Multifamily still delivers as investors avoid rent control

Investors are still paying top dollar for multifamily assets — if they are outside of the reach of rent control.

Across the country, investors paid more on average per apartment in the third quarter of 2019 than they did in 2018 — $158,296 per door, up from $151,766 in 2018 and $106,074 in 2012, according to an analysis by Marcus & Millichap, the Wall Street Journal reported.

But investors are avoiding areas that are subject to rent control or in danger of getting it.

Kushner Companies and Harbor Group International both made sizable multifamily investments last month.

In New Jersey, Kushner struck a deal to purchase a 1,058-unit rental apartment portfolio for $266.5 million, where six of the seven buildings are not covered by New Jersey’s version of “good cause” eviction. Harbor Group purchased 13,243 apartment units valued at $1.85 billion in eight southern and mountain-region states.

The two companies intend to make a profit by raising rents — a strategy that has come under fire from tenants’ rights advocates and progressive politicians. The average national rent after discounts has gone up 44 percent since 2010 to $1,426 in the fourth quarter of 2019.

Investors anticipate rent increases will continue to exceed inflation because of low housing production. Housing starts for rental apartments and single-family homes were at a seasonally adjusted annual rate of 1.61 million in December 2019, compared with 2.07 million in 2005.

Since 2012, about 9.8 million households have been formed while just 5.9 million single-family homes were constructed, according to listings website Realtor.com. The site found it could take five years to fill the void of 3.8 million homes. But last year single-family home construction starts per 1,000 households rose to 7.3. In 2012 the rate was 4.6. [WSJ] — Georgia Kromrei