Mike is the Co-Founder and CEO of Jetty, a new financial services company on a mission to make renting more affordable and effortless.
Maintaining high occupancy rates is always a priority in the multifamily industry. That’s especially true during the Covid-19 pandemic, as vacancies have hit record highs in some major cities.
Under normal circumstances, maintaining occupancy requires a combination of signing new leases and renewing existing ones. But as new leads slow, the latter has become increasingly important.
Renewals are almost always the best option at the end of a lease.
When a resident’s lease nears the end, the best-case scenario is almost always a renewal. It doesn’t negatively affect occupancy, and it also saves the property the cost of finding a new resident.
Given the cost of marketing a listing, screening applicants and updating a unit, finding a new resident can cost anywhere from $100 to $2,500. If an existing resident renews instead, that’s money that doesn’t need to be spent. It also eliminates the risk of a vacancy, which can be extremely costly.
And, possibly most importantly, a renewal saves the leasing team time. Between showing a property, signing a lease, collecting checks and setting up move-in, finding a new resident can take a significant amount of time. If a resident opts to renew instead, that’s time your team can use for other things.
Slowing leads have made retention even more important.
Retention has become even more important this year as many properties struggle to find new residents. New resident leads are coming in more slowly as fewer people are looking to move, and new lease signings are hitting record lows in certain parts of the country. This lack of leads is, unsurprisingly, leading to increases in vacancy length, with 45% of property managers reporting longer vacancies during the pandemic.
As a result, many properties are being forced to offer concessions. Concessions like free rent and waived deposits are now nearly twice as common as they were in February of this year, and the percentage of properties that offered concessions this July was more than double that of July 2019.
Each of these concessions negatively impacts NOI — and the best way to avoid making them is to focus instead on keeping current residents in their homes.
Engage new tactics to drive retention in the age of Covid-19.
Many properties are already adopting new strategies for keeping residents in place this year. For some, this means keeping residents engaged with safe social events like Zoom happy hours and virtual bingo nights. If a resident enjoys these types of activities, hosting them regularly can improve the chance that they’ll decide to stay when their lease comes to an end.
But for many residents, strategies that address their financial situations are much more compelling.
A new study from Buildium found that 36% of property managers surveyed are keeping rents flat or offering some sort of concession upon lease renewal. This is a shift from the 5% increase that’s become standard across the industry. Other properties have started offering month-to-month leases for residents who are concerned about job stability and are unsure if they want a long-term commitment. Meanwhile, at Jetty, we recently launched a product that gives residents the option to access the cash they have tied up in deposits, in exchange for a Jetty policy.
All of these strategies can help residents who are facing instability. And as the unemployment rate hovers at just around 8%, leaving millions of Americans without a steady income, these are the types of initiatives that are likely to make an impact.
So as properties look for ways to boost retention rates, it’s in their best interest to focus on ways to reduce the financial burden on their residents. After all, affordability issues are the reason that many would-be renters aren’t seeking out new homes in the first place. The more effective a community is at addressing these issues and helping residents in a stressful time, the more effective they’ll be at keeping those residents happy in their homes.