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  • Writer's pictureAshley Wilson

A Storm is Brewing and No One is Talking About It

According to, the national average rent increased by $302 from January 2021 to January 2023. Bad news for Renters, but good news for Investors…or is it? On the surface Investors are ecstatic about the increase. Specifically, across a 100 unit property, with an average annual occupancy of 94% (the national average over that same time period) that translates into a $28,388 increase in monthly income, $340,656 increase in annual income, and a $6,813,120 increase in evaluation in a 5 cap market!

Remember the saying, “If it’s too good to be true, it probably is”? I am here to tell you it is too good to be true. Unlike what everyone else is talking about, the amount of new inventory coming on line, I think the threat to multifamily rents, and in turn values, is already here.

Without spoiling the surprise, let me give a real life example and see if you come to the same conclusion I have. January 2021, Jane puts in an application to rent at an Apartment Community. The Owner reviews her application and sees that she qualifies for the unit as her monthly income is $4,920, exactly three times the monthly rent of $1,640 (which also happens to be the national median rent). In January 2022, she decided to renew and her rent is now $1,870, a $230 increase. She is considering moving, but she really likes the place so she decides to stay. In January 2023, she decided to renew again, but now her rent has jumped to $1,942, another $72 increase. She really wants to leave, but realizes that she now won’t qualify for any other comparable apartment. Unfortunately over this time, her salary did not increase at the same rate as her rent. Specifically, it increased 5% in 2021, and then 4.5% in 2022 resulting in a monthly income of $5,398. If she were to apply to the same apartment today, she would not qualify as her salary would not equate to 3x the rent. In this particular example her multiple is 2.78, but not every renter is so lucky.

The reason this is so problematic is renters are qualified upon initial application, but not at renewal. As rental rates have never appreciated so quickly over any other similar duration in history, this event has put a spotlight on a flaw in the system. While I am not suggesting that renters be requalified upon renewal, I am of the opinion that owners/operators should be cognizant of delinquency and eviction exposure due to the challenges of affordability to existing tenants. If you are concerned about this on your property, there are two reports you can look at which will give you some initial insight: aging delinquency and late fee collections. If either of these are upwards trending there is definitely some cause for concern.

Over time as skips and evictions are processed, having previous landlord debt becomes the norm - not the exception, and supply increases multifamily may be in for a little bit of a bumpy ride. With every challenge comes opportunity and the emergence of risk insurance programs will most likely be the winners in the next couple of years as investors will want to overlook a renter's payment history to keep occupancy, and in turn, operations, stable. Oh...the ebb and flow of multifamily!

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