Good morning or good afternoon all, and welcome to today's call, the Invitation Homes Fourth Quarter 2021 Results Call. My name is Adam, and I'll be your operator today. If you'd like to ask a question during the Q&A portion of today's call, you may do so by pressing star one on your telephone keypad. I will now hand you over to Scott McLaughlin to begin. Scott, please go ahead when you are ready.
Good morning and welcome. I'm here today from Invitation Homes with Dallas Tanner, our President and Chief Executive Officer, Charles Young, Chief Operating Officer, and Ernie Freedman, our Chief Financial Officer. During this call, we may reference our fourth quarter 2021 earnings release and supplemental information. This document was issued yesterday after the market closed and is available on the investor relations section of our website at www.invh.com. Certain statements we make during this call may include forward-looking statements relating to the future performance of our business, financial results, liquidity and capital resources, and other non-historical statements, which are subject to risks and uncertainties that could cause actual outcomes or results to differ materially from those indicated in any such statements. We describe some of these risks and uncertainties in our 2020 annual report on Form 10-K and other filings we make with the SEC from time to time.
Invitation Homes does not update forward-looking statements and expressly disclaims any obligation to do so. We may also discuss certain non-GAAP financial measures during the call. You can find additional information regarding these non-GAAP measures, including reconciliations to the most comparable GAAP measures in yesterday's earnings release. With that, let me turn the call over to Dallas.
Thanks, Scott, and good morning to all of you joining us today. In my remarks this morning, I'd like to share several thoughts and highlights from this past year and also take a look at the year ahead. To start, we continue to be impressed with the level of demand we are seeing for high-quality housing that focuses on functional living with the flexibility of a leasing lifestyle. It's this strong demand that's helped us maintain our same store occupancy above 98% for the entire year in 2021, and also taken our average market rents to over $2,000 a month this past quarter. As a result, our Core FFO per share increased 16% from the prior year.
Thanks to the execution of our teams, we were able to deliver full year 2021 same-store revenue and NOI growth at the high end of our expectations. During 2021, we acquired 4,800 homes, which is roughly double our original guidance at the beginning of the year. With an average cost basis of over $400,000 and an acquisition cap rate of over 5%, we believe our home buys were among the highest quality of those bought by our industry peer group and accretive to both earnings and NAV. I'd like to mention a few additional highlights from this past year. We achieved three investment-grade ratings.
We made significant investments in technology, including the introduction of our new mobile app maintenance app, and we continued to work on adding amenities and services that improve our residents' experience, such as offering great pricing on pest control and other services by using the value of our size and our scale. We also made great strides with regards to ESG, where we improved our disclosures and scoring and launched two big initiatives. First, our Step Up, Stand Out program in partnership with SkillsUSA, which encourages and supports careers in the skilled trades. And second, our Green Spaces program, which is dedicated to the development and improvement of outdoor community spaces within our markets. While our teams did an outstanding job in 2021, it's time to look ahead. Demographics remain solidly in our favor.
The leading edge of the millennial generation is now starting to reach our average resident age of 39 years old. In addition, migration trends continue to result in significant household and job shifts to the southeast, southwest, and Sun Belt. At the same time, many Americans are showing a preference to lease their home, so they can have more space and live in great neighborhoods with improved access to better schools, jobs, and transportation. By contrast, housing supply in the U.S. continues to be a challenge for a variety of reasons, and those challenges are even more pronounced within our markets. We believe it's imperative that we play a more significant role in bringing new housing supply to the market, along with helping to provide additional housing solutions around flexibility and choice. Let me offer two examples. The first is our commitment to invest in new housing supply.
As you know, we've chosen to focus on being the best owner and operator of single-family for-lease housing. When it comes to building new product, we believe it's better to partner with the best home builders rather than competing with them directly in the home building space. Last year, we announced our strategic relationship with Pulte Homes, which amplified our new home acquisition pipeline and gave us additional strategic opportunities for future growth. In addition to that important relationship, we're also working with other home builders across the country to help them break ground on new communities where they are strongly needed. At the end of last year, we were under contract on over 1,700 of these new build homes in eight of our existing markets while staying true to our criteria for location and risk-adjusted return.
We expect to see delivery of these new homes beginning in 2022 and accelerating in future years. The second example involves our commitment to expanding opportunities for choice. Earlier this month, we announced that we're the lead investor in Pathway Homes. Pathway's mission is to make homeownership more attainable for more families. They do this by working directly with aspiring homeowners to identify and purchase a home, offering them the opportunity to first lease that home with the opportunity to buy it at a future date if they choose. The new venture with Pathway creates additional options for choice. In addition to being the lead investor in Pathway, our partnership offers us the opportunity to broaden our third-party property management expertise. Outside of Pathway, another way that we've helped families achieve their housing goals is through our Resident First Look program.
For homes that we've identified for sale for strategic reasons, this program offers residents residing in those homes a first opportunity to purchase. Since we started the program in 2016, we've sold nearly 250 of these homes to our residents, representing over $60 million in sales, further living out our mission of together with you, we make a house a home. That mission marks a big milestone in 2022. On April 11, we'll celebrate 10 years of providing high-quality housing to people choosing to lease a single-family home. When we launched this business, a professional home leasing company with coast-to-coast 24-hour customer service seven days a week did not exist. Invitation Homes was at the forefront of creating a new model and changed the narrative by offering an innovative concept built on customer demand and favorable demographics.
During this past decade, we're pleased that an important part of that narrative has been our meaningful impact in the communities in which we serve. We've invested nearly $2.5 billion in home renovations within our communities. While last year alone, our associates also volunteered more than 13,000 hours of company-paid volunteer time to help local organizations they care about within their communities, a practice we strongly encourage. In conclusion, today in the U.S., there are over 125 million households, with 90 million single-family homes, of which about 17 million are single-family rentals. I'm extremely proud of the 80,000 of those within our portfolio, where we believe the highest standard of quality, location, and genuine care for our residents is both expected and delivered.
I'd like to close by saying thank you to our teams for 10 years of curating a unique leasing lifestyle, providing a level of service that gives our residents peace of mind, and creating strong communities where our residents and our associates can thrive together. With that, I'll pass it on to Charles, our Chief Operating Officer.
Thank you, Dallas. Our fourth quarter results helped us finish the year strong. As you mentioned, we reported same-store revenue growth and NOI growth both at the high end of our guidance ranges. Average occupancy stayed at 98% throughout the year, and retention and our resident satisfaction continued their strong highs. We believe we offer the best level of resident service of any single-family rental operator, and this is reflected in our operating results. Let me walk you through the details. Same-store NOI grew 12.6% in the fourth quarter, which brought our full year 2021 same-store NOI growth to 9.4%. Same-store core revenues in the fourth quarter grew 9.5%.
This increase was driven by average monthly rental rate growth of 7.1%, a 130 basis point improvement year-over-year in bad debt expense, and a 53.6% increase in other income, net of resident recoveries. Average occupancy of 98.1% in the fourth quarter was consistent with prior year. As a result, same-store revenue growth for the full year 2021 was 6.4%. Fourth quarter 2021 same-store core operating expenses continued to come in favorable to our expectations, increasing 3.1% year-over-year, driven by a 3.1% increase in same-store fixed expense and a 12.6% increase in personnel expense, partially offset by a 12.3% decline in turnover expense, net of resident recoveries.
Next, I'll cover our leasing trends in the fourth quarter, which continued to reflect strong demand and favorable market conditions. Our new lease rent growth came in at 17.3% for the quarter, while renewal rent growth was 9%. Together, this drove blended rent growth of 11.1%, up 630 basis points year-over-year and up 50 basis points over prior quarter. We're also seeing these strong results continue in January with blended average rent growth of 10.9%, up 590 basis points year-over-year, and occupancy remained above 98%. As you know, we send our surveys out each quarter to better understand the choices and preferences of our new residents. Let me tell you what we learned this past quarter.
About a third of the group chose one of our homes because they wanted more space, with over 80% of new residents moving from another single-family house, seeking, above all, a family-friendly, convenience-oriented, pet-friendly home. Nearly half of our new residents are working from home at least two days a week, and 75% plan to continue to work from home after their office reopens. Three-quarters of new residents feel safer living in a single-family home than an apartment because of the additional space and privacy a single-family home provides. Surveying our new residents when they move in is really just the beginning of our listening process. With our ProCare services, we help keep our residents' home in good working order by performing proactive maintenance visits twice a year.
With the mobile maintenance app that Dallas mentioned earlier, we make communication between our residents and our service teams more convenient and efficient. These are just a few of the many ways we help to make our residents' experience more worry-free. We may not have invented the leasing lifestyle, but we are certainly working every day to improve it while creating a resident experience that is second to none. I'm excited by the strong momentum our teams continue to maintain as we start the new year.
I'll now turn the call over to Ernie, our Chief Financial Officer.
Thank you, Charles. Today, I will discuss the following three topics. One, balance sheet and capital markets activity. Two, financial results for the fourth quarter. Three, our 2022 guidance and main drivers. Let's start with balance sheet and capital markets activity. Our efforts toward improving the balance sheet didn't stop after achieving our investment grade ratings in April. In November, we closed our second public bond offering totaling $1 billion. The transaction further improved our weighted average years to maturity to 5.6 years as of year-end, and our percentage of homes that are unencumbered to 63.2%.
Our net debt to EBITDA ratio at the end of 2021 was more than a full turn lower than at year-end 2020, finishing 2021 at 6.2x , not too far off from our targeted level of 5.5-6x . We finished 2021 with $1.6 billion of liquidity, including $600 million of cash and the full capacity of our $1 billion revolver available. For the year, we issued almost $2 billion of unsecured debt to pay down secured debt with an average maturity of almost 10 years and an average coupon of 2.36%. During the fourth quarter, we issued approximately 4.1 million shares of stock at an average price of $41.63 through our ATM program.
Total gross proceeds of $169 million were primarily used for acquisitions. In December, we launched a new ATM program, providing us $1.25 billion of capacity that has not yet been used. Subsequent to year-end, in January, we completed settling conversions of our remaining 2022 convertible notes with 6.2 million shares of common stock. Next, I will go through our fourth quarter 2021 financial results. Core FFO and AFFO per share for the fourth quarter increased 19.7% and 21.0% year-over-year to $0.39 and $0.33, respectively. Our full year Core FFO and AFFO per share were $1.49 and $1.28, respectively.
This represents year-over-year growth of 16.2% and 18.8%, respectively, which was primarily driven by higher NOI and lower cash interest expense. The last thing I will cover is 2022 guidance. As Dallas and Charles outlined, we finished 2021 with tremendous results, and we believe that favorable supply and demand fundamentals will remain a strong growth catalyst for us again in 2022. Starting with same-store revenue growth. Occupancy is anticipated to remain elevated in 2022, in line or slightly lower than 2021 results. Despite a tough comp, our guidance range assumes a similar blended rent growth in 2022 as in 2021. It also assumes that bad debt expense improves on 2021 levels, but not yet returning to our pre-pandemic historical average.
Taking those assumptions into account, we expect same-store core revenue growth of 8%-9% for the full year 2022. Turning to same-store expense growth, our guidance range for 2022 is expense growth of 5.5%-6.5%. Our same-store expense growth for each of the last two years has been under 1%. We expect higher expense growth in 2022 due to real estate tax growth reverting to closer to 5%, inflationary pressures on repairs and maintenance, turnover in personnel costs, and a higher turnover rate. That being said, we were pleased to beat our expense growth expectations last year and will work hard to do our best again this year. This brings our expectation for 2022 same-store NOI growth to a range of 9%-10.5%.
With regards to Dallas's comments earlier on the pipeline of new homes we're acquiring from various home builders, note that we expect these homes to be a more meaningful contributor to growth in 2022 and beyond. You may have seen that we have included new disclosure around our anticipated delivery of these homes, which can be found on Schedule 8-B of our supplemental filing. With everything considered, we are expecting full year 2022 Core FFO per share to be in the range of $1.62-$1.70. In full year 2022, AFFO per share in the range of $1.38-$1.46. A bridge of our 2021 Core FFO per share to the midpoint of our 2022 Core FFO per share guidance can be found in yesterday's earnings release.
I'll wrap up with a reminder of our announcement earlier this month that our board has increased our quarterly dividend to $0.22 per share, a 29.4% increase over prior year. In conclusion, it's not just favorable industry fundamentals that are helping us succeed. It's also our differentiated strategy that's built upon our locations, our scale, and our local eyes in markets. Whether it's through our growth, our execution, or our industry expertise, we believe we have a strong competitive advantage to continue to achieve favorable results. With that, operator, we're ready to open the line, please, for questions.
Thank you. As a reminder, if you'd like to ask a question today, please press star followed by one on your telephone keypad now. When preparing to ask a question, please ensure your headset is fully plugged in and unmuted locally. That's star one on your telephone keypad. The first question today comes from Tony Paolone from JPMorgan. Tony, please go ahead. Your line is open.
Great. Thanks and good morning. My first question is on the regulatory risk and regulatory environment. Can you talk about what dialogue, if any, you have with the regulators, what the hot buttons may be, and anything you envision changing in the business going forward on that front?
Hey, it's Dallas. You know, first off, thanks for the question. You know, from time to time, we'll get inquiries from regulators. We've disclosed that, we've been working with the FTC to help them understand our business in a broad sense. But not really any change there, and aren't seeing anything necessarily that suggests a change in the business environment. I think, you know, the big focus right now is around rental rate growth across residential generally. Our multifamily peers are coming out, I think with, you know, pretty big growth rates as well this year. I think just that inflationary pressure tends to be more the headline versus, you know, necessarily anything on the regulatory front.
Okay. In your guidance, I know we can probably back into this, maybe if you'd help us, what do you assume market rent growth to be over the course of 2022 in order to maintain these rent spreads that you laid out?
Yes. I think, Tony, important lens, Ernie. You have to look at it between renewal spreads as well as new lease spreads. I know a lot of people pointed out, I think you have as well, we have a, you know, pretty big embedded loss to lease in our portfolio that's, you know, in the high teens, if not close to 20%. You can certainly see in our activity during 2021, new lease numbers, you know, far exceeded renewals. Said another way, that's probably gonna give us a longer period of time over and probably more stability in our renewal increases. As Charles talked about in, on his call script, you know, we got numbers in the renewals, you know, in the 9% range.
We'd imagine there's the opportunity for that to be pretty steady throughout 2022. What's a little bit harder to predict is the new lease rate. Remember, Tony, renewals are 75%-80% of our business. The new lease rate certainly is impactful, but not as impactful on the renewals. You know, as Charles talked about in his prepared remarks, we're still seeing extraordinarily high new lease rates, 14%+ in January. We do expect that will moderate as the year goes through. When you look at that on an overall basis, you know, we think it's been pretty consistently numbers that are very similar to where we ended up in 2021, which was about a 9% blended growth rate.
About, you know, because renewal being the majority of that, not seeing a lot of volatility in that result throughout the year.
Okay, great. If I could sneak one more in, just what do you have assumed in terms of just, acquisitions over the course of 2022 in your guidance? Outside of the stuff you laid out on the builders.
Sure. No, absolutely. As you can see in our Schedule 8-B, the builder contribution is pretty small in 2022. You know, if you look at our guidance range, we're assuming about $2 billion of acquisition activity during 2022. About $1.5 billion of that would be on the balance sheet. About $400 million of that would be closing out the Rockpoint joint venture. We expect to have that closed out sometime during the second or third quarter in terms of being fully committed and invested. Then separate from that, with the Pathway opportunity, we expect, you know, it should be ±$100 million that we'll invest in the Pathway's of our $250 million commitment there.
Importantly, Tony, you know, I saw some people pointing this out this morning. We started the year with a larger cash balance than we typically would. We kind of got ahead of our needs from a capital perspective as we finished out the fourth quarter. When you factor in about $1.5 billion of balance sheet activity, we've got $600 million of cash sitting on the balance sheet today to help fund that. We do expect disposition activity of between $300 million and $400 million in 2022, so slightly elevated from where we were in 2021. And then of course, you have your free cash flow. You know, our dividend payout ratio, even with our large dividend increase, is still on the lower side for REITs at about 60%-65%.
Those things, you know, taken into account, that will fund a vast majority of the $1.5 billion we're able to off-balance-sheet activity. We certainly will need some capital for us to get all the way there with some combination of debt and equity potentially during the year, just depending on which would be more efficient cost of capital for us to use as we try to achieve that number that's very similar to what we did here in 2021.
Okay, great. Thank you.
Thanks, Tony.
The next question is from Jeff Spector from Bank of America. Jeff, please go ahead.
Great. Thank you. Good morning. My first question is on migration trends. You know, everyone's laser focused on some of the comments you discussed, you know, Sun Belt population shifts, jobs. I guess anything new to share that you're seeing, let's say, you know, January into February, you know, any other trends you could share with us from your data?
Great. This is Charles. Great question. You know, I shared some of it in my prepared remarks. Honestly, there's really nothing new than what we've seen in prior quarters. You know, about 83% are coming from single-family prior, meaning that they know what they're looking for. As we talk to them, this wasn't in the prepared remarks, but the two main reasons they're looking to move to is to get more space or to be closer to work, which speaks to our locations where we own our homes. You know, we do see that about 60% are coming from out of town. That's a combination of different cities or from out of state.
as I've talked about previously, we were, given the pandemic, seeing a number of people move from the Northeast to the Southeast, specifically Florida. You can see it in our numbers. Our new lease rent growth, the demand is really high in Florida, Atlanta as well. We're seeing Vegas with some real high demand, people moving out of California, Texas as well. These are some of the migration trends, but things have been pretty consistent over the last few quarters in terms of
The demographics. You know, we do also ask, as we get a little deeper on around what are they looking for in terms of the community types, and it's the family-friendly, you know, kids, schools, pet friendly, convenience-oriented. That's really our portfolio, and that's why you're seeing such high occupancy and great demand within our homes.
Thanks, Charles. Then, you know, thank you for the new Schedule 8-B. I guess two questions there. First on South Florida, just kind of stands out that nothing's delivering in 2023 or beyond. Anything particular in South Florida to note?
It-
No, yeah, with that one. I'm sorry, Dallas. With that one, we have a specific contract with someone today, and they're going to deliver most of those homes in 2022. Jeff {inaudible} is gonna look for future opportunities there to expand that further in 2023 or 2024. That's actually one of the first ones up in the queue in 2022 for delivery for us, for some specific projects that we're working on with them. That's outside the relationship. That's a different builder.
Thank you. Actually my last question, if I could just ask on the expense growth. Ernie, just to confirm the 6% midpoint, are you saying most of that is estimates for higher real estate taxes?
Yeah, it's a good question, Jeff. As I mentioned in the prepared remarks, the last two years, our expense growth has been at 1% or less. It's been pretty extraordinary. I think it's a combination of a few things. You point out the biggest one, Jeff, in that, you know, real estate taxes are about 60% of our expenses, and baked into our guidance is an expectation of about 5% increase in real estate taxes. We're gonna aim to do better than that. If we can have some good news on some appeals and things like that, maybe we can come in a little bit. That, that's certainly going to be a big driver. Then, you know, the other big drivers are just being the inflationary environment we're in with regards to repairs and maintenance costs and turn costs.
Finally, you guys saw in the numbers, our turnovers came in again extraordinarily low here in the fourth quarter and for the full year is at 22.9%. We are assuming the turnover goes up a little bit from that about 23% number to something more in the 24%-25% range. Not only do we the inflationary pressure of, you know, labor and supplies, but also, you know, at least baked into our guidance are more turns. Now, Don, to be fair, we sort of thought that was going to start to happen in 2021 and it didn't. You know, hard to predict for certain that will happen, but that is what's embedded in our range of the 5.5%-6.5% for expense growth.
Okay, thanks, and congratulations on a great 2021.
Thank you, Jeff.
The next question comes from Brad Heffern of RBC Capital Markets. Brad, your line is open. Please go ahead.
Thanks. Morning, everyone. On Pathway, I was curious if you considered thinking about doing that model yourselves, and then is there any scale that you can give to the fee potential there?
Yeah, you know, we're really excited about this partnership. Maybe just level setting for a second. You know, we talked about this a little bit in the release, but we have an ability with people that are leaving our portfolio and seeking homeownership to also help bridge some of that gap as this program develops over time. I think your question is a good one, which is, you know, why not do this per se yourself? I think out of the gates, what we'd like to do is get smarter around the product, do it with partners that we trust and that we've worked with in the past. I think Pathway offers us that kind of perfect opportunity.
You know, I would expect that if we like the programs over time and distance, we'll be able to also extend those programs, you know, via Pathway or whatever alternatives are in the marketplace. I think, you know, helping people along the housing continuum and in their journey is something that, you know, our company and our people are passionate about. The investment in Pathways is reflective of that, and we're excited to see what sort of fruit it can yield in the future.
Okay, got it. Any new color on where rent to income ratios have trended recently?
Yeah, great question. We've been continuing to see an upward kind of movement on that rent to income ratio. We're over $120,000 on the average household income, which is very healthy. You know, with our rents around $2,000 a month, we end up at a 5-2 ratio, which you know what I would say is one of the strongest in the residential sector. It's a testament to our location demand that we're seeing and our team's doing a really good job of screening as well.
Okay. Thank you.
The next question is from Nick Joseph at Citi. Nick, please go ahead.
Thank you. As we've seen increasing amount of capital that's being earmarked to the single-family rental space, where are you seeing the most change in direct competition? You know, either from a growth channel or geography or something else.
Well, hey, Nick. Dallas. We're certainly still hearing a lot of the build for rent, you know, narrative out there, and that's starting to take shape across two or three different categories. You know, you really have garden-style apartments that are starting to pop up in suburbs that are much smaller square footages. You certainly have partnerships with companies like we have with Pulte, and other builders where we're building single family detached product that is, you know, generally geared towards for lease product. And then you're seeing kind of a hybrid where guys are doing stuff infill on a townhouse basis. It feels like a lot of the capital coming in is more sophisticated or at least wanting to come in as more sophisticated.
You're hearing, you know, really kind of insurance companies, sovereigns, you know, pension funds, looking for ways to deploy capital as we're having conversations. I think the challenge is largely around kind of a couple of areas of why that's not as easy. One, you got to have a great platform, which we all know is difficult to build and replicate, specifically with what we have here at Invitation Homes. I think, you know, the second piece of it is which markets and why, and where's your thesis and do you have, you know, kind of sound logic. I'm hearing the same things I think you are, Nick, which is there's a lot of capital that wants exposure to single family in similar ways that they've had exposure to multifamily over the years.
Dallas, it's Michael Bilerman speaking here with Nick. Does that alter your views on perhaps growing a much larger asset management program and sort of ventures to take advantage, one, of all this capital that's out there and appears maybe lower return than what you're willing, and then layering in your operating platform and the management of it, you can sort of juice, you know, the overall enterprise? Is that an active process for you today?
It's certainly something we've gotten a bit smarter at over the last year with our Rockpoint Venture. Michael, yeah, I think you're touching on kind of key things that are important to us. One, you know, take a step back. You know, absolute shareholder return is our focus, so we do wanna do things that allow accretive growth to the portfolio or the platform that has, you know, complete upside for shareholders. The Rockpoint Venture for us was a way that we could, you know, obviously insulate some of the risk if for whatever reason our cost to capital was in a position to grow as quickly as we want it to. There's also, you know, different slugs.
There's probably some different opportunities over time as we get a bit more sophisticated in how to think about JV businesses over time and distance, that we can do things at our discretion that are very accretive to the platform, to shareholders. I think we'll continue to be opportunistic. I think that capital coming into the space obviously lends itself to, you know, future thinking around some of that. It could also be price point driven, geographic. I think there's some things that you could think of outside the box where we could take less shareholder risk in terms of how to look at markets or opportunities, but drive a ton of value to the platform and actually use the synergies and the efficiencies of the platform to create, you know, exceptional returns.
It's something we'll certainly look at over time and distance.
Just moving to the second topic. Charles, you talked a little bit about surveying the new residents that are coming in, and you made a comment that, you know, about half of those are working from home, two days a week, and 75% intend to work from home in the future, even once their office is open. I guess, what is that new renter, what does that represent of the total portfolio? How representative do you think it is? I don't think you're surveying all 80,000 homes, right now. It's only that new part. Maybe you can just I don't know if there was some geographical impact, or can you just sort of tease out a little bit more of those comments?
Yeah. No, it's a great question. Just to be clear, we're surveying new residents who moved in that quarter. You have a good question, but it's hard to tease out what you're asking for given that. We're really just trying to capture those who are moving in and kind of what's their general sentiment at the time. Having looked at it over you know, last few quarters or last year through COVID, you know, it really hasn't changed that much. You know, there's you know, as I said, high 40s, almost 50% are working from home some part of the time. And you know, the other thing we got from it is about 73% are you know, thinking that that single-family home gives them that safer environment that they're looking for their families, for their pets.
We can try to pull out that information in the future, but right now we can't go as deep as you're asking us.
Yeah, I just didn't wanna jump to a conclusion based on a smaller sample set. It was certainly a bigger headline, an eye-catching headline. I just wanna put it into context relative to the size of your portfolio and all the geographies that you're in, just to try to understand it better, which we can do at a later time. Appreciate it. See you in a few weeks.
Thank you.
Thanks, Michael.
Thank you, Michael.
Next question is from Keegan Carl from Berenberg. Keegan, your line is open.
Hey, guys. Thanks for taking the questions. First, I think this one's a little more challenging to answer, but I'm just curious if you guys have any broader thoughts on what home price appreciation looks like this year. Do you have any sort of internal forecast for rates and the impact it's gonna have on the housing market?
Hey, this is Dallas. You know, we would all be in different professions if we could have predicted what's happened over the last 24 months in terms of home pricing. I agree with your sentiment that it is very, very difficult to predict and, you know, obviously, it's interest rate sensitive. I would say this: As we look at, you know, just the Case-Shiller across our marketplaces, we're somewhere around 23% on a look-back basis. Now, I can remember three or four years ago when we would look back and that number was closer to 6% or 7%. I can think about 10 years ago when we started the business, when we were looking back at that number and it was between 12% and 13%.
You know, the momentum or the inertia of where kind of mean median pricing in a market is going is impacted by a variety of factors. I said this morning in some media we were doing, but we don't expect trees to continue to grow to the sky forever. With that being said, with all the things Charles just laid out around desirability, people wanting maybe a little bit more space, people wanting a yard, I do think, you know, living a couple of years like this now with these types of things influencing our decisions are likely here to stay longer than they are to go away. I do think that pressure around housing prices continues. I think the supply challenges are so much bigger than what we just talk about around months of inventory.
This is at a very municipal level and at a zoning and an implementation level to really course correct and be able to create ease of supply to come into the marketplace. We would expect home prices to generally stay elevated given that interest rates are, you know, by and large, still really low, even though they're gonna creep up. If you look at it on a relative basis, when I bought my first home in 2003, I was paying 6%. Today, that rate's somewhere in the high 3s. It's still really, really cheap money for somebody that wants to go and acquire a home. I think the key thing is we need municipalities and at the state level to be pro-development in some of these markets. That's gonna solve some of the appreciation issues that people are calling attention to.
Got it. I guess this one's more for Ernie, but, I mean, just any sort of commentary that you have around insurance renewal rates and what they could look like in March?
Yeah, good question. We're actually just going through our renewal right now. Because we've had such very good loss history and insurers understand the spread of the risk for us is much different from a catastrophic event. If you think about our home portfolio, certainly Charles and Dallas look to build scale, but you know, scale in our business is a lot different than having you know, one or two large commercial buildings or residential buildings that could be worth hundreds of millions of dollars. We're expecting an insurance renewal that's gonna be generally flat. You know, it might be up 1%-2%, but we've gotten good feedback from the market. We should have that hopefully wrapped up here in the next few weeks.
Insurance will be a good guy for us, we believe, relative to our other inflationary pressures we're seeing on expenses.
Yeah. No, certainly. It's good to hear. Just, I wanna clarify one thing. I know it was mentioned a little bit at the beginning on regulatory. Did you guys mention anything about the FTC investigation? Any sort of update on that?
No. No update there. Just that we've acknowledged that we're working with the FTC to answer any and all questions that they have around the company or the industry. That the inquiry is pretty broad, and we're doing our best to make sure we get them the information they need.
Got it. Thanks for the time, guys. Really appreciate it.
Thank you.
Thank you.
Thank you.
The next question is from Jade Rahmani from KBW. Jade, please go ahead.
Thank you very much. As a follow-on to the FTC question, could you give a broader update on the regulatory and the political environment, both with respect to rental housing overall, and if there's anything you're hearing in single family rental, in particular just around the affordability question and rent growth?
Yeah. Happy to, Jade. And you know, by and large, we've continued to keep you guys, and everyone for that matter, updated with inquiries and questions that we've got from state, local, and federal inquiries over time. We've worked over the last several quarters with the House Select Subcommittee on the Coronavirus Crisis to give them a bunch of information, as have many companies within our industry. We've done that also across the U.S. Senate Committee on Banking, Housing, and Urban Affairs, as we've had inquiries from Senator Warren and others. We'll continue to do that. It's best practice. It's also how we've been for 10+ years in terms of you know, making our information available to those that have inquiry.
By and large, one of the benefits of being public is our information is generally available on what's going on with the industry. I think at the local levels where you're hearing kind of some of the noise and the pressure really does center around rate discussion. You know, the cost of goods generally, we have all felt it across different categories and sectors, is going up. We just talked about it with home price appreciation. Our cost of, you know, materials and flooring and paint and all that will also have some of that creep as well over time. I think Charles and the team have done a phenomenal job. If you look at our expense creep the last two years of keeping that locked in and using our platform and our pricing power to be as effective as we can.
It's just an environment that creates a heightened sense of awareness on costs. I think some of that, Jade, feeds into the public narrative. Again, we said this, you know, every two to four years, we're in another election cycle, and unfortunately, some of this starts to become the headlines. We'll do our best to continue to take the same approach we always have, which is work with any and all parties that, you know, objectively wanna dig in and understand what's going on in single family. We are a very small percentage, but a good barometer of what we're seeing across the space, and so we'll share that information freely. Outside of that, Jade, we haven't had really anything new beyond what we've kind of been addressing over the past several years.
Is there anything from the feedback you're receiving or your sense of the environment that it's causing any operational changes? One of your peers, for example, has some limits on the rent bumps that they will take, and some concessions they provide as partial offsets to rent growth. Are there any practical operational implications to the way you're running the business?
Yeah. I mean, to be clear, and we talked about this on the last earnings call, we've done a considerable amount of rent adjustments, rent forgiveness, and worked with folks through the last couple of years in the tens of millions of dollars in terms of how Charles has run that program. You know, going forward with obviously working with all the different rental assistance providers to make sure that we're erring on even the side of caution and making sure we're working with customers. Charles has done a spectacular job. I think we're close to $50 million, Charles, we've secured in rental assistance over the last two years on behalf of almost 8,000 cases with our residents. The team has done an exceptional job.
I don't think we're gonna change anything that we do outside of following state and local laws around how to operate property management businesses and how to think about the way that you issue new and renewals. I think the headline there, also, Jade, is that we have a lot of embedded loss to lease on the renewal side of our business. We do look at where our renewal asks are going out. We modify and make sure that we're being sensitive to market, you know, kind of current market environment. You see that in our numbers. Our new lease numbers are substantially higher than our renewal numbers. We think that, you know, actually has a good long-term tailwind for the business over time.
Thank you.
Thanks.
The next question is from John Pawlowski from Green Street. John, your line is open.
Thanks a lot for the time. Dal, I was curious to get your thoughts on the pretty wide disparity we're seeing in private market pricing on portfolios versus one-offs. Is there an opportunity to kind of reposition the portfolio more in a step change fashion, take advantage of portfolio premiums predominant right now?
Yeah. It's a great question, John. You're seeing similar things. Really more so last year, it felt like we saw a few portfolios trade at really high premiums on a relative basis to where we thought maybe our cost of capital was or what we would consider call it end user retail pricing. We're seeing less of those opportunities going out. Yes, as part of our asset management practice, we're constantly looking at parts of our portfolio where we think you know could we drive a premium? You know, you might be able to argue that our California portfolio has pretty high values to it. Again, it's also got the Proposition 13 protections. It's got a really steady tenant base, and there's a lot of upside in terms of a risk-adjusted return profile.
Anytime we look at our portfolio itself, we do a rebuy analysis. We have a discussion around where we have conviction and why. You'll see us continue to cull and prune and look for opportunities. I don't think there's an opportunity necessarily in the near term that's immediate or wholesale that would take us off course from what we're doing currently. It's certainly something that we do as a matter of best practice internally.
Okay. Maybe just one follow-up on the acquisition side as you're underwriting even small to mid-sized portfolios. Could you help quantify portfolios you've looked at, what a typical spread is on a cap rate basis on the portfolio versus if you had to assemble that portfolio on a one-off?
Yeah, it just depends by market. I mean, we saw some trades last year in Sun Belt and Southeast markets, you know, that were trading, what I would say on an in-place cap rate, kind of in the high 3s, right? You might be able to buy those assets one by one at a five cap, today or high 4s. Again, your cap rate will compress the more you buy, because there's just so limited opportunities out there. Those deltas can swing, you know, pretty widely, and it's based on the product and how big the deal is. I think you're highlighting an important point, and it goes to the one that Michael talked about earlier, which is, you know, with the balance sheet, we're gonna be really careful. We wanna do things that are accretive.
We wanna do things that make sense, and are, you know, buying 4,000 or 5,000 homes a year one-off is extremely accretive for us. We'll continue down that path. I think to be aggressive on some of those other portfolios, you have to look at other, you know, slugs of capital over time, and you have to have conviction that you believe in the assumptions. Those are the things that we look at when we look at those opportunities, John.
All right. Appreciate the time.
Thanks.
The next question is from Haendel St. Juste from Mizuho. Haendel, your line is open. Please go ahead.
Thank you. Good morning. Hey, I guess a question. I think you guys mentioned earlier that you expect to extinguish the remaining capital from the Rockpoint JV this year. I guess I'm curious how you thought maybe about potentially expanding it or maybe adding a new JV partner here. I'm curious how you're thinking about JV capital and how it might play a role or not here near term. Thanks.
Yeah. I already mentioned that, you know, the initial Rockpoint venture will likely be finished in the second or third quarter, and we view that, you know, that buying would then go back on the balance sheet and be additionally accretive growth for the REIT. I think, you know, I mentioned it earlier. We're thinking, you know, outside the box. Are there markets, are there sub-markets within our markets at different price points that could be accretive with outside capital where, you know, the platform could benefit on that over time and distance? I think, and Dallas, we are spending time trying to get smarter around what that approach could be without confusing our core business, which is to continue to buy accretively for our shareholders.
I think anything that we can look at with, you know, outside JV partners or maybe long, you know, call it core ventures, could be interesting over time. You gotta find the right type of capital. You gotta think about what those price points are and why they make sense. You don't wanna do anything that distracts you from what you do day-to-day. Just being smart about the opportunities, the geographies, the price points, and making sure that the story's really clean and that we don't compete against ourselves. 'Cause at the end of the day, we have a, you know, a really good, you know, generally good cost of capital. We have an infrastructure that supports really good shareholder growth.
We wanna make sure that we maximize that over time on anything that we would look at outside of investing on balance sheet.
Got it. Thank you. A follow-up on Pathway. I guess, can you talk a bit more about the pace of capital deployment? It sounds like you're expecting half of that to be deployed, half the 250 this year. Maybe a bit more on the scope of fees and investment returns. I'm trying to understand how this might impact the numbers, earnings going forward. Thanks.
Yeah. No, Haendel, this is Ernie. Happy to address that. Part of it also is, you know, in terms of the how fast they'll deploy is, and you saw it in the Pathway Homes announcement, they're also looking for additional capital, not just ours. Right now we're the lead investor, but they're out seeking additional capital. During this period of time where we're the only investor, any homes that they're acquiring is purely from our capital. There's certainly a potential later in the year that other investors will be added to, which will then, you know, proportionately reduce what our capital deployment will be during the year.
I'd say the best way to think about this, Haendel, is that, you know, they're buying homes very similar to what we're doing on our balance sheet today in terms of, you know, stabilized deals, maybe even slightly higher. Then the difference here is they're doing the work around sourcing the home, sourcing the customers. The Pathway Homes operating company, which we're an investor in, is being paid an asset management fee, and then we're paying a property management fee on running the homes, like we do with our current portfolio. Where we can really see some really good leverage for us with regards to, you know, having a really nice return here is if additional capital comes in. Earning those management fees, not just of our own capital, but also someone else's capital is too.
A lot of it's gonna be, you know, base case, it looks pretty good if it's just our capital.
It gets really nice if we can start bringing in other people's capital as well and really grow that platform. Of course, you know, with our investment in the operating company as well, there's potentially a valuation on that operating company that could certainly be beneficial to us in the future too.
Got it. That's helpful, Ernie. Dallas, if I could just squeeze in one more, this is regarding litigation. It's stunning, and it's always a sensitive matter, but anything you can share or comment on the whistleblower lawsuit in California that was in the press yesterday?
Yeah, happy to share what I can. We don't really comment on, you know, pending legal and whistleblower is not really the fair term. What we had was a city saying that our general contractors weren't pulling permits on rehabs. As a matter of practice, this is kind of the only comment I'll make on this 'cause I wanna make sure Mark and our legal team can deal with this the appropriate way. As a matter of practice, in our contracts with our general contractors, much like you would expect, they're required to pull appropriate permits with the city. Again, these things come up from time to time.
We typically make sure that our lawyers look and review, and then we point the municipalities to the proper direction of where the issue actually lies. Outside of that, I know I can't really comment on pending legal. Just know as a matter of practice for our business, in our contracts with our GCs, they are required to pull all appropriate permits.
Got it. Thank you. Appreciate the call.
Thanks.
The next question comes from Brian Spahn of Evercore. Brian, your line is open.
Hey, on the supply side, are you seeing any bottlenecks currently affecting you and your building partners, and how do you see that trending during the year?
Yeah, we're not seeing any real direct bottlenecks given the structure of our homes. You know, when we buy a new home, about 10% of the purchase price goes into the rehab. So it's, you know, in that $30,000-$40,000 range, mostly paint, carpet, and all that. Early on, we saw a little bit of noise late in the middle of last year, but today, not really. I think most of it is coming just on the kinda labor side and sourcing GCs. We had a really good, healthy buy acquisition year and, from a ops perspective, we're doing a good job of catching up, but it is a little bit of catch up and to keep up with what we're trying to do this year.
It's really just to make sure that we are making it as streamlined for GCs to work with us, and we're doing a lot of things on that front in terms of making it easy for them to be paid quickly, supporting them, you know, writing quick you know scopes and all that. Really haven't seen much on the material side. It's mostly on making sure that we're sourcing the right GCs who are gonna turn the house around and from our requirements.
Okay, thanks. Just on the ancillary income side real quick, you've talked about reaching that stabilized goal of $15 million-$30 million by the end of this year. Just wanna check if any changes to the timing there. Is that still kind of the target goal?
Definitely the target.
Yeah.
Sorry, go ahead.
No, Charles, you got this.
Sorry. Yeah. We're at the high end of that guidance that we gave a few years ago, really being driven by, you know, seven areas. You know, through the pandemic, we were able to maintain and keep real good momentum on the ancillary growth. We built a really nice team over there. From an ops perspective, it's really rolling out nicely. Main focus has been on smart home, optimizing that program, as well as introducing video doorbells this year. Pet programs are going well. Our filter program that we rolled out about a year and a half ago. Insurance, a partnership with Terminix on pest, utility partnerships, and then starting to work on landscape stuff.
That's really the base case that's gonna get us to the high end of that guidance that we gave, and we think that continues to grow from there, as we go. Ernie, if you wanna add anything. Sorry to cut you off.
No, no. You nailed it, Charles. All good.
Great. Thank you.
Next question is from Dennis McGill from Zelman & Associates. Dennis, please go ahead.
Hi. Thank you. Thanks for taking the question. First one, I guess just looking at the Texas markets, if we were to take 2021 as the reference point, both rent growth and occupancy is among the lowest in the portfolio. The migration data or the way people are talking about migration, that narrative would kinda lead you to the opposite conclusion. Just curious from your perspective, I know Texas looks good versus history, but relative to other markets and relative to the migration narrative, why aren't numbers better there?
Well, let me start off by saying we love Texas. We were able to acquire the beginnings of that footprint in our merger with Colony Starwood, and we're trying to grow it, Dennis, quite frankly. I think some of the dislocation that you see in the numbers has more to do with the size of the sample, some of the existing assets than it does the market as a whole, to be fair. We are in our home builder program really trying to target Texas growth. The fundamentals are off the charts, as you know. It feels like the net migration patterns which have gone on here for 20 years are only gonna get better. We're bullish, like extremely bullish. We would expect...
We saw this a little bit too, if you remember back when Charlotte was a smaller market for us, the Carolinas, we struggled to see kind of the growth rates and the trends. As we were able to scale up and provide services at a candidly a better level, you started to see the acceleration and you start to get better at the pre-leasing and your loss to lease, you know, comes down and you actually start to see better programs within your renewal campaigns. I don't wanna say it's a nothing burger. It's something that we focus on, but it will adjust and change over time as we get the right product into the portfolio. I don't know, Charles, if you wanna add anything.
Yeah. No, I think it's a good call-out. Size does matter. Long-term, very, very bullish. You know, if you look at this specific trends within the market, Houston in Q4 was 97.7% occupancy, same as it was last year, which is still really healthy. Then today, or ending January, we were up to 97.9%, and blended rent growth in Q4 was 7.2% versus 2.8% Q4 of 2020. So while it's not keeping up with some of the Florida and Vegas and Phoenix, which are just extraordinary numbers, these are good numbers for Houston. Dallas, we saw a little bit of turnover spike in Q4, which brought our occupancy down to 96.8% in the quarter.
January's already up to 97%, and we're increasing. The blended rate growth was 99.6% in Q4. That's really healthy, up from 3.7% before. In January, we're still in the 8% blend. You know, given seasonality, given the occupancy, we think this is gonna, you know, I think the numbers in Texas will continue to be healthy, and, you know, over time will start to compete with some of the other migration markets we talked about.
Okay. Thanks. I think that's helpful. A little bit separately, do you have how much of your leases are month to month and how that's shifted over the last year or two years?
Yeah. Month to month is I think about 3.5% of our portfolio today. It's shifted a little bit. Some of that is the California effect when you have a limit on the renewal leases, and they're kind of matching up to what would be our month-to-month rate. Some of our residents out there decide to go month to month, and that's what's pushed it up. Otherwise, it's pretty typical to what we've seen, and it's a small part of the portfolio.
Okay. Great. Just one last one. On the development pipeline of 1,700 homes, maybe just a little more detail on the asset types. Are all of those single-family detached, or what percentage would be true single-family detached? Are these typically whole communities or partial communities? Any additional detail there?
Yeah. No, happy to. Bear with me 'cause I'll give you a few bullet points here. I think we disclosed that we've got ±1,700 homes in contract that are, you know, in play right now that we'll start to take deliveries on later this year. We have another 200 or 300 homes right now that are pretty close to contract. Call it 2,000 that are kind of in our ultimate pipeline. The majority of these are single-family detached, Dennis. We are gonna experiment a little bit with some townhome product in much more infill locations, which we've bought in the past, to be clear. We've done some of this back in the early days and also picked up some of this along the way, but it's really location-driven.
We believe that on a margin basis, some of this could be pretty accretive. We think, you know, kind of our going-in cap rates right now are kind of in the low- to mid-5s, so really accretive in terms of where we think we take delivery. You know, about 80% of what we've got in our current pipeline is kind of largely Sun Belt and Southeast markets. We're gonna expect that to continue to insulate, you know, that narrative around Texas and the Southeast and where we're seeing some of the highest growth. You know, we're also trying to get smart around new markets. We've talked about markets in the past that we'd like to be in.
You know, markets like Salt Lake and Austin and San Antonio are all really interesting for us, and we wanna continue to try to see if there's accretive ways to ultimately, as a business, maybe be in some of those markets. The network of build-to-rent providers will continue to expand. John Gibson and Peter DiLello on our team do a really good job of spending time with a number of different builders. They're looking at, you know, thousands of opportunities over a three to five-year horizon. We're excited about where we are. What we laid out a couple of quarters ago, in my opinion, is working.
We haven't taken the majority of these deliveries, but we're doing things with tried and true partners and building these on, like, you know, the right foundations that are built on trust, transparency, and an initiative to candidly bring more leasing supply into the marketplace. I think we're gonna do it. I think we're gonna do a good job of it as well.
Now, are you experimenting at all with the sort of ultra-high density product beyond the townhome?
At the end of the day, Dennis, our customer wants a 1,800-2,400 sq ft home, you know, at about $2,000 a month where it blends, and that ultra-high density tends to be a little bit more amenity-based. I would never say never, but those start to tend to get to be smaller product. It's a little different customer. Not saying it's a bad customer. It's just a little different from the customer that we have that stays with us now almost three to four years and wants the ancillary businesses and the things that Charles talked about.
I'd actually expect this maybe in some ways to go the opposite way, continue to do what we do really well, and drive additional services into the platform and make everything mobile to where our customer can adjust kind of what's part of that experience from their phone over time and distance. I think that will lend itself to great growth for the business beyond just the real estate and being location-focused with our investments.
Makes sense. Thanks, guys. Good luck.
Thanks, Dennis.
The next question is from Sam Choe from Credit Suisse. Sam, please go ahead.
Hi. Hi, guys. Thanks for taking my question. Just since we're talking about the acquisition pipeline again, just wanted to know what percentage of that current pipeline is from Pulte, because I think you guys threw around a number like 1,500 last quarter.
Yeah, the majority.
If you look on
Oh, sorry.
If you look on supplemental Schedule 8-B, the vast majority of that is from Pulte. Yeah, that's probably 80%-90% of it, Sam. In terms of what's gonna happen in 2022 in terms of what we actually intend to buy, very little comes from Pulte. Pulte really doesn't start to kick into gear for us until 2023, and then the vast majority, as you can see in supplemental Schedule 8-B, comes through in 2024. As we do more deals with Pulte, I think you'll continue to see 2024 build out as well. You'll start seeing 2025 and 2026.
Right. That's where the 7,500 homes kick in, right? After 2023, that's the five-year period where you guys expect that relationship will build, and you guys will eventually try to get to the 7,500. Is the way to think about it?
Yeah. We announced the relationship here about two quarters ago. Over the five years, that would certainly get us into 2026, maybe into early 2027.
Mm-hmm.
You know, because when we're getting involved with Pulte is really at the beginning of the process with regards to when we are thinking about acquiring the land or they have acquired the land. You know, certainly from there, it takes certainly a couple years to get the land ready for the developments to start to happen. That's why you'll see, you know, a lot of the Pulte stuff deliver in the out years for us, and the vast majority.
Okay. I just wanted to check that. Thank you for the color.
Yep.
I guess on the expense side, you saw that 13% increase in the fourth quarter. I guess I just want to wrap my head around how much of that is transient. I guess you did provide that guidance, but I'm just wondering what you are anticipating for the first half compared to the second half, and then maybe the full year thought on, I guess, how you're thinking personnel expenses will trend.
Sure. If you're specifically personnel, you know, one of the big reasons you saw an increase in the fourth quarter was around the fact that we had a very good year from a performance perspective. A lot of that was driven by truing up our accruals at year-end for short-term bonuses. That's why you saw, I would say, an outsized growth in personnel costs in the fourth quarter. Otherwise, we would expect that to be relatively steady in the same-store, because the same-store takes into account the fact in the same number of homes in terms of what the growth rate will be.
I don't think you'll see, other than you know, accruing appropriately for outperformance, if we're so fortunate to have that later in the year, I think you'll see kind of a steady growth with regards to the costs associated with personnel. Then just overall for expenses, Sam, you know, real estate taxes, you take your best guess at the beginning of the year how it's gonna go. And then again, you put that increase through, you know, pretty evenly throughout the year. Then as you get more information, you tweak those accruals.
I would, you know, expect you would see, and again, with property taxes being 60% of our expenses, you know, you'll see, you know, we would expect a relatively smoother expense growth in 2022 with regards to where it's at. Maybe we get some slightly easier comps until we get to second half of the year around repairs and maintenance and turnover, things like that. Because, you know, the inflationary environment really started to kick into gear for us here, toward the, you know, the end of 2021.
Got it. That's really helpful. One more from me. I guess the total occupancy for Seattle and Denver were kind of low compared to the rest of the portfolio at, like, 91% and 87%. What was going on during that quarter?
Yeah. Sam, what you're seeing there is. Go ahead, Charles.
Yeah. Just quickly on Seattle, what's standing out there is, you know, there was a freeze on the renewal side of the business that the Washington had in place. When we could start to move rents back to market, and we did that in a very thoughtful way, some residents decided to move out. It created a little bit of a spike in turnover. That's why you see occupancy went down to 97.1%, still very healthy from 98.5%, but it's already rising up in January. We're at 97.6%. You're gonna see the renewal rent growth and rev rent growth go higher.
Sam, I know you were talking about the total portfolio, not same store on total portfolio.
Yeah, total portfolio.
What you're seeing is the activity there. We've had a significant amount of acquisitions in both of those markets. What's happening is we're acquiring homes. As Charles talked about a little bit earlier, we did see some labor supply shortages in the fourth quarter of 2021 with our general contractors. With this quick ramp-up in acquisition activity in the second half of the year, we did see it taking us longer to get our initial renovations done. We've been very acquisitive in both the Denver and Seattle markets. What you're just seeing there is it's taking us about 30-45 days longer than historically to get homes ready, and that's impacting our occupancy.
We would expect that will work itself out over the year, actually the first half of 2022 to get to more normalized total portfolio numbers.
Got it. Appreciate the color, guys. Congrats on the great quarter.
Thanks, Sam.
The next question is from Austin Wurschmidt from KeyBanc. Austin, please go ahead.
Great. Thanks, everybody. I wanted to circle back on the Pathway investment really quickly, just to better understand it. Is the $250 million investment your total commitment or just an upfront investment that could, you know, grow from here over time? Second, are you structuring these deals essentially to ensure you achieve your targeted return? Any upside from home price appreciation, you know, over the term of the rental period is then enjoyed by the resident? Just any detail you could provide would be helpful.
Yeah. Austin Wurschmidt, this is Ernie Freedman. Dallas may chime in as well. With the first part of your question, you know, we committed $250 million to the platform. We funded $25 million of that to the operating company. The group has actually, you know, they've set up an operating company to source the customers and source the homes. Our capital partners have also put some cash into that entity as well, and we own 15% of that entity. Then the remaining $225 million is committed to the property fund where the homes will actually be owned, and there'll be leverage that will be used there as well.
The hope is that in the Pathway Homes folks that I talked about earlier are out trying to raise additional capital there to grow that even further. From a, you know, from a return perspective, we would expect that these homes once stabilized, and they stabilize very quickly because if someone's moving in right away, there's a very light renovation to have some of these homes because the current consumer the resident can pick out the home. This is the home that they wanna potentially buy after a period of time. We expect the yields at the property level would be similar or slightly better.
The lease clearly states what the renewal rates will be over the period of time that they're leasing and it pre-negotiates what the purchase prices will be. If you do see some outsized home price appreciation, that would certainly accrue to the benefit of the resident. You know, that's all factored into the lease that's put in place together with that resident.
Got it. That's really helpful, Ernie. Thank you for that. Just secondly, back on the regulatory side, I guess, how do you allay investor concerns about the regulatory backdrop and, you know, outstanding class action lawsuits that came up, which, you know, presumably are on everyone's mind and come up frequently in conversations? You know, maybe bigger picture, do you think any of these risks really derail the opportunity set for, you know, Invitation's ability to continue gaining scale or on the internal growth profile looking forward?
Well, let me address first the class action reference. This is one we've been dealing with for several years. There are two claims, but they stem from the same case. The first one was dismissed across all states, but they kept the California piece. Our general counsel is working with that there. We don't comment on anything ongoing, but this has taken some time, just a case that's been going on for a while. The second one is the old plaintiff, after the case had been dismissed, filing in the state of Maryland. No new news there outside the fact that these things do arise from time to time, and it's in regards to a late fee claim, and our counsel is working through it.
In terms of the broader environment, I think I'll go back to what I said earlier, which is, there's a heightened sense of awareness with where housing costs and supply constraints currently live. We're all feeling them. We're feeling them in our own choices around housing, whether it's to buy a home and the home price is up 25% than it was a year ago, or whether it's in a lease like a market like, you know, Phoenix, where we're seeing new lease growth in the 20th percentile during peak months. We can't solve the overall supply issue for the country. In our shared remarks at the beginning, we do try to make sure that people understand we represent a very, very small subset of the for-lease single-family rentals housing space.
We're part of a broader sector and an industry that's evolving and getting better. I think the narrative will be that people will continue to invest in SFR because they like the returns. It's never been an institutional asset class, but there's been somewhere between 15 and 18 million people that have rented this type of product forever. We're happy and proud of the small part we play in that story. Our goal will be to continue to find ways to creatively grow our portfolio, but not just the portfolio, but the services we provide to the residents. I cannot tell you whether, you know, the regulatory environment goes up, goes down. It tends to follow political cycles and spectrums and stories that are out there. Right now, you have a high cost of housing reality that we're all dealing with.
It will get picked on a little bit from time to time. At the end of the day, we are part of an industry that's been around forever, and I think we can continue to find ways to make it better than how it was before. That's really our focus is how do we take an industry that's been here for 200 years and make it better? I think you see with our Pathway announcement, those are areas and quite candidly, opportunities for renters or potential owners to ease into homeownership in a way that is less obtrusive and that you can also cap the way that your rate growth on your rent might be while you're considering whether you wanna own this home or not. We're fully supportive as a business, an industry, and a company.
We talk about this all the time. We are all about choice. We think the consumer ultimately deserves choice. Two-thirds of the country is gonna own something, a third of the country is gonna lease something. In that category around lease, we wanna be as active a participant as we can, and we wanna take current practices and make them better. That's ultimately the view of Invitation Homes and some of these other opportunities that we're gonna continue to look and try to invest in.
That's helpful. Appreciate the thoughts. Lastly, Ernie, on the $2 billion of acquisitions, how much accretion is embedded in guidance?
Well, I'll let you use your.
Sorry about that, Austin. You know, we would expect to continue to be able to buy in an environment similar to where we are right now in you know 5% plus cap rate range. You can layer in your own assumptions then around what you think you know cost of debt or where our equity may be trading.
Got it. Sounds good. Thanks, guys.
The next question is from Neil Malkin from Capital One. Neil, please go ahead.
Hey, good afternoon, everyone. Thanks for the time. Glad to be on with all of you. Look forward to continuing to cover you guys. I guess first one, just going back to acquisitions. You know, the announcement about the Zillow Offers unwinding their portfolio. You know, looking at some of those houses that they have on their website, I don't know if that's the entirety of their inventory, but a lot of their properties seem to match up with your markets pretty, you know, significantly and in a meaningful way, you know, infill locations, kind of square footage, et cetera, particularly in some of the markets you've talked about, you know, such as growing in Texas, Nashville.
You know, you'd wanna look back into, you know, getting into if you found the right inventory. There's several hundred houses in each of these markets. Have you been looking at those? You know, do you think that's gonna be a larger part of your investment activity this year, and would that be a good way to sort of increase your exposure or get a quicker sort of foothold in markets you're wanting to grow in?
It's a great question. As you look at, I'll tell you, this year or 2021, we only bought 126 homes through iBuyer channels. So it's not a material amount for us in terms of how we look at growth. We definitely look at those channels, and the headlines always sound good to your point, that there's a lot of crossover. When you start to get underneath the hood on markets, neighborhoods, HOAs, the amount of refurbishment that might be needed. Again, I go back to the fact that we're a pretty stingy investor. We're really particular about where we invest capital and why, and we want it to line up with our strategy around the resident experience.
We didn't tend to see a lot of opportunities, particularly on the Zillow side of things. We certainly looked, and, you know, we'd be crazy if we didn't. You know, there's price, there's location, there's fit and finish standards. There's things that we hold ourselves to as we wanna continue to build out our brand and the way that we do business. While we would welcome any opportunities to buy from iBuyers, if they made sense, we just haven't lined up on a lot of trades, this year. That's the answer, kind of plain and short.
Yeah. Makes sense. In terms of the platform, you guys have obviously been you know leading the way in terms of institutionalizing and you know sort of making that model more efficient. A lot of the apartment peers have really been focused on sort of like wanna call it next gen or you know putting technology and you know the resident experience you know more to the forefront. Obviously you know your portfolio is different than a high-rise apartment building. Can you maybe just elaborate on things that you're doing beyond the sort of $15 million-$20 million of other revenue increases you talked about achieving?
You know, can you just talk about how you see, you know, technology or the operating portfolio, maturation, along with technology, you know, impacting the business in terms of potential margins over, like, a three-year period?
Yeah. Great question. This is Charles. You know, innovation is kind of at a core of what we've been trying to do in this industry. Obviously, professionalizing the single-family business and being able to introduce technology, that's been our base of how we kinda deal with and manage, you know, 80,000 homes across 16 markets. Early on, we were early adopter in the smart home technology that did a lot towards that, and we're still trying to evolve that side of the business. That allowed us to do self shows. It allowed the resident then to control the thermostat and safety. By introducing video doorbells, I think we're gonna be able to do more on that front in terms of making it even more convenient and safer for our residents to tour the homes.
One of the innovations that we introduced this year or in 2021 was around our maintenance mobile app, which has been really helpful. We've had about 30% adoption of our work orders are coming through the maintenance mobile app. It's on both Apple and Android, and almost over 60,000 downloads. What we find with that is that the resident, it's really meeting them on how they wanna operate with us. It's very convenient. Our satisfaction scores are higher when people go through the mobile app. We're getting lower number of multiple trips. These are the type of things that you know make the resident experience better and makes us more efficient. We'll continue to do that. You brought up the ancillary side.
I think there's huge improvements there. As we survey our residents, we constantly ask them, "What are you looking for? What's gonna make it more convenient for you?" Whether it's move-in services that we can talk about, it's you know, the broadband services, handyman services. These are things that we are experimenting with, we'll be piloting and then rolling out. That innovation is really gonna be led by what's going to be that leasing lifestyle that our residents want and that we know is gonna make us more operationally efficient. To your point, pull in those margins, if you will. That's everything that we've done, you know, in the history of the company as we've expanded and been able to get more and more efficient in our operating environment.
Great. Sounds like you have a lot of things in the hopper. That's all I had. Thank you very much. Great quarter. Look forward to continuing to work with you guys.
Thanks, Neil. Appreciate it.
Our final question today is a follow-up from Nick Joseph from Citi. Nick, please go ahead.
It's Michael Bilerman. I appreciate you guys sticking around. I just wanted to come back to sort of the loss to lease, which, you know, you talked about being up at 20%. Obviously, that's grown through the year, and you've had very strong market rent growth, and you haven't been able to push the renewals as strong. I was wondering if you can just step back and just talk about your renewal process in the markets that don't have caps on rent increases. Are you imposing a self-imposed cap on those increases? You know, how do you think you're gonna be abl e to get at this 20%, which arguably you should have continued rent growth given everything that we've talked about from a fundamental standpoint. That 20%'s just gonna grow larger by the end of the year.
How do you sort of put this all together given some of the regulatory constraints that are going around?
Yeah, it's a good question. Short answer is there's no hard cap. We're really just trying to be thoughtful around, you know, how we go out with our renewals. We're seeing what's happening on the new lease side. Obviously, we've had really good numbers, even through the January numbers that are really healthy in the mid-teens. But what you will notice on the renewal side, it's increased every month over the last year, and we're continuing to see that acceleration. I think over time, we'll get back to capturing some of that spread that we're losing in the loss to lease. How we do that practically on the ground is we perceive what we think is that market rate.
You know, we then go and give that to the field teams, and we look at it house by house, market by market and try to be thoughtful. If there really is a high push that you start adding $400-$500, then we need to be thoughtful around what we do there. We may pull it back. But we're starting to see that we're able to capture more and more of that because our residents are also seeing what the new lease side is looking like out there. They're seeing that this is value in our renewal numbers that we're giving them. Over time, we're just trying to be thoughtful that we will continue to push that up.
If you look at our January numbers, our renewal numbers are at 9.6%, where we were on the renewal side, 9.3% in December. That's continued to accelerate as we look at February. I expect that we'll continue to push up on the renewal side, and we'll find out where it goes over time. We'll find that balance.
Michael, one quick-
I'm really proud of our teams and how thoughtful they've been to try to make sure that we're creating a right experience and not spiking turnover as well and putting people out into a tough environment.
Right. And then do you have a sense when you quote that 20%, how much of that's attainable if you were just to take it all to market? You know, how much regulatory, you know, issues could there be in markets where you can't lift the rent to that extent? Right. So if you looked at it on a, you know, adjusted basis, what would that upside be to what you actually-
Putting it aside, Michael.
I think you probably wouldn't do it for exactly the reasons. Yeah.
Yeah. That's the key, Michael, is we're not going to do it even though we could do it legally in virtually every one of our markets. You know, California would certainly be the exception around what we can do with renewal increases there. Saint Paul recently passed rent control legislation in the fall of 2021. Minneapolis has a very specific cap of 3%. Minneapolis now allows for rent control, but they have not enacted what they're gonna choose there. The vast majority of our portfolio, we could do what you're seeing the multifamily guys do. I saw some of the slides with their fourth quarter numbers and their January numbers, where their renewal rates are close to new lease rates. As Charles said, we've made a conscious effort.
You know, in our business, our residents stay with us three, four, almost five years, when you see our turnover at 20%. A little bit different than the multifamily business. It's not likely we're gonna capture that full loss to lease in one year. Now on the flip side, that should allow for less earnings volatility going forward because if market rates stay where they're at, and to your point, they probably continue to grow a little bit, it certainly gives us a longer path than we otherwise might see for what we can do for renewal increases over the next many years and still have our residents under market.
It's kind of a win-win for our residents, where they've been with us for a long time, and it's certainly an 8% or 9% or 10% increase is a big increase, but it's not where the market rate is. We're playing that balancing act, and it's not so much from you know, certainly where there's regulatory pressures, we're following those 100%, but it's really just we think it's the right way to run the business right now.
Yeah. Thanks, Ernie, and I appreciate you guys sticking around. Thanks.
Thanks, Mike.
This concludes today's Q&A session. I'll hand it back to Dallas Tanner for any closing remarks.
We appreciate everyone's support in participating in our quarterly call. We look forward to speaking with everyone next quarter. Thank you.
This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.