What’s driving multifamily rent growth?

Question

Title says it all. What factors drove the double digit rent growth we saw in 2021? Not really understanding where all this sudden demand came from. Secondly, how were renters able to absorb these increases in their rents? I understand inflation, federal stimulus, people moving out of their parents homes and relocating to new areas, Californians moving to Texas, and New Yorkers moving to Florida, may be some of the reasons.

Surfboard · Accepted Answer

With the eviction moratorium in place you had people staying in their units but not paying rent. This limited the supply of available units even further as in a normal market they would be evicted, and that unit would go back on market. We did see more demand and renters able to pay more with all of the free money provided by the government, but the vacancy rates we are seeing don’t take into account delinquency. I’m selling buildings that are only 80% collected in Los Angeles.  I think we are at the top.

egold70 · Answer

Yes I agree there is more to it than simply "there's a ton of dry powder chasing deals".  What we should also touch upon is the human psychology element.  The FOMO mentality you see in various aspects of life also plays a role here.  For example, in Los Angeles over the past decade, submarkets such as Woodland Hills/Warner Center and Glendale have experienced a boom in MF deliveries.  Alot had to do with upzoning in these markets, or a bunch of vacant parcels or underutilized sites.  Before you knew it, every major public/private apartment developer was planting a flag

MPBYO · Answer

Always request and really look through delinquency reports. Just because someone signed the lease doesn't mean you are getting paid :-). Pretty simple, average student loan payment is $460. With people not having to pay it, the funds have moved else ware and rent as picked up a good amount of it. Everyone has eyes on the rate hikes, but the resuming of federal student loan payments will be interesting to watch unfold.

allongo · Answer

If you look at same store NOI in NCREIF, apartment NOI is just now at the same level it was pre-pandemic. So you have strong growth, but mostly because noi was way down in 2020.

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What’s driving multifamily rent growth?

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What’s driving multifamily rent growth?

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