Gearing up for the Big Move of Renters
2021 and the pandemic had its big renter migration event, and wouldn’t you know it’s continuing, but in a different form in 2022/2023?
What’s driving it this time is the cost of living, and soon, employment. If employment levels weaken in 2023, many renters could decide to move to access less expensive living options including co-living. Churn and costs will rise for landlords.
The pandemic kept people in place, but now cost factors are pressuring them. For many renters it’s not a choice, but rather a must do situation. Moving companies will be busy and you may want to sharpen up your move in move out process.
For years now we’ve seen rent prices rise steeply and as the charts below reveal, those rents have risen fastest in 2022.
US Rent Price History Chart. Screenshot courtesy of TradingEconomics
It shouldn’t be a stretch to believe however that your tenants are nervous about the economic outlook. As those conditions deteriorate, their thought about moving, will turn to action. Stats show they’re already visualizing a move this fall and more in 2023. Landlords will be asking „what can we do about this?“
Two Thirds of Renters Are Considering a Move
One survey indicated two thirds of house renters are giving some consideration to changing their address in the next year. Why? Unemployment, living dissatisfaction, and high food, transportation, and energy costs along with unaffordable rent prices are creating a force.
And since renters will end leases, it will create more vacancies. Some tenants will decide to move to capture those newly vacated units including apartment transfers. During the pandemic, renters couldn’t move for many reasons, but we’re now in the post-pandemic era.
A report by Apartmentlist for Q1, 2022 showed renters are moving more now than before the pandemic. With some cities removing renter eviction protection starting Jan 2023, it stands to reason you’ll be seeing more churn and turnover costs in 2023. Add on the fact that many big corporations want their workers to return to the head office, and you have more churn.
Renters Searching for their Next Rental Home
Renter searches for out of state rentals also grew. Tech-powered cities such as Denver, Charlotte, San Jose, and Austin show strong inbound and outbound migration, however some major cities are seeing high outbound migration, thus losing tenants.
With inflation running hot and persistent (August rate stayed at 8.3% even though energy prices plummeted), economists fear the US Fed will be forced to raise interest rates several times this final quarter of 2022. Rising rates increase costs for landlords and renters and threaten to create higher unemployment.
ApartmentList found that movement within Los Angeles was strong as renters looked for better or cheaper accommodations within the metro area. In Texas too, each city provides most of the searchers for each other.
You can see more on the report at: apartmentlist.com/research/apartment-list-renter-migration-report-2022-q1
Fighting Inflation Will Bring Pain to Tenants and Landlords
The concern is that big rate increases will be needed to cool inflation. The Fed needs to see a big jump in unemployment along with lower worker wages to achieve their inflation goals which may not be achievable. How the US economy is being managed, is making a lot of Americans nervous about 2023.
Are your staff wages heading downward?
Rising mortgage rates could send a shockwave through the housing market over the next year as many landlords and homeowners look to refinance their mortgages.
Ready and Willing, To Move
At some point then, renters at various incomes levels will suffer job losses. Given rents are high, and regaining their previous salary might be tougher, most will be contemplating a move to more affordable accommodations, perhaps in other cities.
It seems renters are more adaptable these days (work from home), more accepting of the option of moving wherever they have to, to live well.
A recent (2022) survey showed renters plan to buy a home or might move due to affordability issues. Others want a move given they can work remotely, and others simply want more living space and amenities. 1/7th of those surveyed said they were not satisfied with their rental experience.
Tenant’s Perception of Value
It’s understood by industry professionals that renters stay leased based on their estimate of value received via their rental. We might call that the „rental experience.“ They consider 4 factors:
- the condition of the rental unit and property
- the amenities in the house or apartment building
- their satisfaction with their relationship with the property manager or landlord
- the price of the unit
When your tenant hands you their notice, it’s their estimate of value that’s changed, even though nothing you’ve done has changed. If they lose their job, they may lose interest in the house, the neighborhood and city. Mentally, they’re moving onto to their next job, city or neighborhood.
If your value proposition isn’t extremely good, then they won’t want to continue paying that rent price. The longer they’re unemployed, the more certain change is in the offing.
If 2023 does bring a mild recession, landlords will see churn, as renters become desperate to lower their rent expense in the face of continuous inflation. This might sound discouraging, however, you still have the power to shape their perception of value — something you should be exercising now.
To Keep Tenants, You Could:
- keep the rent price stable and avoid increasing their financial pressure
- emphasize the location or other features in your tenant communications to remind them of its convenience and value
- offer to re-lease at a discount rate for a longer-term lease (market rate rents will likely decline slightly in 2023/2024)
- offer to upgrade something important in the rental units (appliances?)
- maintain good communications and discuss how much they and their family like the neighborhood
- provide materials or small budget to let them improve their apartment or rental house (painting, landscaping, gardening)
- ask them if anything in the rental is an issue and get it remedied right away
- agree to a lower rent price based on the tenant’s belief of poor value/issues in the rental
These tactics may help ease their tensions about work and finances. And there are more ways to strategically improve the renter experience, ratchet up perceived rental value, to make them want to renew their lease.
Tenant Retention Will be a Priority in 2023
Keeping a tenant is usually preferable to losing one. Very often, their spouse can carry the rent until they find a new job. But the dissatisfaction or concern of one tenant can result in lease termination. Then churn and turnover costs become a business loss.
An added benefit is that you may lose some troublesome, low value tenants and find yourself with a higher rent paying tenant who intends to stay leased and pay their rent.
Some good can come out of the challenge ahead in 2023.
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