Top 5 stories from Multifamily Dive

Dive Brief:

• New U.S. apartment construction is expected to reach a record high this year, with developers on track to deliver an estimated 518,108 units by the end of 2024, according to a report by RentCafe. 
• Nearly 60% of the expected deliveries are clustered in the 20 most active new multifamily construction markets. New York City leads the list for the third year in a row, with an estimated 32,935 units expected to come online. Dallas’s estimate is only three units behind at 32,932. 
• Looking ahead, approximately 2 million new apartments are expected to be available in the U.S. between 2024 and 2028. Nearly half — 47% — of the 369 metros analyzed in the report are likely to build more apartments in this period than they did between 2019 and 2023.

Dive Insight:

While the market is currently riding the peak of the supply wave, RentCafe expects that new completions will drop significantly in the near future. Approximately 440,000 new deliveries are expected in 2025, down 15% from 2024, followed by 332,000 in 2026 and 319,000 in 2027 — a 10-year low.

Higher borrowing costs have made it more difficult for developers to start new projects over the last several years, starting in late 2022 when the Federal Reserve began raising interest rates to combat inflation. This may drive developers to focus on lower-risk projects or shift toward stronger markets for development, according to RentCafe.

“Most markets won't see the impact of rapidly falling starts translating to lower completion levels until the second half of 2025, and more likely in 2026,” Doug Ressler, senior analyst and manager of business intelligence at Yardi Matrix, RentCafe’s parent company, said in the report. “All said, this massive drawdown in starts across all regions sets the stage for a very different industry trajectory come 2026 and 2027.” 

The report notes that the majority of apartments built in the last five years, as well as those under construction, are high-end projects that cater to middle- and higher-income renters.

New York City is one of only two Northeastern metros in the top 20 for new apartment construction this year — the other being Boston at No. 19 with 8,022 units. The majority of New York’s new apartments, almost 10,000, are concentrated in the Brooklyn borough. This construction boom is attributed to the housing shortage in the Northeast. 

As for the Dallas metro, its strong population growth, business-friendly environment, affordability and strong infrastructure are driving both construction projects and corporate relocations, the report said.

The U.S. needs 4.3 million new apartment units by 2035 in order to mitigate issues related to apartment demand and affordability, according to an August 2022 report commissioned by the National Apartment Association and National Multifamily Housing Council.

Based on RentCafe’s delivery data and estimates, approximately 2.87 million units are expected to come online between 2022 and 2028. Approximately 1.43 million more would be needed between 2029 and 2035 to meet the report’s estimate.

The San Francisco rental market hasn’t been normal since COVID-19 hit the U.S. After the pandemic arrived, workers, untethered to their offices and free to toil from wherever they chose, left the city. As result, apartment owners suffered. 

As occupancy dipped, problems with apartment loans in the city began to bubble up two years after the pandemic began. By early 2023, Veritas Investments’ $448M loan backing 62 San Francisco properties went into default. The problems continued into 2023 and 2024.

In some cases, there have been positive resolutions for owners. In June, Miami-based Crescent Heights secured a loan modification for the 754-unit NEMA San Francisco apartment complex.

But in other instances, such as New York City-based global banking and investment management firm Goldman Sachs and San Francisco-based multifamily owner and operator Ballast Investments handing over 82 apartment buildings to affiliates of the Royal Bank of Canada, there is still more fallout to come.

Here, Multifamily Dive rounds up the problem loans in San Francisco and around the country that have come to light since January 2023. Please check this page for regular updates.

Dive Brief:

• The Biden administration called on Congress Tuesday to pass legislation penalizing property owners for rent increases above a certain level as part of its plan to lower housing costs through a series of administrative actions.
• “Today, I’m sending a clear message to corporate landlords,” President Joe Biden’s statement reads. “If you raise rents more than 5% on existing units, you should lose valuable tax breaks.”
• Under Biden’s proposal, landlords would, for the rest of this year and for the next two years, only be able to take advantage of faster depreciation write-offs if they keep annual rent increases to no more than 5% each year. The plan would only apply to property owners with 50 units or more, and would exempt new construction projects or substantial renovations.

Dive Insight:

The Federal Housing Finance Agency is also making changes to its policies regarding housing financed by future loans provided through Freddie Mac and Fannie Mae. Borrowers will need to provide a 30-day notice before rent increases or lease expiration and a five-day grace period before imposing late fees on rent payments. 

Alongside the rent restriction plan and FHFA changes, the president also announced efforts to repurpose public land and create new monetary grants for affordable housing development. This includes the potential construction of up to 15,000 new affordable housing units on public land in Nevada, rehabilitation of distressed housing and $325 million in grants from HUD for affordable housing construction.

The administration also called for the passage of the Biden-Harris Housing Plan, a proposal which would enable the construction of 2 million new homes and provide $10,000 in mortgage relief for borrowers.

Opposition to the plan

A variety of housing organizations, including both tenant and property owner advocacy groups, responded in different ways to the Biden administration’s plan.

The National Multifamily Housing Council, in a statement published one day before the White House’s announcement, opposed the plan in strong terms. The NMHC’s view is that instituting national rent control will drive up housing costs and limit new construction at a time when supply already falls short of demand.

“If the administration’s goal is to lower housing costs and support residents it would be better advised to implement policies that expand housing supply — the only real way to sustainably lower housing costs and create more housing security for renters as the Biden administration pointed out in its very own Housing Supply Action Plan,” said Sharon Wilson Géno, president of the NMHC, in the statement. “Rent control has been tried for decades and been a resounding failure. Now is the time for actual solutions, not electioneering.”

The Mortgage Bankers Association also came out against the rent control proposal, and cast doubt on whether it would be able to move through Congress into law.

“Rent control is a counter-productive policy idea that ultimately harms renters by distorting market pricing, discouraging new construction and degrading the quality of rental housing,” said Bob Broeksmit, president and CEO of the MBA. “While the odds are stacked against this proposal ever passing Congress, a federal rent control law would be catastrophic to renters and our nation’s rental housing market.”

Broeksmit also stated that the MBA is working with Biden, Congress and local municipalities to develop “commonsense solutions that will boost housing supply, lower costs for renters and improve the federal government’s multifamily lending programs.” These include enhancements to the Low-Income Housing Tax Credit program in order to incentivize low-income and workforce housing construction.

Voicing support

The Tenant Union Federation, a group that represents tenant unions throughout the country, voiced its support for the plan and called for the president to immediately regulate rents in federally financed housing.

“Rent control is sound economic policy, and it is the only solution that meets the urgency and scale of the crisis that millions of tenants endure every month,” Tara Raghuveer, director of the Tenant Union Federation, said in a statement provided to Multifamily Dive. “The president’s monumental directive is a recognition of the federal government’s responsibility to regulate the rental market, and of tenants’ power as a political class.”

The National Housing Law Project, a San Francisco-based housing law organization, also published a statement supporting the plan. “Tenants across the country fought for years to get the federal government to care about the rent,” Shamus Roller, executive director of NHLP, said in the statement. “We applaud the organizing that led President Biden to get real about what the federal government can do to increase housing stability for tenants.”

Dive Brief:

• Richardson, Texas-based software and data analytics provider RealPage issued a statement last week that it said was intended to “correct factual inaccuracies” in the media and legal filings about the company’s revenue management software and its impact on renters. 
• RealPage said that starting in October 2022, when a ProPublica exposé took aim at the company’s software, “false and misleading” statements have been made about the company and its software. “The time is now to address a number of false claims about RealPage’s revenue management software and how rental housing providers operate when setting rent prices,” Dana Jones, RealPage CEO and president, said in the statement. 
• The company said that these claims threaten to undermine the benefits that RealPage’s solutions provide to renters and housing providers. The firm contends that its revenue management software contributes to a “healthier and more efficient rental housing ecosystem.”

Dive Insight:

Since late 2022, renters and attorneys general have filed over 30 lawsuits against Yardi, RealPage and assorted multifamily providers in state and federal courts, alleging that the price-setting software the companies provide or use enables competitors to collude on rent prices. RealPage is also the subject of a criminal investigation by the Department of Justice and state attorney generals. 

In its statement, RealPage said that its customers “always have 100% discretion to accept or reject software price recommendations” and are never punished for declining recommendations. In a suit filed last year, Washington, D.C., Attorney General Brian Schwalb claimed that the company policed its contracts and that landlords abided by its suggested rents more than 90% of the time.

Clients using the company’s AI Revenue Management and YieldStar products accept pricing recommendations for new leases less than 50% of the time, according to the statement.

The company’s revenue management software also can make price recommendations to lower rents or not change them, according to the company.  “RealPage revenue management software never recommends that a customer withhold vacant units from the market,” the company said in the statement. “In fact, properties using our revenue management products consistently achieve vacancy rates below the national average.”

RealPage said that its services serve a smaller pool of rental units than has been publicized. In Washington, D.C., Schwalb claimed that 90% of units in buildings with 50 or more apartments use RealPage software. Overall, the product is used by operators of 50,000 units in the District.

However, the RealPage statement said less than 7% of units nationally use RealPage’s AI Revenue Management and YieldStar, while fewer than 4% use the Lease Rent Options product. 

The company also claimed that its software offers options and flexibility in lease terms, aids compliance with Fair Housing laws, does not use any personal or demographic data to generate rent price recommendations and helps ensure that prospective residents have access to the best pricing available.

In the company statement, Jones shifted the blame to overall housing affordability for the skyrocketing rents in the market. 

“Housing affordability should be the real focus. RealPage is proud of the role our customers play in providing safe and affordable housing to millions of people,” Jones said. “Despite the noise, we will continue to innovate with confidence and make sure our solutions continue to benefit residents and housing providers, alike.” 

Click here to sign up to receive multifamily and apartment news like this article in your inbox every weekday.

Over 890 new laws signed by California Gov. Gavin Newsom took effect on Jan. 1, including many that affect the state’s rental housing operations. A number of these new laws relate to leasing, landlord-tenant relationships and eviction conditions. 

Many of these housing laws were signed in a package of 56 bills in early October. In addition to the landlord-tenant bills, they included SB 4, known as the “Yes in God’s Back Yard” law, and SB 423, which streamlines affordable housing construction.

“California needs to build more housing and ensure the housing we have is affordable. In partnership with the legislature, we have advanced billions of dollars to that end,” Newsom said in a statement. “These 56 bills build on that work, supporting tenants and ensuring cities are held accountable to plan for and permit their fair share of housing.”

While the majority of these laws are now active, one of the most impactful laws for landlords won't go into effect until this summer. Starting on July 1, landlords and property owners in California will not be able to charge more than a single month’s rent as a security deposit. 

Owners with no more than four units across no more than two properties may request up to two months’ rent. The security deposit change is a departure from the previous law, which set a limit of two months of rent for furnished units and three months for unfurnished units. 

Apartment industry organizations in California have opposed this bill since its introduction. 

“Further limiting a property owner’s ability to financially cover property damage or unpaid rent is an unfair imposition for rental housing providers,” said Debra Carlton, executive vice president of the CAA, in a letter last year about the bill.

Other laws

Another important law that went into effect Jan. 1 sets new conditions around the eviction of a tenant in order to move an owner or the owner’s family into the unit. Potential new residents must have at least a 25% stake in the property in order to evict a tenant to move in, or less than 25% only if the property is entirely owned by relatives. 

The new occupant must move in within 90 days and reside in the unit for at least 12 months, according to a fact sheet shared with Multifamily Dive by the California Apartment Association.

Other housing-related laws that took effect this month in the Golden State include:

• AB 1418 — Local governments are now prohibited from imposing penalties on residents or owners who have contact with law enforcement. 
• SB 267 — Property owners cannot use credit history as part of a rental application process, unless an alternative is offered.
• AB 1620 — Residents with disabilities living in rent-stabilized properties may move to a more accessible unit in the same property without incurring any change in rent.
• AB 1765 — Allows landlords and applicants for rental units to agree to use email to deliver screening fee receipts. Existing law required owners to mail the receipt.
• SB 602 — Extends the validity of trespass letters, or 602 letters, from 30 days to 12 months. These trespass letters allow property owners to inform law enforcement that a unit is uninhabited, and enables them to clear the unit of anyone who attempts to take up residence there without needing to go to court.
• SB 712 — Allows tenants to store e-bikes or e-scooters inside their units, as long as the batteries are approved by the Consumer Product Safety Commission or the E.U.’s European Standards. Property owners can mandate storage of any e-bikes or e-scooters in a separate secured storage area if one is provided, given the fire risks associated with lithium-ion battery malfunctions. 

An additional measure, qualified to go on the 2024 statewide election ballot on Nov. 5, would ask voters whether or not to repeal the Costa-Hawkins Rental Housing Act, which limits local rent control ordinances in California. 

“If passed, the proposed repeal could drastically slow down the construction of affordable housing, adversely impact homeowners and small landlords, and exacerbate the state’s homelessness crisis,” the CAA said in a statement on the measure.