September 2022 Multifamily Investment News Round-Up

In spite of an inflationary landscape with rising rates, the multifamily sector has remained resilient. Still, economic pressure faced by renters has had an impact, with slight declines in rental rates across select MSAs. Passive investors continue to deploy capital into deals as housing shortages remain driving multifamily demand.

The Multifamily Investment News Round-Up is a monthly digest of five “must read” stories from around the Web.

Industry

Rent growth fell in August (Multifamily Dive)

“For the first time since June 2020, the national average multifamily rent fell in August, down $1 to $1,718, according to Yardi Matrix’s latest National Multifamily Report. While year-over-year rent growth remained high at 10.9%, it has fallen 170 basis points from the previous month, continuing a long trend of YOY rent growth deceleration this year.”

State Agency Moves To Clamp Down On Popular ‘Frankenstein’ Rent-Stabilization Loophole (Bisnow)

“The Housing Stability and Tenant Protection Act of 2019 curtailed property owners’ ability to move stabilized apartments into the free market and reduced the amount they could raise rents based on building and apartment improvements. Combining stabilized apartments to create larger units, and allowing landlords to charge what they please on the newer, larger apartment, remained legal. Under this proposed amendment, the DHCR has said that if a property owner combines stabilized units to form larger offerings, they will only be able charge the total of what they were charging for the previous apartments when they were separate, with the relevant increases.”

Macro

Multifamily Sector Remains Resilient Despite Rising Rates, Inflation (Multifamily Executive)

“Despite rising interest rates and persistent inflation, the commercial real estate industry will continue to exhibit resiliency, proven by investor demand in our primary and secondary geographic markets across the country,” said Ernie Katai, executive vice president and head of production at Berkadia. “With the rising cost of homes and interest rates, the renter lifestyle has increased investor demand in primary and secondary markets across the country. While we continue to navigate economic volatility in the second half of the year, our team provided a strong start to 2022.”

Markets

Inside Multifamily’s Migration Patterns (Multi-Housing News)

“As for migration patterns, U.S. Census statistics show that neighborhoods receiving the most influx are predominantly falling in Idaho, Utah, Montana, Arizona and South Carolina, which have seen a percentage population gains of 2.9 percent, 1.7 percent, 1.7 percent, 1.4 percent and 1.2 percent, respectively, between 2020 and July 2021. Migration has been a net benefit to several multifamily markets such as Boise, Idaho, where asking rents rose 33.6 percent…. Migration patterns, however, are not always correlated with increased economic prosperity or a desire to spend on new housing, as the U.S. largely saw workers nationwide moving to states that offer a lower cost of living and/or lower asking rents.”

Investing Strategy

Institutions Have Shifted to Multifamily, Industrial and Data Centers in Their Real Estate Allocations (WealthManagement.com)

“When asked to select the top three investment vehicles institutional investors are most interested in, survey respondents rated direct investment in multitenant commercial and multifamily real estate assets the highest at 54 percent, followed closely by private equity real estate funds at 49 percent. Private placements with real estate investment managers and public REITs also rated favorably among 27 percent and 25 percent of respondents. Those vehicles least in favor were real estate mutual funds at 8 percent and CMBS at 7 percent.”

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