Good morning, and welcome to Camden Property Trust's Fourth Quarter 2021 Earnings Conference Call. I'm Kim Callahan, Senior Vice President of Investor Relations. Joining me today are Ric Campo, Camden's Chairman and Chief Executive Officer; Keith Oden, Executive Vice Chairman and President; and Alex Jessett, Chief Financial Officer. If you haven't logged in yet, you can do so now through the investors section of our website at camdenliving.com. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. Today's webcast will be available for replay this afternoon, and we are happy to share copies of our slides upon request.
Before we begin our prepared remarks, I would like to advise everyone that we will be making forward-looking statements based on our current expectations and beliefs. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially from expectations. Further information about these risks can be found in our filing with the SEC, and we encourage you to review them. Any forward-looking statements made on today's call represent management's current opinions, and the company assumes no obligation to update or supplement these statements because of subsequent events. As a reminder, Camden's complete fourth quarter 2021 earnings release is available in the investors section of our website at camdenliving.com, and it includes reconciliations to non-GAAP financial measures which will be discussed on this call.
We hope to complete our call within one hour, and we ask that you limit your questions to two, then rejoin the queue if you have additional items to discuss. If we are unable to speak with everyone in the queue today, we'd be happy to respond to additional questions by phone or email after the call concludes. At this time, I'll turn the call over to Ric Campo.
Good morning. The opening ceremonies for the 2022 Winter Olympics are today. As you could tell from our on-hold music and slideshow, Team Camden has embraced the Olympic spirit. The Olympic theme sent me down memory lane and into Camden's archives for the video I'm gonna show you today. During the 2012 Summer Olympics, the U.S. women's swim team made a video using a very popular song titled Call Me Maybe. At Camden, we are proud to be a friendly and welcoming workplace. One unique way we show this is by greeting teammates with a hug instead of a handshake. Camden employees probably give and receive more hugs per day than any other workplace in America. If you combine our hugging culture with the Olympic spirit, a Call Me Maybe video becomes a Hug Me Maybe video.
Following the 2012 Olympics, this happened at our corporate office.
I sent my resume in. Got interviewed by Oden. I got the job, what a win. And now I'm here to stay. My first day full of zeal. I can't believe this is real. I didn't know I would feel it. But now I'm here to stay. Nine values we're holding. Key strategies are showing. Greenbird feathers blowing. And up is where we're going, baby. Hey, I just started, and this is crazy. So come on over and hug me maybe. Yeah, start it off right for you, baby. 'Cause we're all family, so hug me maybe. Hey, I just started, and this is crazy. But come on over and hug me maybe. And all the other REITs, they try and chase me. Won't get my number. We're Camden, baby. Our teams work to be best. There is just no contest. Camden is not like the rest.
Now I'm here to stay. Fall frenzy, what a success. Performance with finesse. Wait, is that Rick in a dress? Oh, yeah, I'm here to stay. Happy, we're all smiling. Career where we are styling. Seventh best and up we're flying. Next year we'll be number one, baby. Hey, I just started, and this is crazy. Come on over and hug me maybe. Yeah, start it off right for you, baby. 'Cause we're all family, so hug me maybe. Hey, I just started, and this is crazy. Come on over and hug me maybe. All the other REITs, they try and chase me. Won't get my number. We're Camden, baby. Before I started at this place, I was just so sad. Camden's so rad. Now I'm so glad. Before I started at this place, I was just so sad.
You should know that the Camden's so rad. Hey, I just started, and this is crazy. Come on over and hug me maybe. Yeah, start it off right for you, baby. 'Cause we're all family, so hug me maybe. Hey, I just started, and this is crazy. Come on over and hug me maybe. Before I started at this place, I was just so sad. Camden's so rad.
One of the many adjustments in Camden's world caused by social distancing during the pandemic was replacing actual hugs with virtual hugs. Since Camden is a fully vaccinated workplace, we have recently seen an uptick in breakthrough cases of actual hugging in our workplace. We all look forward to the day when all virtual hugs at Camden will become actual hugs. 2021 turned out to be a remarkable year, and we clearly exceeded our original guidance that we provided at this time last year. Our 2021 budget called for FFO of $5 per share, with same-property revenues up slightly and net operating income down approximately 1%. As reported last night, we closed 2021 with FFO of $5.39 per share and same-property growth of 4.3% and 4.8% for revenues and net operating income, respectively.
We expect 2022 to be our best year on record for earnings and same property growth. The midpoint of our 2022 guidance calls for FFO per share of $6.24, with same-property revenue growth of 8.75% and net operating income growth of 12%. Our geographically and product-diverse portfolio in the Sun Belt markets continue to outperform. I wanna thank each of our Camden team members for their hard work and commitment to our values, and for improving the lives of our team members and our customers one experience at a time. 2021 was a great year, but the best is yet to come. Thank you, and I will now turn the call over to Keith Oden.
Thanks, Rick. We have a tradition of assigning letter grades to forecast conditions in our markets at the beginning of every year. I'll start with a review of the supply and demand conditions we expect to encounter in Camden's markets during 2022 and rank the markets in the order of best to worst. For the first time in 10 years, Camden's overall portfolio earned an A with a stable outlook, and no market received a grade below A-. In addition, we are now providing this report card to you as part of our earnings call slide deck, which is showing now and will be posted on our website after today's call. We anticipate overall same-property revenue growth this year in the range of 7.75%-9.75% for our entire portfolio, with most of our markets falling within that range.
The outliers on the positive side would be Phoenix and our Florida markets, which should produce double-digit revenue growth. Houston and D.C., which will likely lag the overall portfolio average, but still show significant improvement versus 2021. Our outlook for supply and demand in 2022 is based on multiple third-party economic forecasts that generally reflect strong job growth in Camden's markets, coupled with a steady amount of new supply. Estimates range from 1 million-1.2 million new jobs created in our 15 major markets in 2022, along with 150,000-200,000 new completions. Our outlook reflects somewhere around the midpoint of both projections.
It is likely no surprise that for 2022, our top ranking once again goes to Phoenix, which has averaged 7% revenue growth over the past three years and has an expected revenue growth well above 10% this year. We give this market an A+ rating with a stable outlook. Supply and demand metrics for 2022 look well-balanced, with estimates calling for 80,000 new jobs in Phoenix and 18,000 new units coming online this year. Up next are our three Florida markets: Southeast Florida, Tampa, and Orlando. Each also earned A-plus ratings with stable outlooks. These three markets should achieve revenue growth of over 10% in 2022 and are projected to have strong job growth to offset new supply coming online.
Current estimates for job growth are approximately 50,000 in both Southeast Florida and Tampa and 60,000 in Orlando. Completions are expected to be 10,000, 6,000, and 9,000 units respectively. Our next eight markets all earned an A rating with a stable outlook and should produce revenue growth generally within our guidance range of 3.75%-9.75% in 2022. Atlanta, Austin, and Raleigh should achieve revenue growth toward the high end of our guidance range in 2022. In Atlanta, job growth is expected to be 90,000 with around 10,000 new apartment completions. In Austin, projections call for 50,000 additional jobs with completions of roughly 18,000 units. In Raleigh, the jobs to completions ratio should be 5x with 35,000 new jobs versus 7,000 new apartment completions.
San Diego Inland Empire and Charlotte are next, falling around the middle of the pack in Camden's portfolio. For the San Diego Inland Empire market, we expect to see over 100,000 new jobs in 2022, with new supply around 8,000 units. Charlotte should also deliver 8,000 units with 40,000 new jobs created, providing a good balance of supply and demand in that market. Nashville is Camden's newest market as we acquired two communities there last summer. While Nashville will not be included in our 2022 same property pool, we would rate the city as an A with a stable outlook. There has been a significant amount of construction in Nashville, and that will continue in 2022, with approximately 10,000 new units expected to deliver this year.
However, demand for apartment homes has remained strong in Nashville with positive in-migration trends and projections for over 40,000 new jobs. Dallas and Denver are both solid markets, and we expect market conditions to be favorable again in 2022. Supply-demand ratios in Dallas and Denver remain steady, with 95,000 and 55,000 new jobs anticipated respectively during 2022, with supply at 15,000 and 10,000 new units respectively scheduled for delivery this year. L.A. Orange County and Houston are the last two markets earning an A rating, but both have improving outlooks. Our portfolio in L.A. County saw higher delinquencies in bad debt in 2021 than our other markets, but we are hopeful that conditions will improve in 2022 as COVID restrictions begin to ease and regulatory issues around evictions are reduced.
L.A. Orange County faces healthy operating conditions with favorable supply and demand metrics. Job growth should be around 150,000, with completions of 16,000 expected in 2022. In Houston, conditions began to improve in 2021 after the market had struggled with many new lease-ups giving high levels of concessions. New supply is expected to ease in 2022 to around 17,000 units, and job growth should remain strong, with around 75,000 new jobs expected. Our final market is D.C. Metro, which we gave an A-, but with improving outlook. Supply remains steady with over 13,000 new units coming on this year, but job growth should be healthy as well, with 80,000 new jobs expected.
Similar to L.A. Orange County, Washington, D.C. has been a challenging market given the COVID environment and the many restrictions that were put in place as a result of the pandemic. While we are optimistic that 2022 will reflect an improved operating environment there, we have budgeted low to mid-single-digit revenue growth for D.C. Metro this year. Now a few details on our fourth quarter 2021 operating results and January 2022 trends. Same-property revenue growth was 8.5% for the fourth quarter and 4.3% for full year 2021. Our top performers for the fourth quarter all had over 10% revenue growth and included Tampa, Phoenix, Southern California, Raleigh, and Southeast Florida.
Rental rates for the fourth quarter had signed new leases up 16.7%, renewals up 14.1% for a blended rate of 15.5%. Our preliminary January results indicate similar trends with blended growth of over 15% on signed leases. February and March renewal offers were sent out with an average increase in the mid-14% range. Occupancy averaged 97.1% during the fourth quarter and compared to 97.3% last quarter and 95.5% in the fourth quarter of 2020. January 2022 occupancy has averaged 97.2% compared to 95.7% in January of last year and is slightly up from our fourth quarter 2020 levels.
Annual net turnover for 2021 was in line with 2020 at 41%, and move-outs to home purchases were 15.8% for the quarter and 16.4% for the full year of 2021, relatively in line with our reported 15.8% for full year 2020. I'll now turn the call over to Alex Jessett, Camden's Chief Financial Officer.
Thanks, Keith. Before I move on to our financial results and guidance, a brief update on our recent real estate activities. During the fourth quarter of 2021, we purchased Camden Greenville, a recently constructed 558-unit mid-rise community in Dallas, and we purchased five acres of land in Denver and two acres of land in Nashville for future development purposes. For the full year of 2021, we have completed acquisitions of four communities with 1,684 apartment homes for a total cost of approximately $633 million, ahead of our original 2021 acquisition guidance of $450 million, and we acquired four undeveloped land parcels for a total cost of approximately $72 million.
Additionally, during the quarter, we disposed of two operating communities in Houston and one operating community in Laurel, Maryland, for total proceeds of approximately $260 million. These three dispositions were on average 21 years old, with average monthly rents of $1,350 per door and annual CapEx of approximately $2,300 per door. Using actual CapEx, these dispositions were completed at a 3.9% AFFO yield, generating a 10.5% unleveraged IRR over a 20-year hold period. Based on a broker cap rate, which assumes $350 per door in CapEx and a 3% management fee on trailing 12 months NOI, the cap rate would have been 4.3%.
Finally, during the quarter, we stabilized ahead of schedule Camden North End II, a 343-unit, $79 million new development in Phoenix, generating an approximate 8.75% yield. We completed construction on Camden Hillcrest, an $89 million new development in San Diego. On the financing side, during the quarter, we issued approximately $180 million of shares under our existing ATM program. Moving on to financial results.
Last night, we reported funds from operations for the fourth quarter of 2021 of $160.2 million or $1.51 per share, exceeding the midpoint of our prior guidance range by $0.02 per share. This outperformance resulted primarily from higher levels of occupancy and rental rates at our non-same-store acquisition and development communities and lower taxes and utilities at our same-store communities. For 2021, we delivered full-year same-store revenue growth of 4.3%, expense growth of 3.5%, and NOI growth of 4.8% as compared to our original 2021 same-store guidance of 0.75% for revenue, 3.5% for expenses, and -0.85% for NOI.
You can refer to page 27 of our fourth quarter supplemental package for details on the key assumptions driving our 2022 financial outlook. We expect our 2022 FFO per share to be in the range of $6.09-$6.39, with a midpoint of $6.24 representing an $0.85 per share increase from our 2021 results. This increase is anticipated to result primarily from an approximate $0.79 per share increase in FFO related to the performance of our same-store portfolio. At the midpoint, we are expecting same-store net operating income growth of 12%, driven by revenue growth of 8.75% and expense growth of 3%. Each 1% increase in same-store NOI is approximately $0.065 per share in FFO.
An approximate $0.35 per share increase in FFO related to the growth in operating income from our non-same-store, joint venture, and retail communities, resulting primarily from higher rental rates, lower bad debt, and the incremental contribution of our four acquisitions completed in 2021 and our nine development communities in lease-up during either 2021 and/or 2022. An approximate $0.07 per share increase in FFO due to an assumed $600 million of pro forma acquisitions spread throughout the year at an initial yield of 3.5%.
This $1.21 cumulative increase in anticipated FFO per share is partially offset by an approximate $0.11 per share decrease in FFO from our completed 2021 dispositions, an approximate $0.04 per share decrease in FFO from an assumed $250 million of pro forma dispositions anticipated to primarily occur late 2022, an approximate $0.03 per share decrease in FFO resulting primarily from the combination of lower interest income from lower cash balances, higher franchise and margin taxes, and higher corporate depreciation and amortization. Our combined general and administrative, property management, and fee and asset management expenses are anticipated to be effectively flat year-over-year, and an approximate $0.18 per share decrease in FFO due to the additional shares outstanding for full year 2022 following our 2021 ATM activity.
Our revenue growth midpoint of 8.75% is based upon an anticipated 11% average increase in new leases and a 7% average increase in renewals. We are also anticipating that occupancy will moderate slightly to 96.5%. Page 27 of our supplemental package also details other assumptions for 2022, including the plan for $400 million-$600 million of on-balance sheet development starts spread throughout the year with approximately $315 million of annual development spend. We expect FFO per share for the first quarter of 2022 to be within the range of $1.45-$1.49.
The midpoint of $1.47 represents a $0.04 per share decrease from the fourth quarter of 2021, which is primarily the result of an approximate $0.02 per share decrease in FFO resulting from our fourth quarter 2021 dispositions, an approximate $0.01 per share decrease in sequential same-store net operating income resulting primarily from the reset of our annual property tax accrual on January 1st of each year and other expense increases primarily attributable to typical seasonal trends, including the timing of on-site salary increases, and an approximate $0.01 per share decrease in FFO due to the additional shares outstanding from our fourth quarter 2021 ATM activity. Our balance sheet remains strong, with net debt to EBITDA at 3.8 x and a total fixed charge coverage ratio at 6.4 x.
As of today, we have approximately $1.4 billion of liquidity, comprised of approximately $500 million in cash and cash equivalents and no amounts outstanding under our $900 million unsecured credit facility. At quarter end, we had $199 million left to spend over the next two years under our existing development pipeline, and we have no scheduled debt maturities until late 2022. Our current excess cash is invested with various banks, earning approximately 15 basis points. At this time, we'll open the call up to questions.
We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys.
Our first question comes from Haendel St-Juste with Mizuho. Please go ahead.
Hey, good morning. Appreciate all the market color, all the detail. I had a question more so on the I guess we're starting to see a bit of a divergence here in the new lease rates, and renewals. The new lease rates continue to accelerate, renewals slowing a bit. How should we think about that relationship near term? I expect new lease rates to come under more pressure as we face tougher comps, but I guess I'm curious also which markets are you seeing the best and weakest pricing power on renewals? What's causing the drag? Thanks.
Yeah. Haendel, the gap between new leases and renewal rates is something that moves around quite a bit, primarily because of what we do on renewal rates. From time to time, depending on what's going on in a market or a sub-market, we might put in place renewal caps, which is not something we would ever do on new lease rates, not in this environment. It's gonna move around a little bit depending on, you know, kind of what it's literally our pricing team looking at the trends day to day and making recommendations.
I think in the first quarter, we had a couple of markets that we had renewal caps in place, but I mean you're talking about renewal caps on a what might have been as much as a 20%+ renewal rates, being capped at 18% and that would've been in some place like Tampa, St. Petersburg. It's not unusual for that to move around. I would expect to see that over the course of the year you probably will see a narrowing in that. I think our guidance as Alex pointed out has new leases at 11% over the course of the year and renewals at 7%, so it's not too far off of where we are right now.
It's clear it's absolutely part of the art and science of revenue management, and it's just our revenue team looking at current trends and making recommendations.
Got it. No particular market of note on the renewal side that you're seeing a more meaningful difference in any form?
I would say, you know, when we talk about less strength, I mean, I think that's the overriding message of all the dataset that we sent out last night. I mean, you're talking about pretty unprecedented levels of both new lease and renewal rates across all of our markets. We had 12 of our 14 markets with double-digit NOI growth in the fourth quarter, and that trend has continued into the first quarter.
You know, somebody always has to be at the bottom, and right now Washington, D.C., is at the bottom, and some of that is the drag from the D.C. Metro properties where we are really precluded from, you know, finding a market clearing rate for the communities, the apartments that we have there. But overall, these are, I think the lowest grade that we gave was an A-, and that was Washington, D.C. This is the first time we've ever had that happen in our portfolio. Obviously, a lot of strength out there.
Yes. Yes. Very well noted. Actually, your comments lead me to my second question, which is I guess your longer term views on your Houston and D.C. portfolio exposures here. You know, both markets haven't exactly been the strongest of late, although they're improving, at least the outlook for this year. I guess I'm curious on your exposures here. They're your two largest markets. You're increasing exposure to other smaller Sunbelt markets. You've sold a few assets in Houston this past quarter. I guess how do we think about your exposure there over the next few years? Do these markets become source of the fund for your expansion into some of these other smaller, higher growth Sunbelt markets? Thanks.
Well, Haendel, that's exactly what our strategy has been. We talked about it on the call last time, which was we were going to use this environment to sell down Houston and D.C. and then expand our portfolio into, you know, increase the exposure in some of the markets that we're underweighted in. You know, ultimately, that's our strategy. It's gonna take us a few years to get there, but it makes a lot of sense. I mean, clearly, geographic diversification and I think ultimately as we, you know, do that sort of portfolio redistribution over the next couple of years, you know, it will help us be more geographically diverse.
If you look at the last cycle in terms of how much we bought and sold, I mean, we really transformed the portfolio from 2010 through about, you know, 2020 to the pandemic and we sold on average, you know, 26-year-old assets and redistributed that cash flow, sold out of Las Vegas. You know, so we did a lot of portfolio management then. One of the numbers I thought was really interesting, if you look at how many sales we did relative to our total asset base in 2010, we redistributed 44% of our NOI around the country as a result of those transactions. You know, where we sold assets nearly $3 billion, we bought properties, and then we also developed properties.
We'll continue that. I think you know this environment gives us the opportunity to do it on a very low spread basis where we're not giving up a lot of cash flow given the amazing market that people wanna buy you know older properties. That's kind of the hottest spot on the market right now, even though all of it's very hot for sure.
Yeah, that's helpful. Is there any pricing difference or are you noticing any significant demand difference in selling, say, Houston assets versus, D.C., given some of the challenges you noted earlier?
You know, early on, there was a sort of a pricing differential in Houston relative to other markets and in D.C. a bit. That has vanished because the wall of capital. I mean, when you look at what's happened, I mean, in 2021, you know, there was roughly almost $350 billion in multifamily transactions. Just to put it in perspective, gateway markets, the sales were up 8% from the prior year, and in non-gateway markets they were up 96%. All the non-gateway markets is where the capital went. For us, when we started talking...
I think last year when we talked about selling down and redistributing these assets, we talked about perhaps having 100-125 basis point negative spread on the cap rates, and that's narrowed to under 50 because of that you know the massive bid for those properties. There is no discount today in Houston or in you know or in D.C. I think the other part of that equation is you know when you think about Houston you know Houston added 154,000 jobs this year. It's gonna add 75,000 jobs next year. 2022 is the year where energy companies are actually hiring, and that has to do with $90 oil.
Some people are thinking that oil is gonna, you know, go to over 100. The bottom line is that while Houston has not added all of its jobs back from the pre-pandemic level, and all of the other cities in Texas have, Houston has gas in its tank. It is our lower, you know, Houston and D.C., while they're the lower growth cities today, you know, they have gas in their tank because we haven't been able to push them as hard as other cities. D.C., as Keith mentioned, you know, in our district, we have, you know, some really significant assets that we cannot raise renewal rates.
You just have to renew it at the original number, you know. You have a lid on the market there, and that's what's driving sort of D.C. to be at the bottom of our growth. Even when you look at the Houston number, I mean, we're in a normal year I'd be cheering Houston. The problem is you got these markets like Tampa and Phoenix that are just out of control good, and so the slowness of Houston makes you feel like it's dragging because, you know, I mean, it is on a fundamental basis, but it, you know, it's still really good. Well above trend for Houston.
I think we have the benefit of, you know, more growth there, when other markets perhaps start slowing in the future.
Great. That's fantastic color. Appreciate the time and the insights. Thank you.
Our next question comes from Derek Johnston with Deutsche Bank. Please go ahead.
Hi, everybody. Thank you. Can you touch on the 2022 expense environment kind of baked into guidance, really in regards to taxes and payroll pressures? You know, it generally seems to be a favorable setup, but any additional color on, you know, possible tax rate increases or expectations given that the expenses, you know, seem to remain largely in check?
No, absolutely. We're anticipating that property taxes are gonna be up about 3.3% in 2022. A large component of that is some significant property tax refunds that we've already settled the cases, and it's just a matter of receiving the checks. To give you an idea, our total property tax refunds in 2021 was about $2.2 million, and we're expecting about $3.1 million of refunds in 2022. That's one of the primary drivers of the property tax number being, you know, relatively mild at 3.3%.
The other thing I'll point out is that rates in Texas, so both Houston, Austin, and Dallas, rates came in much lower than we had originally expected for 2021, and I think that bodes very, very well for 2022. If you think about the rest of our expense categories, we continue to do a really good job of controlling and being more efficient with our marketing spend. A lot of that is driven by the technological advancements that I've talked about in prior quarters. We're seeing the same thing on the salary side.
You know, if you think about the technological advancements that we've talked about, including installation of Smart Access for all entranceways, which not only improves the customer experience, it also provides efficiencies for our maintenance teams and then most importantly facilitates self-guided tours. We're also improving our sales process through our Funnel implementation, which is our sophisticated customer relationship management tool, and then also a marketing automation platform. When you put all of that in place, and then we're also working on AI, that all helps to sort of counter some of the inflationary expense controls in 2022 and beyond. So that that's really the primary drivers, and that's why we feel pretty good about the 3% number.
No, that's very helpful. Thank you. Yeah, in this quarter and last year, the land acquisitions certainly show a commitment to develop even amid rising construction material, labor costs. Are rising rents encouraging enough to further ramp development now? I mean, what yields would you expect on any new starts, or what yields would you need to make a project a go? You know, especially when you look at apartment cap rates for acquisitions, especially the new stuff you like, you know, are so tight down in the mid to high threes. You know, what development yield kind of makes a project a go, and what's the minimum or what's the tipping point?
Ric, you're on mute.
You're on mute.
The development yields are what we look at as our unlevered IRR over a seven-year period. You can talk about it from that perspective. Clearly, you know, the good news is that the rental rates have risen faster than construction costs, at least in this cycle, which is pretty amazing. Just to give you some data points. The 600 + if you take the $600 million we have under construction plus the $200 million that we've already finalized, we have cap rates. Our initial yields on stabilization have actually gone up because of the rise in interest rates or the rise in rental rates to roughly 6%, you know, sort of going in yield.
When you look at our pipeline that we have, which is roughly another $1 billion-$2 billion, something like that, most of the sort of average that we're sort of looking at, those are gonna be in the fives, low fives probably. We haven't really updated the model numbers on both costs and the rents in those pro formas. When you look at cap rates in the low threes and existing yields in the fives, clearly a development is a preferred option when you think about risk/reward and the returns that we're making. We have pressed our development people to try to, you know, expand the pipeline. If you look this year, we're gonna...
You know, our midpoint is half a billion dollars to starts, which will take our pipeline back up to a little over $1 billion, or at least our construction progress up to $1 billion. You know, it's a really good business right now and you know, one of the challenges obviously is the forward-looking start numbers, and those are also peaking. You know, we're long-term holders obviously, so we can work through those cycles. You know, I think it's hard if you ask me could we double our pipeline and go from $1 billion-$2 billion, really hard to do, just given timing and just what it takes to get a development done. You know, we're
You know, we usually do $300 million a year, and we'll do $500 million this year, and hopefully maybe something like that next year. At the margins, we're comfortable in that $1 billion, you know, $2 billion, $3 billion range.
Thank you.
Our next question comes from Nick Joseph with Citi. Please go ahead.
Thanks. What's the current loss to lease for the portfolio? For the 11% increase assumed on new leases, how does that look in the first half of the year versus your expectations in the back half of the year?
Yeah. If you look at current loss to lease, and there's. You know, as we've talked about in the past, because of dynamic pricing, there's lots of different ways you can sort of slice this number. If you look at all of the new leases that we signed in December and you compare those to the effective leases in place, that would put loss to lease sort of in the 10%-11% range right now. That's sort of where we are. If you think about the way we are anticipating 2022 to sort of roll out, we're anticipating continual very strong numbers in obviously in the first quarter and then second quarter, third quarter we get into sort of our peak periods.
We are expecting seasonality to start kicking in towards the latter part of the third quarter and the fourth quarter. You'd start to see a lot of that coming back down.
Thanks. Just on rental assistance, I think you had $5.3 million in the third quarter. What was that number in the fourth quarter, and then what is assumed in 2022 guidance?
Yeah. Absolutely. The $5.3 million in the third quarter, that was total. On a same store basis for the third quarter it was $4.2 million. That did increase to $5.1 million in the fourth quarter of 2021. That gave us for a same store basis about $12.5 million for 2021. What we've got in our assumptions today is that we're gonna recognize about half of that amount in 2022.
Thank you very much.
Mm-hmm.
Our next question comes from Brad Heffern with RBC. Please go ahead.
Hey, everyone. Alex, just as a follow-on to that last question about new lease growth. You know, you have the 15%+ number in January, and it seems like you can probably sustain, you know, double digits through the second quarter before the comps get really tough. Just to hit the averages that you talk about, it seems like it would be some sort of, you know, low mid-single digit number in the second half of the year to hit the averages. Is that the right way to think about it? And is that kind of what we should think about as your expectation for market rent growth from where we are right now?
Yeah. Absolutely. I think that's probably a pretty good way of thinking about it. If you sort of look at December of 2021 to December of 2022 and what do we think market rent growth is gonna be over that period, you know, we think it's sort of in the, you know, call it the 4%-5% range. You've obviously got the loss to lease that we're gonna be able to recognize partially throughout the rest of the year.
Okay. Got it. On the balance sheet, you know, obviously this quarter you ticked below the bottom end of, you know, your typical 4%-5% range. I'm curious for funding needs beyond the dispositions in 2022, should we expect that those will come from debt, or do you have a desire to keep the balance sheet maybe cleaner than it would normally be just given the place in the cycle?
Yeah, you know.
Well, we've always had this stated view that we should have our debt-to-EBITDA in the 4%-5% range. We're obviously below that as a result of the equity issuance, but we also have net acquisitions or a net investment when you take acquisitions minus dispositions plus development spend. When we execute all that, and we'll get that debt-to-EBITDA back into the middle part of the equation. You know, today it's an interesting time when you look at the ability to put permanent capital on the books with and then deploy that capital into what's a very frothy acquisition market.
I've never seen our AFFO yield under 3% on our stock price, you know, generally in my business career. I think we have a green light to use every source of capital, and we will continue to be in that band. When it's opportunistic for us to issue equity, we will. When it's opportunistic to issue debt, we will. We'll stay in that band generally.
Great. Thank you.
Mm-hmm.
Our next question comes from Neil Malkin with Capital One Securities. Please go ahead.
Hey, thanks. Good morning, everyone. First question, a little bit bigger picture. You know, you guys have a unique insight into sort of the divergence between Sun Belt and Coastal to some extent. You know, you have the D.C. and then obviously Southern California. I'm wondering, you know, I've heard kind of mixed things between some people who have elevated Coastal exposure kind of being incrementally positive and seeing people return to the office or whenever that happens, maybe in 2025. You know, expecting solid growth and sort of almost like a return to normal in a California market, kind of like a pre-COVID type of thing.
At the same time, you're seeing amazing historic levels of in-migration to your Sunbelt markets and just very strong growth as evidenced, you know, by where you are relative to pre-COVID rent levels. I'm just wondering if you can kind of give your view on over the next, call it three years, you know, what you see, you know, in terms of job growth, population growth, migration, you know, in the Sunbelt versus, you know, kind of what you're seeing in California, and if you just think, you know, California may be, you know, a little bit impaired, just given the significant outflow of businesses and people. Thanks.
Yeah, you know, we do have a little bit of a unique perspective because we've operated in the coastal and the Sunbelt markets for many years now. Yeah, I think, I mean, our general has been that the patterns of migration from coastal markets, in particular California and the Northeast, into the Sunbelt markets that was already in place pre-COVID clearly accelerated during COVID. But our view is that when it all settles back down to a more normal pattern, you're still gonna be left with the normal, with the pre-COVID trends of migration to the Sunbelt for reasons that really don't have anything to do with COVID and the experience, although that clearly was an accelerator.
Interestingly enough, in California for 2022, based on our game plan, California is really not gonna be a drag on the portfolio in 2022. You know, the job growth that's happening in L.A. County versus the number of new starts there, you know, puts that particular market in a really good place. We still have some, you know, kind of fighting the regulatory construct in California, but we do anticipate that that will improve in 2022. I think we are gonna get some relief. In D.C., our issue in D.C. relative to the balance of the portfolio, as Ric Campo mentioned, is more a D.C. proper experience for us. The Metro.
There are a couple of outliers in the D.C. Metro suburban markets where you know there's still some regulatory constructs in place but they're minor in the overall scheme of things. I think that both of those markets post-COVID post-regulatory constructs are still gonna be going through the reset in rents that a lot of America is already in the midst of. I don't think they're gonna get passed over in the sense of you know that we're gonna come out of this and look back two years from now and there was a reset that didn't include the last 10% up in both California and D.C. and in the D.C. Metro market. It's just gonna come at a different timing. As Rick mentioned I mean it's kind of
It kind of bodes well for us as we roll through 2022 to have two of our larger markets, and then I'd throw Houston in that basket as well, because we're not gonna get the reset all at the same time as we got in our other markets in Houston. You have three of our largest markets that are kind of going through the reset at a different phase than the others. Our view fundamentally hadn't changed about the investment thesis for why we're in California and why we're where we are in California, which is exclusively Southern California. The D.C. Metro market, you know, I think is due for a nice recovery post-COVID.
I appreciate the color. Maybe just, again, on, you know, just thinking about the acquisition side, I mean, obviously putting a lot of capital to work and, you know, it's great. You know, I'm just curious to see if your underwriting standards have changed, your unlevered IRR targets, you know, have changed. I understand that your cost of capital is at historic levels, but, you know, it's just buying at a three cap and, you know, you're kind of uncertain about what the terminal or exit cap rate would be and you know, I.
Just when you're having those internal discussions, I mean, has anything, you know, changed or have you gotten more bullish on your like, sort of year one through three rent growth assumptions that make you comfortable, you know, going in at a, you know, low-to-mid three cap? If you could just maybe expound upon that and if you'd use, you know, debt more so to get an even higher, you know, positive leverage this year. Thanks.
Well, I think clearly our cost of capital has gone down, and we do adjust our hurdle rates based on our cost of capital. It's just a weighted simple model, right? It's equity, your equity cost plus your debt cost and the weighted average cost of capital, and you compare that to your unlevered IRR. So to a couple of points, one being the exit cap rate, and that's always a very tricky number, right? Which is, so what do you use? That can be all over the map. We generally try to move that up from our initial acquisition, a number by, you know, 25, 50, something like that. You know, that's obviously a crapshoot.
You know, what are cap rates and prices gonna be in 2027, right? Which is our model period. In terms of going in yields, though. When we underwriting today, I mean, if you go in and we buy a property today in Phoenix, for example, or only using an example where we actually bought one like in Nashville. In our original Nashville underwriting, the two bought properties we bought last year, you know, we had moderate growth. We bought those in May, right? We didn't have this big wave that sort of happened, and we knew it was good markets, and we knew that rents were starting to move up, but we didn't think.
We didn't realize they were gonna move up as hard and fast as they did. All of our acquisitions last year are outperforming by a substantial margin of what we thought that they'd be doing. We put in, you know, moderate growth through 2021 and forward. Today, you know, our underwriting's a little different because it just depends on where the rent roll is. We definitely are increasing rents at a faster pace in the first 12 months of the acquisition today. We start backing off of that in 2023. We probably have better than average growth in 2022 for obvious reasons, better average growth in 2023, and then we start moderating it to long-term historical numbers.
We use, you know, somewhere around three or 3.5%, depending on what it is. After that, the numbers, you know, work. If the numbers generally still work pretty well even when you're going at these low numbers because of low cap rates, because of the outsized growth you're gonna get in 2022 and 2023, we're comfortable that we're making good spreads over our long-term average cost of capital or long-term weighted average cost of capital and not underwriting so much that we have to have prices go up or cash flows go up dramatically to make those numbers work.
Okay, great. Thank you guys, and nice quarter.
Thanks.
Our next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.
Hey, morning down there. A few questions here. First, looking at this year and the rent growth, how much of the rent growth are you getting this year from the burn-off of pre-rent from last year? I'm guessing probably very few of your markets really had material pre-rent, but maybe D.C. or Southern Cal. Just sort of curious how much of this year's rent growth is coming from just the expiration of pre-rent in last year's numbers.
We don't offer concessions, and so that's not a factor for us.
Yeah, I think it was to Haendel's question or Nick's question, the 4%-5% market rent growth that you're expecting, that's on top of the mark-to-market. Basically it's all face value on face value rent.
Correct.
Okay, cool. Second question is on markets. You guys just entered Nashville, but two other markets that, you know, would seem to jump out and be naturals would be Salt Lake and San Antonio. As you guys look to recycling capital from Houston and from D.C., what's the appetite for entering additional new markets?
Well, we clearly like the markets we're in, otherwise we'd be there. You know, I think today, entering a new market, we—when we entered Nashville, we did in a pretty big way, and we did it early on a relative basis, to the big run-up in pricing and run-up in rents, and that was good. You know, those markets are interesting markets long term. San Antonio has always been kind of an unusual market. We're close to it. It's in Texas. We see it. We generally have kind of not gone to San Antonio because of the depth of the employment market there. AT&T moved there, its headquarters. They have a couple other really good things going on.
We just kind of stayed out of San Antonio because we didn't like the pace of the job market there on an ongoing basis. Salt Lake, we've looked at other markets, like smaller markets like Boise and Charleston. We just think that our markets today are, you know, are. We've got enough to say grace over, and we have enough underrepresented markets where we don't really need to get into other markets. That being said, you know, we did enter Nashville and, you know, there's clearly a. We follow these markets and try to decide whether we're gonna, you know, allocate capital, you know, there, but we have enough places to allocate capital without going to new markets right now.
Okay. Thank you.
Our next question comes from John Kim with BMO Capital Markets. Please go ahead.
Good morning. I wanted to follow up on your update of loss to lease, which Alex mentioned is 10%-11% now versus 16% just a few months ago.
Mm-hmm.
If only 20%-25% of your leases rolled in the fourth quarter and all of those went directly to market, which I think those are pretty aggressive assumptions, shouldn't that figure be at least 12%, maybe as high as 12.8% versus the 10%-11%?
Yeah, that's why I was trying to make a differentiation between if you think about the dynamic pricing, right? Our pricing is changing every single day, and if you take a sort of a snapshot at the end of the quarter, right, and you say, "This is our asking price as compared to our effective rents," then you're gonna come up with a different number. What I was telling you is that if you actually look at the leases that we've signed during the month of December, and you compare those to the effective rents, that's where you're gonna come up with sort of this, you know, 10%-11% level. It's two different ways of looking at it. If you just look at it based upon the pure asking rents, yeah, then it's gonna be about a 13% number, right?
As we know with dynamic pricing, that there is a tendency whereas pricing is sort of ticking along, and then it'll drop, and then we sign, you know, a good amount of our leases at that little drop, and then it'll go back up. Really two different ways to look at loss to lease. I think that the sort of 10%-11% is probably a better way to look at it in an environment like this. In a typical environment where you're sort of talking about, you know, 3%-4% loss to lease is not as dramatic. Clearly when we're here with unprecedented new lease and renewal increases, I think it's important that you look at it both ways.
Okay, I get that. At the same time, the market rents for your markets probably didn't see that much seasonality, I'm guessing. I would have thought that would have been a further support for that number being higher.
You know, we certainly did see some seasonality, and you can see that if you look at the effective versus the signed. We did see some seasonality, particularly in the month of December. Yeah. That's the math and that's how our numbers are working out.
You know, the seasonality we had this year was interesting because, you know, usually you're dropping rents pretty dramatically from the second quarter, third quarter, fourth quarter. What happened here is we had a slight decrease, a slight negative second derivative, but still a very robust number that you know, if you go back probably 10 years, you wouldn't see the number, the amount of rental increases that we're getting in that fourth quarter. You just wouldn't see it like that. Because the seasonality this year was very. It was like a really slow but not dramatic at all in any major market, which is usually not the case.
You know, what's happened is you just had more people coming into the market and more demand in the market, which kept occupancies high and where we didn't have to drop rents or lower renewals during this period dramatically to keep market share and to keep occupancy up, and that's just for the equation where you just have a whole lot more demand for multi-family than you have supply. It just created a very slight seasonality, but generally not like we normally have.
Right. Okay. Rick, you mentioned what development expectations are in IRRs on development starts. You had one development at 8.75% stabilized yields, coming in this period. What should we be modeling for the existing pipeline, just given how much rents have come up in the last, 12 months?
Well, the existing pipeline without remodeling it was sort of in the mid-fives, but you know, it's probably gonna be better than that. You know, it's just one of those things where we haven't really remodeled all of our pipeline development deals at this point with new rents, but also we haven't remodeled them with new costs either. You know, I think the development yields will be higher than we originally projected, but you know, it's hard to tell right now, and especially when you're talking about initial occupancies that we're looking at in my pipeline report right now. Our initial occupancies on our pipeline are into second quarter, you know, first quarter through the third quarter of 2024.
For us to kind of try to model that today, we're just not gonna do that yet. Bottom line is that it looks like this development pipeline will be a pretty robust and good pipeline.
that's the pipeline-
Is that?
of communities that we haven't started. If you think about the ones that we have started, we're looking at yields north of 6% there on average.
That 8.75%, that was truly a one-off or could there be others north of 7%?
Uh, you know, we, we, we have-
We have another one that hit over 7% in Phoenix. You know most of them are in the six's you know mid-six's to you know high five's. Some of the ones for example when you think about really urban properties or California properties those were in the low five's or five-ish when we underwrote them originally. Definitely we're gonna be better than that on those. Getting the outliers like the eight' s and the seven's. Hard to do that in this environment.
You know, given where cap rates are, you know, if you think about, you're producing a 6% or a 6.5%, and you have a 3.25 cap rate, I mean, you talk about some creation of value there, it's pretty amazing. The development margins are probably at the highest level I've ever seen them, and I said that probably in 2010 and 2011, but these are higher today 'cause cap rates have compressed so much.
Thank you.
Mm-hmm.
Our next question comes from Austin Wurschmidt with KeyBanc. Please go ahead.
Hey, guys. Thank you for the time here. Just curious what the rates are on your renewal leases that are going out into February and March?
Mid-14s.
Mid-14s? Great. Thank you. Then when you talked about some of the technological advancements and the savings that you're getting in your operating expenses. Can you give us a sense of what the total amount or breakdown of that is, that you have left to capture over the next few years?
Yeah. I would tell you that we're really on the forefront of this. Ultimately, we expect the efficiencies to continue through 2022, and really take hold in 2023 and beyond. It's obviously the trend that we're all moving towards is self-guided tours. As I said, when we rolled out our Smart Access solution, which is what you must have in order to effectively do self-guided tours, I think that's gonna be a big driver as we go forward, especially if we can start adding wayfinding, which is gonna be the sort of the next thing that we're all working towards.
I think our virtual leasing agent, which we're in the process of building out right now, I think is gonna create some real significant efficiencies as we go forward. Really excited about where we are today, but even more excited about where we're gonna be, as I said, the latter part of 2022 into 2023 and beyond.
Could you quantify, you know, how big that savings potential is or, you know, NOI creation, however you guys are looking at it, to give us a sense of, you know, how that could play out in years to come?
Stay tuned and we will continue to, as we flesh this out, give you guys better information around the actual dollar amounts. I will tell you, I think we're all very well aware that we are operating in a very inflationary timeframe right now, and we're coming out with expense growth at 3%. You can start to see that we're already capturing quite a bit.
All right. Got it. Thanks, Alex.
We'll give more clarity on that in the next quarter call.
Our next question comes from Joshua Dennerlein with Bank of America. Please go ahead.
Hey, guys. I mean, could you walk us through the assumptions that get us to the low end of your guidance? I guess I was particularly focused on kind of the rate assumptions you're assuming to get there.
Yeah. Here's what I would tell you. It's probably a little bit different. If I think about the factors that could cause us to be below the midpoint, one of the big ones is bad debt and ERAP, right? You know, we talked about that we had $12 million or $12.5 million of ERAP in 2021, and then we're anticipating about half of that in 2022. Obviously, that's a very variable item, right? That's something that we're very focused on. The other thing I'll tell you is that you know, we took our occupancy down to 96.5% from 96.9% in 2021.
You know, we'll watch that very closely. Really the third factor is how does the third and fourth quarter shake out? I mean, there are certainly you know, obviously we feel very good about our business, but there are things out there that we're all watching, which are more on the macro side, and we'll have to see how that affects the third and fourth quarters.
Okay.
I would
That makes sense.
I would add.
Yeah.
I would add one to that, which is we still do have these regulatory impediments in California and then D.C. proper, and a little bit in you know, suburban D.C. markets, where we've made some reasonable estimates of when things return to normal, and by that means you know, can you evict people who haven't paid rent for 2.5 years? Are there rental controls in place or renewal caps in place? We do believe that we're heading towards improvements and some of these things that are gonna be taken off the table as far as impediments to running our business. You know, it doesn't take.
You know, what does it take in today's environment for policymakers who have been kind of behind the curve on adapting to the pandemic as an endemic versus, you know, you get the first hint of the new variant and it just seems like all bets are off, and they retreat to the lowest common denominator of, you know, start talking about lockdowns again. I would just add that to Alex's list of, you know, kind of what's out there that could be different and create headwinds for where we are in our portfolio.
Got it. One follow-up to that. On the occupancy, that moderation you're factoring in.
Okay.
What's driving that? Is that just conservatism and what you kind of normally see when occupancy is this high, or is there something more specific that you're seeing?
Well, we don't normally see occupancy this high, so I'll point that out in the first place. You know, we're on record levels of occupancy and obviously, you know, that's one of the things that we're watching closely and we are looking at our yield management software to make sure that as occupancy gets to these type of levels, that we are pushing rents and the natural effect of that is that you would expect to see occupancy sort of curtail a little bit.
Okay.
We've been doing this for 40. 96.5 doesn't feel conservative to me.
Yeah. Begs the question, where did all these people come from?
Well, you know, that's an interesting thing because when you think about the demand, it has come. The people came out of the woodwork, right? I think what they did is, when you think about this, is that in the pandemic, there were like 1 million millennials that were missing from the market. A lot of those folks were still living at home or they were roommate scenarios and formed households. If you think about what happened then with the pandemic, everybody doubled up. You had more people that were doubled up during the pandemic. Once it started releasing, those folks had jobs, number one. Number two, they probably got raises because of the issues with, you know, that are facing employers today.
They got checks from the government, massive stimulus checks. When you think about it, probably by the end of last year, I think there were $2.7 trillion of excess savings. Now, we have about $2 trillion of excess savings. If you were cooped up and you have, you know, weariness from COVID and being around the people that you've been around for so long, you go out and form a household and rent an apartment 'cause you got plenty of money in your pocket, you got a job, and life is good. All of a sudden, this massive demand came out as a result of opening up, and especially in our markets. Now, you didn't have that happen in California or New York as fast as it did in Texas and Florida.
I think you just had a lot of people who didn't have the funds pre-COVID, but have them now because of the tightness of the labor force and the massive government stimulus.
Got it. Thank you.
Sure.
Our next question comes from John Pawlowski with Green Street. Please go ahead.
Hey, thanks for keeping the call going. Keith, can you give me a few details on how the team sets the boundaries of the bands for the letter grades and the outlook? 'Cause there's pretty big disparities between jobs and completion ratios. You take a look at Atlanta, at nine jobs per unit delivered. You take a look at Austin, sub three, yet they're the same grade and the same outlook. Any additional commentary would be great.
Yeah. The primary driver, John, is first of all, we're only looking at one year out. We're looking for the forecast year. If I were given three-year or, you know, letter grades, they would probably move around somewhat. The primary driver is just looking at revenue growth that's in our forecast model. If you... You either have to grade on a curve, which I don't do, and I didn't do as a 22-year-old graduate assistant teaching cost accounting at the University of Texas. I'm not gonna change now. I don't grade with a curve.
When the lowest revenue growth in your entire portfolio for the year forecast is D.C. at 4%, you know, four and change, which in any year, in any given year, you would say that that's clearly an A, because it's a you know B+ at worst, but an A - certainly. Then you go up from there to Houston at a 6.5%, and while it you know it sort of pales in comparison to our portfolio-wide average, again, 6.5% for Houston, that that's a solid A in my book and always will be. It's not. You're right. The disparity on the. There's quite a bit of disparity on the ratio for the year. Honestly, that tends to not.
That ratio tends to not swing things around in the forecast period because all that stuff gets delivered over, you know, 12 months and there's sub-market, you know, where is it being built and all those things. Our bottom-up budget process assumes that, you know, we know exactly what's gonna be delivered in our sub-markets. We take that into consideration as we do our revenue growth forecast. I still look at them and say, "You know, every student in this class is an A student this year.
Okay. That helps. One final one from me. D.C., around 4% revenue growth. Could you give us a sense of what it would have been had regulation curbs been gone on January 1? I'm just trying to understand the kind of structural earning power of D.C. right now.
If you look at, I'm gonna use the forward-looking construct as a model kind of of what the past year was. In the past year, we think in D.C. it affected our overall results portfolio-wide of about 40 basis points. I mean, it's not a huge thing, and going forward, we do expect that we will see some relief in 2022 in D.C. proper and probably in the suburban markets as well. We've kind of got that. You know, our thinking process is that maybe somewhere around midyear you get a, you know, the beginnings of a return to normal.
That's again, like I said, that's crystal balling to a certain extent, and there's always the possibility that you get some new, you know, stealth variant that people get freaked out about and retreat to their old habits. Yeah, it's not a huge deal in our portfolio. It wasn't last year and wouldn't be in a reasonable scenario in 2022.
Okay. Thank you for the time.
Yeah.
Our next question comes from Chandni Luthra with Goldman Sachs. Please go ahead.
Hi, good afternoon, and thank you for keeping this call going. Most of my questions have been answered, but your 8-K yesterday talked about seeing or expecting to see more opportunity for acquiring stabilized properties, potentially later in this year. What are your thoughts around that? Are you seeing similar situations developing, and how will you approach? Will you be aggressive if the opportunity presents? Just trying to gauge how would you approach that.
Sure. Well, I don't think that based on what we've seen through the year, at least if the year progresses the way we think it will, I don't think there'll be. I think you're gonna have a still competitive acquisition market. I don't think that's gonna change. I guess it sort of depends on what the Fed does, right? If the Fed gets ahead of itself, and all of a sudden people are starting to forecast an economic slowdown because they are moving too fast and people worry about recession, and rates go up really fast. You start worrying about that underlying economic activity, maybe you'll have some softness in acquisitions.
Right now, if they moderate interest rates and interest rates start going up, I don't think. There's still a wall of capital, and there's still great supply and demand dynamics. You know, when you think about pricing of real estate or any sort of asset, it's really about liquidity, and there's massive liquidity still in the market, and the Fed's not gonna just remove the liquidity day one. Then the second biggest issue is supply and demand when you think about pricing. Liquidity is not going away, and supply and demand is great. You know, then you start thinking about inflation issues and then ultimately interest rates. I think.
I don't see an opportunity for, you know, for rising cap rates or better pricing for multifamily assets, you know, this year. We will get our fair share. You know, when there's $300 billion of transactions, you know, we can eke out a few in our little corner of the world. I think that we'll still be able to buy properties, but I think it's gonna be, you know, a slugfest for sure.
Understood. You know, migration has sort of been a tremendous tailwind for the Sun Belt, obviously through 2020, and then 2021 was perhaps just as robust. As we think about 2022, do you see any signs of reversal yet? I mean, I understand that, you know, two years is a long time and lives and habits form and things become permanent from temporary. Any signs that, you know, as we are in the endemic stages of this virus, perhaps those who moved from the coastal regions are now maybe thinking about, you know, moving back?
You know, it's interesting. If you look at from 2017 to 2020, Florida. The two largest markets that had in-migration domestically were Florida and Texas. In 2021, Florida had 100,000 more people go to Florida versus the average for 2017 through 2020. Same thing in Texas. We had a little less, 75,000 people came in from domestic migration, and the two states that lost the most were New York and California. This out-migration of those high-cost, highly regulated markets has been going on, as Keith mentioned earlier. What happened during the pandemic is people moved because the other markets were open, right?
I mean, you could go to a restaurant, you know, in Texas or in Florida and so that when you think about that part of the equation, I don't think you're gonna have. Most economists don't think you're gonna have, "Okay, we're gonna run back to California or New York because we, you know, moved." Because they're settling down you know, buying houses and leasing apartments and they don't really need to be in a specific place to do their job yet because of the office situation.
I think we probably don't have the big peak or the big spike if we are out of the pandemic. It just will continue in its normal, you know, pattern, which is people wanna be in a place with less regulation and lower housing prices and, you know, good weather and that's just what's been driving the Sun Belt, you know, for the last 20 years. Clearly I agree with Keith when he made the comment that California and New York are not going away. I mean, they're still big, large economies and people love to live there, and they'll still live there. At the margins, you're gonna have the cost forces people out, and the businesses, you know, move, and so that's gonna.
I think that's gonna keep happening, but that doesn't mean that they're not gonna do well long term, because they have plenty of other, you know, in-migration from immigrants, and just natural births that actually losing population generally.
In our portfolio in the fourth quarter of 2021, 20.4% of all of our new leases-
Mm-hmm
... in our Sun Belt were from people outside of the Sun Belt, and that is a 430 basis point increase year-over-year. To Rick's point, we're clearly seeing it in our portfolio, and we're seeing it continuing to accelerate.
Oh, that's remarkable. Thank you for that color.
Our next question comes from Anthony Powell with Barclays. Please go ahead.
Hi. Good afternoon. The question on, I guess, housing affordability in your markets, how do you see the rise in rates impacting the rent versus buying, I guess, calculation in your markets? We're seeing a lot of capital flow into rent-to-own, I guess, startups and schemes in a lot of your markets. How do you expect that development to maybe impact that decision over the long run?
Affordability still remains, you know, really good in our portfolio. There's just. Even with rents going up as much as they are, you have to look at it on a relative basis. If you average it over a three-year period, since we didn't raise rents in 2020, and rents only went up 4%-ish in 2021 on for the whole year, you know, you're talking about a 4% and a 5% rental increase over a three-year period with these big rent increases, right? It's not like people are going up from, you know, from that it's just higher, and higher, and higher, and they're having problems paying. Plus rates and wages have gone up. Our markets still are very affordable when you look at actual rents relative to incomes.
The other piece of the equation on single family rentals. Single family rentals are a really interesting market, and clearly the public companies have proven that single family rental is a real thing, and they figured out how to run it, which is really good. When someone moves to a single family rental, the average square footage is 2,000 sq ft compared to a 950 sq ft average apartment that Camden has. They tend to be more suburban rather than urban. Most people, when you think about buying a house or leasing a house, they're doing it for not capital, you know, money reasons, they're doing it for social reasons. They need more space.
They have kids or they have you know. They just need more space. So with that said, we've never had a you know where you say, "Well, it's a house in the Houston suburbs than it is in the urban core," which it is. I mean, if you are leasing in downtown Houston or in Midtown, you can go out 30 miles out of downtown and buy a house and have a occupancy cost that's lower than your rent substantially. But people don't do that because they wanna be in the urban core, and they're not married. They have average don't have kids. So you have this.
It's really not because I can go rent a house or buy a house. The money side of it, whether it's affordable or not, is really not what drives the people to go do that. What drives them is their social position. They're older. They have kids. They, you know, need more space, that kind of thing. That really hasn't hurt our market obviously because, you know, we still have more demand than we have supply, and our occupancies are 97%. In Houston, they're 96% and some change. Yet, you can go out and buy a house in the suburbs for a lot less than you pay for rent in the urban core.
Got it. It sounds like, you know, you're not looking to get into the adjacent space as SFR yourself over time. You're pretty content with, you know, focusing on multifamily for now.
Oh, I think it's an interesting space, and we've looked at it, you know, a lot. To me, it's just another niche, right? The question of whether we would get into it big, you know, we tested things. Like for example, we tested independent living, and we decided once we, you know, did a couple of independent living deals that the cycle in the market was very different than our normal than just a market rate apartment project. We decided that we wouldn't expand that. We're gonna dabble in single family rentals and see how we like it. We think it's an interesting model because it's really just another segment. As long as it's.
We can operate it efficiently the way we operate our apartments, then it might be a nice growth area, you know, over some period of time.
Got it. Great. Thank you.
Sure. I think we're
Please conclude by pressing the answer button
Do we have any other questions in the queue? I think we are. That was the last one. Great.
Yes.
Well, we appreciate your time.
Please conclude by pressing the answer button
We'll see some of you in South Florida. Take care, and we'll talk to you next time. Thanks.
Take care. Bye-bye.
Take care.
Bye.
Bye.