Though many owners around the country have seen resident retention rates increase sharply over the past year, there isn’t a single reason as to why. Instead, there are a number of contributing factors, according to property managers and industry observers. Here’s a look at three key drivers of retention in the current market.
1. Home ownership has fallen.
As the for-sale market simmered in the mid-2000s, the home ownership rate pushed up above 69 percent. But now, that rate is back to 67 percent and moving downward. The biggest beneficiaries of that? Apartment owners. “They’re not losing renters to home purchases,” says Greg Willett, vice president of research and analysis for Carrollton, Texas-based M/PF Research.
Thomas L. Grimes Jr., executive vice president and director of property management at Mid-America Apartment Communities, a Memphis-based REIT, thinks there are a couple of things keeping residents in his apartments and out of homes. Right now, less than 20 percent of the company’s move-outs are leaving to buy a home. That number used to be around 30 percent.
“I think there’s psychology [behind the trend],” Grimes says. “They don’t like being under a home that could lose money, and they value their flexibility. They don’t want the commitment of mortgage.”
2. There's more attention being paid to leasing.
Companies are learning that the main jobs of leasing agents should be just that—leasing. And that doesn’t mean focusing on cultivated potential residents and writing new leases. “A big trend is having the on-site people focus on leasing and resident relationships,” Willet says. “They’ve taken back office or administrative functions off of those people.”
Apartment owners and management companies are also starting to incentivize their leasing agents for renewals at the same level as new leases. “A lot of companies have changed their compensation levels for leasing,” Willet says. “They used to get paid more for new leases than renewals. A lot of them are paying the same thing for the two flavors.”
3. Internal systems are changing.
A couple of years ago, AIMCO, a REIT based in Denver, decided that it needed to get better, keeping its current residents happy and in apartments—because it cost a lot more to get replacements. So the company undertook an ambitious program where it surveyed the full resident lifecycle—from first visit through move out.
The communications are handled by a centralized location, not leasing staff. “By taking items off of communities, it gives the community team more time to focus on the customer and making the customer experience better,” says Melanie French, a senior vice president of operations at the REIT.
While not everyone has the consistency and frequency of AIMCO’s contacts, Willet says other operators are doing the same things—and that could ultimately keep retention levels fairly high. “With everybody making a concerted effort to retain residents, they have now put into practice that you need to increase the communication and contact with residents all of the time,” Willet says.