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Single-Family

Single Family Rental Strategies in a Hot Market

Act Quickly, Honestly, and Decisively by Adam Stern The residential housing market is HOT. Inventory is down in all major markets acrossthe country, prices have risen precipitously for consecutive years since the late 2010’s, and the influx of capital into the rental housing space has been steady and ever increasing. Low inventory, cheap money, and the driver? People are renting homes at a faster pace than ever before. The confluence of these market factors could make it hard for incumbent firms with existing rental property assets to acquire new homes and make it difficult for newly emerging investment firms to find an entry point into the asset class. It all comes down to strategy. As a broker that has been focused on identifying capital sources active in the Single-Family Rental space and, on the flip side, identifying, engaging, and servicing those who own, manage and build rental housing, my firm, Strata SFR, has a unique perspective of the various strategies that firms employ across the country. Since Strata does not generally act as a principal in transactions, the velocity of our movement in the space is extremely high vs investment firms that generally stick to a single strategy for buying and/or selling.  Strategy of the Biggs Incumbent firms that have been in the space since the downturn in 2008, many of them public REITs and privately held real estate investment companies, are a good place to start. Their strategies generally have to do with building onto existing footprints, growing market share in the areas they currently operate, pruning their holdings to create higher margins through improving operational efficiencies, and in some cases breaking into new markets while leveraging existing infrastructure. Firms who do not have the scale that these bigger companies possess may think that their tasks are somehow easier than firms that are just starting out, but I find generally it is quite the opposite. After all, once you set the level at which revenue is generated from owned assets, there is only one direction these firms can move to keep investors happy and coming back and keep companies thriving. If progress is not made through continual revenue growth, the market tends to notice. Lots of attention means a higher level of scrutiny from all sides. Forward progress is the only surefire way to ensure long term survival. When my company is engaged by larger firms with existing portfolios, it is generally geared toward the disposition of assets no longer viewed as essential to their long-term strategy. That means pruning existing holdings to redeploy capital into areas that have a better opportunity for future growth. The strategy is to sell those assets and move capital into higher growth areas, including transitional areas, where inventory is of lower cost and higher yielding or where the acquisition of new assets is easier to come by due to higher availability or lower competition. Very often assets are sold to other firms with a more regional focus thereby allowing competing firms to grow to scale. Many firms opt to add new build strategies in areas where one-off or portfolio acquisitions are harder to come by. This strategy, Build-For-Rent, is a longer and more involved way to eventually own and operate assets at the end of the process, but the benefits of venturing into these types of deals provide a huge long term competitive advantage. While cash flow is further out than buying existing assets, often the price that firms pay, on a per asset basis, is lower and at the end of the process, they own a new home that will appreciate faster in a rising market than older homes. An added benefit of moving into the new build space is the experience and know-how achieved buy completing such transactions. Once you have the infrastructure to source land or lots and the resources to erect new communities, the barrier to entering new areas of existing markets or new markets all together with a Build-For-Rent strategy are much lower than competitors without such experience. Once these firms learn how to ride that bike, that skill set cannot be unlearned, and the benefits of this acquired ability will pay dividends for years to come. Strategy of New Firms For newly minted firms, raising capital, whether easy due to reputation or contacts or hard due to lack of experience, is seen by many who have raised it as the easier part of the equation. Once capital is committed, then comes the challenging part of choosing markets, setting up acquisition and sourcing channels, and managing assets. Many firms coming from alternate asset types such as multifamily are making the switch, looking to use their resources to address the challenges of entering the Single-Family Rental space.  At Strata SFR, we love these new firms. They provide an opportunity to source brand new large and medium sized portfolios from some of our smaller regional investment clients looking to exit in a seemingly overheated market. The way these relationships often play out is, the firmidentifies a market or markets they are bullish on; we identify the largest owners of SFR in those markets; and approach them with an exit opportunity. For many owners, the presence of these new buyers is a welcome site as they give smaller operators a path to sell their portfolios at an attractive price, in one transaction, to one buyer. The ability to bring to the table a buyer with deep pockets, a relatively low Cap Rate threshold, and the ability to take down large numbers of rented houses is enough to get an opportunityon the table for our new fund clients. Once an initial portfolio trade happens, setting upon the task of helping these new funds build on early success is the next stage. Often this entails helping them create on-market acquisition strategies or connecting these firms with land developers and builders to build single-site communities. Whatever the method, the goal is clear: fast growth, rapid capital deployment into assets that will deliver a

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Why House Prices Beat the Pandemic Odds

…And Why So Many Housing Economists Got It Wrong by Brian Fluhr One year ago, at the onset of the Coronavirus pandemic, housing economists were making dire predictions for the market. The demise of housing did not play out the way many anticipated for several reasons but foremost because strong economic housing fundamentals were already in place pre-pandemic. These fundamentals included the durable credit of borrowers, balanced debt-to-income ratios, and reasonable loan-to-value ratios. Homeowners today can withstand the crosswinds of a temporary loss of income because many homeowners have a much healthier balance sheet than homeowners had during the Great Recession—by some estimates, $7 trillion in home equity across the country. The equity well reportedly increased by 16.2% year over year in the fourth quarter of 2020. In that estimation, the equity gain was more than $1.5 trillion. Federal policies enacted since the pandemic began helped provide additional stability. For instance, the Coronavirus Aid, Relief and Economic Security (CARES) Act, signed into law in March 2020, injected relief. This included expanded unemployment benefits, foreclosure bans, and student loan forbearance. COVID-19 hardship forbearance was extended to those hit by the pandemic, which had a federally backed mortgage. So why did so many economists predict a home price collapse as a result of the pandemic? Anxiety ensuing from the wave of job losses that followed the shutdown is in part to blame. The Jobs Impact Ordinarily, widespread job loss is associated with housing insecurity. By the fourth quarter last year, figures from the Federal Reserve Bank of St. Louis showed that despite some improvement in the economy, “heightened unemployment and economic uncertainty could continue to affect the housing market through 2020 and beyond.” The bank referenced the 2007-09 financial crisis when foreclosures and tighter lending practices locked many out of homeownership for several years. “There are signs of these long-term effects again,” they added. However, the types of jobs lost were highly concentrated among lower-to middle-income workers, heavily impacting individuals in the decimated service industry who are more likely to live in rental units. An April 2020 report from the National Bureau for Economic Research elucidates this point. It found that 37% of jobs in the U.S. can be performed entirely at home, establishing that these occupations tend to be higher paying than those that cannot be performed in a home setting. Additionally, these jobs “account for 46% of all U.S. wages.” Veros Got It Right High-profile observers of the housing economy predicted that the market would depreciate annually due to the pandemic, with forecasts of prices dropping 6.6% by the early part of 2021 in one instance and between 0.5 and 2.5% from October 2020 to July 2021 in another.  VeroFORECAST, however, predicted that the global pandemic would only have a brief impact on housing prices. After one uncertain quarter, Veros stood tall by predicting that programs and policies implemented in the wake of the Great Recession would lead the market to return to pre-pandemic levels very quickly. At the close of the fourth quarter of 2019, predictions were buoyant over what was to come in 2020. In its Q4 2019 VeroFORECAST, the company predicted an average increase of nearly 4% by the fourth quarter of 2020. This projected increase was based on data from 332 Metropolitan Statistical Areas (MSAs). At the time of its release, in early January 2020, Eric Fox, Veros’s vice president of statistical and economic modeling, cited sound economic fundamentals, low interest rates, and strong levels of employment as indicators of moderate home-price appreciation “with very few geographic pockets of weakness.” When data from the first quarter emerged in April 2020, Veros Real Estate Solutions projected that home price increases would pause for only one quarter. Home prices rebounded throughout the subsequent quarters of the year. In Q1 2020, VeroFORECAST data indicated an average projected appreciation rate increase of on average 1.9% through the first quarter of 2021. During 2020, there were two notable, competing scenarios at play. On the one hand: historically, low-interest rates stimulate demand and increased prices. On the other: rapidly rising unemployment and quickly falling GDP, both of which were turbulent but did not faze the housing market for the whole year, as others had predicted. Veros correctly indicated that there would be only a mild home price depreciation at the start of the pandemic, with a return to normal appreciation rates later in the year and into 2021. As such, in March 2020, Veros said that in the first quarter of 2020, prices would depreciate by 1.1%, then the real estate economy would recover, and by the first quarter of 2021, prices would return to pre-pandemic appreciation levels of about 1% per quarter. This forecast was in line with previous projections indicating positive average home price appreciation, despite pandemic-related economic uncertainty and unemployment, particularly in the leisure, hospitality, and tourism industries. The themes that Veros would point to early on started to take shape in subsequent quarterly reports. “This quarter’s forecast indicates significant home price appreciation from what we just experienced in the first quarter of 2020,” Fox said in early July. “Despite the devastating economic, social and health impact resulting from COVID-19, the overall average annual appreciation rate increased to 3.5% vs. 1.9% from the annual forecasted rate last quarter.” The return to house price increases presents a paradox: Despite the naysayer predictions, appreciation strengthened beyond the levels witnessed before COVID-19 curbed economic activity. One catalyst was what has been dubbed “COVID migration.” That is where those jobs that can be effectively performed at home take center stage. As soon as large tracts of the population realized that they could move their entire lives even significant distances from where they previously commuted to work, an exodus from key market areas started to occur. To be sure, the pandemic migration phenomenon is real. Places such as Boise, Idaho, and Spokane, Washington, continued to see a pattern of rising prices throughout 2020 and into 2021, while many urban centers across California saw

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Real Estate Investing Outlook

The Pandemic Gave the Real Estate Industry a Crystal Ball to Identify Emerging Trends by Erica LaCentra Despite the global pandemic, the real estate investing space, in particular single-family rental, is booming. The SFR market was one of the best performing areas of real estate in 2020 as it mirrored the strong performance seen with single-family purchases. The thing with SFR is that it is a very attractive asset class for smaller-scale investors or even those looking to have supplemental income. It continues to be a great option for those that are wary of the stock market or investing in other avenues because it is a relatively safe and easy way to invest in residential real estate and has consistent long-term returns. So, let’s talk about what the second half of 2021 and beyond has in store for SFR.    Why Is There Such High Demand? Even pre-pandemic, this was an area of the market that was already experiencing rapid growth due to general demand from many demographics. Millennials that may have been looking for space and the comforts that come with living in a single-family home drove a significant amount of this demand. As this demographic started to get to an age where they are settling down and having families but were not ready or able to purchase a home, renting in the suburbs became a very attractive option. On the flip side, you also have retirees that were looking to downsize and potentially move closer to family as they get older. This was another large segment that was driving demand. Members of older generations who were not interested in owning a home and dealing with the maintenance began looking at single-family rentals to get the best of both worlds. One of the largest issues that continues to face the market is low inventory. There was a lack of supply of single-family houses throughout the country before the pandemic and that demand didn’t go away once the pandemic hit. In fact, it seemed to accelerate demand in this space because of the mass migration that occurred out of major cities to the suburbs when the pandemic hit. This migration of individuals out of cities has only exacerbated the problem. And in turn, it has caused home prices to skyrocket in many areas of the country because there is simply not enough supply to meet demand. How Will Prices Fair? The biggest question on everyone’s mind as home prices continue to climb is, how long will this last? In Q1 of 2021 alone, median home prices were up by around 10% year-over-year. As things look like right now, supply and demand are going to continue to drive home prices up in 2021 and there is no indication that price growth is going to slow down this year. According to a recent Zillow report (Zillow Economic Research) “annual home value growth will rise as high as 13.5 percent by mid-2021 and for home values to end 2021 up 10.5 percent from their current levels.” This forecast also predicted that sales volume will remain elevated throughout 2021, finishing the year at “6.9 million sales, the most since 2005.” It’s hard to say how far beyond 2021 it will continue, but unless there is a large influx of inventory, all signs point to home prices continuing to grow throughout 2021 and even potentially into 2022. And for those individuals that are predicting a flood of distressed assets once forbearance and government intervention is removed, that is starting to seem more and more unlikely. The difference between the Great Financial Crisis and any looming fallout from the pandemic is the tremendous amount of equity that homeowners have. According to Corelogic’s recent Homeowner Equity Report, “U.S. homeowners with mortgages (roughly 62% of all properties) have seen their equity increase by a total of nearly $1.5 trillion since the fourth quarter of 2019, an increase of 16.2%, year over year.” With these gains in home equity, it ensures that homeowners have a reduced risk of being underwater or in the event, they fall on hard times, there are greater options to sell rather than go into foreclosure. Where is the Inventory? So, if future distressed sales are not necessarily on the horizon, what other avenues will potentially play into housing inventory growth? While the home flipping industryis facing its own challenges due to lack of inventory and flipping activity continues to decline due to lack of inventory, new construction is having its moment. Investors looking to flip homes are running into stiff competition for properties and are also finding it challenging to find deals on properties that would provide a reasonable return on investment and are turning to new construction. While new construction is not without its own potential snags, such as constraints due to rising materials and lumber costs, single-family home starts are rising and are projected to continue to rise; thus, providing one of the best areas of opportunity to add additional inventory to the marketplace. There is also the thought that inventory levels may rise as more vaccines become available to the general public. While increases in vaccinations may cause some upticks in inventory due to people returning to cities and leaving the suburbs again for whatever reason, this will probably also not have that large of an impact. Since there was already a lack of supply pre-COVID, the best we can potentially hope for once more folks are vaccinated is for inventory to get closer to pre-pandemic levels. What About Commercial Real Estate? By all indications, many segments of commercial real estate should recover from the devastation that the pandemic caused. Areas of the market, such as the multifamily space, have already started to rebound, and look as though it will likely come out of the pandemic unscathed. In fact, multi-family housing is poised for remarkable growth throughout the remainder of 2021. Demand in this segment of the market shows indications of increasing as vaccinations increase and people and workforces begin migrating

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Investors Face Challenges Today, See Better Times Ahead

The RealtyTrac Investor Sentiment Survey™ by Rick Sharga Individual investors today face unprecedented challenges in the real estate market. Limited supply, soaring prices, and unprecedented competition from both institutional investors and traditional homebuyers. How do investors feel about market conditions today? Is the investment market better or worse than it was a year ago, and will it be better or worse six months from now? What are the biggest barriers to success for investors? And are they anticipating relief to come in the form of an influx of foreclosure properties? RealtyTrac recently completed its first RealtyTrac Investor Sentiment Survey™, surveying 150 individual real estate investors across the country to find out how they viewed the market, what problems and opportunities they faced, and what their impression was of today’s environment for real estate investing. These investors are representative of the majority of real estate investors—the typical mom-and-pop investors who purchase between 1-10 properties a year. It is these individual investors who exert the most influence on market conditions. Nearly 90% of the 19 million single family rental properties in the country are owned by these mom-and-pop investors, while the largest institutions—collectively— own less than 2%. The fix-and-flip market similarly is populated by thousands of small investors who average about one flip a month, but who now face competition from the so-called iBuyers like Opendoor, Offerpad and Zillow, who essentially do flipping at scale. The respondents to the RealtyTrac survey were almost evenly divided between fix-and-flip investors and those who purchased properties for the purpose of renting out these homes. How do they view today’s market, and what do they expect in the future? Some of their answers might surprise you. Three Challenges for Investors Today: Inventory, Rising Prices, and Competition from Homebuyers About 45% of investors believed that the investment market is worse or much worse than it was a year ago, but almost 40% believe that conditions will improve in the next six months. The investors cited three primary challenges in today’s market: lack of inventory, rising prices and competition from traditional homebuyers. The lack of available inventory was overwhelmingly cited by investors as the most daunting challenge—over 68% of the survey respondents listed this as one of the three biggest problems facing investors today, and over 60% believe this will still be a problem six months from now. Supply of existing homes for sale is at the lowest levels ever reported by the National Association of Realtors® (NAR). Similarly, the National Association of Homebuilders (NAHB) has reported that new home inventory is at its lowest levels since they began reporting this data in 1973. And even foreclosure inventory is at historically low levels according to RealtyTrac. Meanwhile, demand from homebuyers is growing rapidly. This demand is being driven by three factors. First, historically low interest rates, which improve affordability, and actually make it cheaper to pay monthly mortgage payments on a 30-year fixed-rate loan than it is to pay rent in many markets. Second, demographic trends. Millennials, the largest generation in U.S. history, have the largest cohort of their age group arriving at the prime age for 1st-time homebuying. And Gen-Xers are hitting their peak years for move-up buying. Finally, the COVID-19 pandemic accelerated the transition of urban renters to suburban homeowners, as tenants left high-cost cities (especially New York City, San Francisco, San Jose and Seattle). The unprecedented demand has created an unusual market dynamic for individual investors: instead of competing with larger institutional investors, mom-and-pop investors find themselves competing with more traditional consumer homebuyers. Over 36% of those surveyed cited this competition as one of their three biggest challenges, edging out the fourth most-cited challenge, the rising cost of materials, which was cited by just over 32% of the respondents. The increase in home prices was identified as the second-biggest challenge (over 58%) by the investors. Fix-and-flip investors found these prices to be more problematic than rental investors, which makes sense since flipper ROI depends to a great extent on the ability to buy a property at enough of a discount to be able to spend money on repairs and still turn an acceptable profit. And while investors generally expect market conditions to improve, they’re less optimistic about home prices. About 56% of those surveyed expect prices to continue to rise over the next six months, with 18% expecting the prices to go up by more than 5% during that time. Interestingly, investors don’t appear to be concerned with their ability to secure financing today, although they’re less certain about that in the future. Only 8% cited access to capital as a barrier today, while over 15% are concerned that it might be an issue six months from now. And, while just under 9% are concerned about rising interest rates today, almost 33% believe that rising rates are coming their way in the next six months. Will Foreclosures Provide Relief? Foreclosure activity today has virtually ceased due to the government’s foreclosure moratorium and the CARES Act mortgage forbearance program. Since these programs began, RealtyTrac data has shown year-over-year declines in foreclosure actions of between 70-80% a month. And the inventory of homes in foreclosure is now at the lowest level ever recorded in the RealtyTrac database. While it’s unrealistic to expect that default activity won’t rise somewhat after these government protections expire, the investors answering the survey aren’t expecting a flood of distressed properties. About 37% of the respondents believe that foreclosure activity will return to its normal, historical level (about 1% of mortgage loans in a given year), while 30% said that foreclosures will surpass normal levels, but remain well below the levels seen during the Great Recession. With a record $21 trillion in homeowner equity, it’s likely that most homes in default will sell prior to the foreclosure auction, and very few will ultimately be repossessed by the banks and subsequently listed for sale. Continued challenges with low inventory and rising prices, higher interest rates, and ongoing competition from homebuyers—and yet these investors

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Prospecting Is Getting Harder in the SFR Gold Rush

Use Smart Technology to Strike Gold by Tim Reilly A confluence of forces has turned the market for single-family rental (SFR) properties into something resembling a gold rush. As buyers, speculators and institutional investors lean into the market in search for real estate value, the odds of finding an overlooked nugget in the gold mine are decreasing. Timing is the key, and smart buyers who are prepared to act quickly are using the latest tools to find and analyze new properties as soon as they hit the market.    Soaring Home Values Create Opportunity for SFR Investors Despite the global pandemic and the economic dislocation it triggered, the national real estate market is showing unprecedented strength due, in large part, to a continued supply and demand imbalance. According to a recent Freddie Mac housing analysis, the housing stock is about 4 million single-family homes short to meet the national demand. And, as a direct result of the imbalance, home prices nationally appreciated at an annualized rate of 9.3% in the second half of 2020, according to the Radian Home Price Index. Across the country, states set records in nearly all transactional categories, including 47 states reporting the highest average sales price on record, and 31 states reporting historically low days on market to sale. Although a housing stock shortage is the linchpin underlying the lack of supply, a host of pandemic-related factors have been fueling the housing demand. Historically low interest rates, shifting preferences for suburban housing, and COVID-related household consolidation have acted like gasoline on a lit fire. As the pandemic forced millions of Americans to lock down and work remotely, demand surged for bigger houses away from crowded urban areas.  And, as more people were priced out or frightened away from the competitive purchase market, the demand for single-family rentals exploded. According to the Census Bureau, occupancy rates across single-family rentals averaged over 95% in the second half of 2020—the highest in nearly 40 years. The surge in demand also translated to gains in rental rates. Morningstar reported annualized rent growth on vacant-to-occupied properties rose to a high of 7.5% in October 2020. These trends indicate strong, stable investment for SFR owners who are able to get their hands on properties. A Gold Rush for SFR Properties SFR homes make up only 11.7% of total national housing stock, according to John Burns Consulting, representing about 16.4 million properties out of a much larger 150 million plus single-family home universe. Most of the rental properties are owned by individuals, known as “mom and pop” landlords, who own a handful of properties each. And further, institutional SFR owners, both large and small, make up just a fraction of the overall SFR market representing about 220,000 properties. Therefore, the larger US housing market is ripe to be “mined” and aggregated by SFR investors.   Meanwhile, as commercial property investments have taken a negative turn due to pandemic pressures, there is a huge amount of money sitting on the sidelines looking for an attractive real estate investment. The Wall Street Journal reported late last year that there is more than $150 billion of private-equity real estate cash looking for a stable investment haven. With traditional hotel and office holdings in limbo, those firms are now looking closely at SFR properties. Perfect market conditions—supply constriction, low rates, rising home prices and rising rents coupled with smart money looking for strong returns—are creating a single-family housing gold rush comparable to the fervor of California in 1849. The challenge for the property prospectors is finding the perfect nugget with increased competition from other investors and homebuyers all looking for the same hidden treasure. Using Technology to Intelligently Mine Leads Investors who leverage smart technology coupled with analytics have a better chance of striking gold before the competition. Those investors still relying on manual searches and outdated technology might as well be panning by hand in the rushing stream. SFR investors need to deploy cutting edge technology and nimble strategy to find their nuggets of gold.  Some of the tips and techniques to help the SFR investor community include: Customize your buy box filters to identify your ideal investment criteria. Fuel your analytics with market data and related inputs to estimate rental market health and home price appreciation. Trigger real time alerts when properties that fit your investment profile hit the market so you can act immediately. Use interactive, geo-fenced automated valuation tools to assist you with nimble, accurate, and quick decisioning. Make informed decisions through a customized workflow that allows you to change your requirements as the market fluctuates by deploying and utilizing a property management/buy platform. Leverage an automated pricing engine and incorporate trending analytics to help you estimate sales prices or rental values. If you have not yet optimized your tech stack for property acquisition, you may be losing out on opportunity to build your rental portfolio. Finding the right technology partner will maximize your chances of success in the red hot SFR housing market. Combining better analytics and management tools with a unified technology-driven acquisition platform will augment your buying strategy and increase your ability to strike gold.

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Security Deposit Replacement Insurance

A New Sought-After Amenity by Adam Meshekow Everyone remembers their first time renting an apartment and having to put up a security deposit. I certainly remember. After finishing college, I moved to New York City and, after an exhausting search, found my dream studio apartment in Greenwich Village. Only when reviewing the lease terms did it become clear to me that the security deposit would wipe out all the savings I had earned during the past four summers of college. Security deposits have been used for generations to limit the amount of risk that a landlord takes when renting out an asset. In most jurisdictions, landlords are required to follow strict rules and regulations governing how much they can demand, how to hold security deposits, and to what they can be applied against. The process of administering, accounting for, and returning security deposits represent a cost center for landlords across the country, costing $35-$60 per door to manage. As rents have steadily risen over the past decade, so too has the average size of cash security deposits. Prospective residents need to come up with a substantial amount of cash to move into a new home. In a city like Boston or New York, where it is customary to put up a one-month security deposit, move-in costs can easily exceed $5,000. It should be clear to all by now that cash deposits are a poor form of self-insurance for the landlord and an inefficient use of capital for all parties. When they are applied in the case of a default, they rarely cover the total losses incurred. An Alternative to Security Deposits Pandemic-driven headwinds, pro-tenant legislation and innovative new products are quickly changing the landscape for security deposits. Today, cash deposits are being replaced by smarter alternatives—soft capital solutions to replace hard cash deposits. These new security deposit alternatives free up critical tenant liquidity which is important in today’s declining credit environment. For example, let us say that a landlord’s average security deposit is $1,000. With security-deposit replacement insurance, the renter would instead pay about $10 a month, and the landlord would receive the same $1,000 in rent and damage protection. In July 2019, the State of New York passed sweeping rent reform law. In part, the bill limited the amount that landlords can require as a security deposit to one month. Soon after, several states followed suit. In recent months, certain cities have passed legislation that goes even further. For example, the city of Atlanta began requiring landlords to provide tenants with installment plans for security deposits or to offer security deposit replacement insurance. Today, there are a dozen states in varying stages of considering legislation that, if passed, will require landlords to offer similar alternatives to traditional security deposits. The next generation of renter is the “subscription model generation”. Generation Z are used to paying monthly fees (think Netflix, Spotify) and using new financing tools (Affirm, Klarna) in lieu of putting cash up front. Generation Z moves frequently and demands flexibility. Market data shows that when a security deposit alternative is offered, roughly 90% of Gen Z choose to keep their cash and go with the alternative. In the near future, this new apartment generation will consider a small monthly payment for security deposit replacement insurance as an amenity. Those who do not offer a choice to tenants will find themselves at a competitive disadvantage.

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