the big problem.

The problem is for the millions who cannot afford market rate, there's a severe shortage of subsidized true affordable housing.
marketplace.org/2023/05/30/how…

Here's a slideshow of maps highlighting TEN of the hottest hotspots for apartment construction.

We'll start with one you probably didn't expect to see here unless you're from (or doing business in) South Dakota... 45 apartment projects under way in Sioux Falls. 1/x Here's one that is far less surprising. Salt Lake City is hoppin.

U.S. apartment demand rebounded back into positive territory in Q1 2023, ending a streak of three straight quarters of negative absorption.

But the rebound looked nothing like the 2021 demand surge, and more like a tepid step toward some semblance of pre-COVID normalcy. The U.S. apartment market added 19,243 net new renters in the first three months of 2023. That marked an improvement over 2022, when net absorption registered at -114,000 units despite strong job growth across the country.

Yet...