Happy Summer,
It has been a while since we last emailed out an operational update – and there is a lot going on! Here are a few highlights of important industry snapshots and BH-specific initiatives.
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National Rent Forecast
We have had a strong 2022 so far! As we know, 2021 was one of the strongest growth years in history. So, as we look to the rest of the year, we are beginning to see first contacts and applications numbers normalize (YOY). This normalization was expected, and, where we are using revenue management software tools (YieldStar or BH Advantage), we accounted for it. So, we’re taking the changes in stride. BH has been watching leading indicators all year to ensure that when the market evens out, we will be prepared.
If they haven’t already, your Performance Advisor will begin to recommend changing settings to capture as much occupancy as possible in Q3, while pushing rates much more slowly than you have seen over the last 18 months. Your Regional Managers or Performance Advisor will reach out to align with you on goals for the rest of the year. Keeping that communication open will ensure we close out the year strong.
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New BH Website Drives Better Traffic
BH launched our new website on April 28 – and this isn’t just any other multifamily website. The new livebh.com was custom-built to meet the expectations of today’s always-on apartment shoppers, making BH communities easier to find online. In just a few months, the new website is already driving more and better-quality traffic to our communities. Here’s an overview of the wins (May 1-June 30, YOY).
BH website moved to page 1 on Google search results.
Translation: BH communities aren’t just easy to find online, we’re beating the ILSs for key spots on a search results page.
Organic click-through-rate jumped from 7% to 20%.
Translation: Content on the website is driving more engagement with visitors.
Bounce rate has improved by 71%, and people are viewing more pages when they visit the website.
Translation: Visitors are taking their time to get to know each community, viewing amenities, photos, and available floor plans.
Mobile traffic increased by 10%.
Translation: Website enhancements are making it easier to reach prospects wherever they are.
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CARES Act: 30-Day Notice to Vacate
BH is committed to doing business the right way. Since the CARES Act became law in March 2020, BH has used 30-day notices to vacate across all its managed properties. Making sure to keep our properties compliant, working with residents to avoid eviction filings and creating clear, consistent guidelines for our teams to operate during a challenging time were the right thing to do. The CARES Act applies to a property (a) with a federally backed mortgage loan (Freddie, Fannie, etc.), (b) participates in a “certain federal housing programs which includes any property that is covered by the Violence Against Women’s Act”, or (c) participates in the Rural Development housing program. We will require a certification from an authorized client representative that the property is not subject to the CARES Act before returning to state-based notice requirements. Beginning August 3, upon client request, we will return to state-based notice to vacate requirements for any property not covered by the CARES Act.
To request that a property return to state-based notices and to receive a certification to sign, please email [duediligence@livebh.com] or reach out to Travis Sheets, Vice President and General Counsel, with any questions.
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Increased Cost of Interest Rate Cap
A result of the rising interest rate environment and market uncertainty has been the astounding increase in the cost of interest rate caps. A 2-year 3% cap on SOFR rose from approximately 10 basis points (bp) in January to peaking near 200 bp in July. Although an existing rate cap will hedge against a rising index, cash flow could still be materially impacted as lenders increase required reserves for the future purchase of a replacement cap as the existing cap matures. BH advises caution around discretionary spending and distributions while lenders reset reserve requirements for future interest rate caps.
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Renewal Specialist Program Leads to Renewal Growth
The Renewal Specialist program started last year to improve resident retention and reduce vacancies. The Renewal Specialist team has proven success and has even been able to remove the lower Early Bird offers for many of our clients. This has allowed us to achieve even higher rates at the consistent retention ratio. As the program stands now, we have 30 specialists managing 212 properties totaling 71,691 units. Same store results show the communities with a Renewal Specialist increased renewal growth by 303% (YOY), while maintaining an average YTD 51.1% conversion rate. The Renewal Specialists are also paying attention to the Pre-Renewal Survey results sent out to residents and working with teams on creating ways to improve scores where necessary.
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BH Advantage Leads to Performance Wins
BH Advantage V2 (our in-house revenue management system) is in the works and will roll out at the beginning of 2023. This new, updated version will include market data, more sensitive forecasting, improved and tested additional statistical functions and controls to allow for more specific goals. Properties on Advantage now outperform the market (same store, YTD):
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In-Place Rent Roll Growth is 6.2% (2.0% higher than the market)
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Average Occupancy is 95.2% (0.4% higher than the market)
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Trade Out is 15.5% (4.0% higher than the market)
If you would like more information on these enhancements, their purpose or schedule, please reach out to Brandy Daniel, Brandy.Daniel@livebh.com.
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Cost of Living Drives Pay Increases
The estimated cost of living average in 2023 is expected to increase by as much as 10.5%. Companies are already planning to increase base salaries to keep pace with the rising cost of living. According to PayScale’s 2022-2023 Salary Budget Survey, more than 50% of U.S. companies plan to increase their salary budget in 2023. The Bureau of Labor Statistics reported that private sector wages and salaries rose by 5.7% (YoY) in Q2 2022. Additionally, the cost of employee benefits is on the rise, so companies will need to find ways to offset the increases to retain talent and remain competitive in the job market. BH plans to increase budgets by 6% in 2023 to anticipate the rising costs and remain competitive. We continue to focus on removing administrative tasks and streamlining the onsite job to create higher job satisfaction and improve career pathing. For instance, utilizing our Renewal Specialist and Resident Account Manager positions will allow for some reduction in overall payroll costs when fully implemented.
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Low Unemployment Rates Create a Tight Hiring Market
The U.S. labor market continues to be extremely tight, with unemployment rates in July nearing a 50-year low at approximately 3.5%. Competition for qualified workers continues to be a challenge. So, companies are boosting pay, offering more flexibility around when and where people are working, and getting creative with benefits to remain competitive. In the 2023 budgets, BH is advising an increase to housing subsidies for employees that live and work on a property as an additional benefit. Additionally, we are revitalizing our pay strategy to include commission-based bonuses as standard salary, basing our bonus program solely on benchmark performance.
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Employee Engagement Reduces Turnover
In addition to pay and benefits, employee engagement ranks high on the list of reasons why people stay with a company. Studies have shown that organizations with highly engaged employees have a 31% lower turnover rate and increase employee loyalty. This fall, BH will conduct an employee engagement survey and use that feedback to improve the overall employee experience at BH. Insights from the survey will be used to inform professional development opportunities, employee benefits, and future initiatives.
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Nearly 20,000 Residents Improve Credit Score with Positive Rent Reporting
In December 2021, BH piloted our first property in Esusu’s rent reporting service to help residents establish and build their credit scores over time. When a resident pays their rent on time, Esusu automatically reports the payment to each of the three credit bureaus, allowing residents to immediately establish or see improvements to their credit scores. To date, nearly 20,000 residents in BH communities have improved their credit scores and 751 residents established credit for the first time. To learn more about Esusu positive rent reporting, read the case study (May 2022).
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Keeping an Eye on the Industry: Rent Control
With election season just around the corner, we’re watching how various state lawmakers approach the topic of affordable housing, including the appetite for rent control in certain states. Read the latest Rent Control Update from NMHC.
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I hope you and your families are having a healthy, happy summer. Please reach out with any questions or concerns. We appreciate your partnership.
Best,
Joanna
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