Good day and welcome to Equity Residential’s 2Q 2022 Earnings Conference Call. As a reminder, today’s conference is being recorded. At this time, I would like to turn the conference over to Marty McKenna. Please go ahead.

Good morning and thanks for joining us to discuss Equity Residential’s second quarter 2022 results. Our featured speakers today are Mark Parrell, our President and CEO; Michael Manelis, our Chief Operating Officer; and Bob Garechana, our Chief Financial Officer. Alex Brackenridge, our Chief Investment Officer, is here with us as well for the Q&A. Our earnings release is posted in the Investors section of equityapartments.com. Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become untrue because of subsequent events. Now, I will turn the call over to Mark Parrell.

Thank you, Marty. Good morning and thank you all for joining us today to discuss our second quarter results. In a minute, Michael will walk you through a performance update by market, then Bob will discuss our guidance improvements, update you on how our innovation machine continues to hold expense growth down in an increasingly inflationary world, and then Bob will close with some color on our balance sheet and then we will take your questions. Equity Residential had a tremendous quarter. Our business continues to benefit from terrific supply and demand dynamics, including excellent job growth and household formation. Our urban and dense suburban portfolio continues to be a magnet for our affluent renter demographic as demonstrated by our 96.7% same-store physical occupancy. We also believe that the desire for more space due to work-from-home and COVID-related health concerns has resulted in significant incremental household formation, creating additional demand for our properties. Also, housing alternatives remain expensive and in low supply. Single-family home prices reached record levels in 2022 while rising mortgage rates have further stressed affordability, particularly for first-time homebuyers. Single-family housing starts are declining. Existing homeowners are more reluctant to sell due to low locked-in mortgage rates, along with minimal and expensive for-sale replacement options, and competition for homes from investors remain strong. The near-term apartment supply picture also remains favorable. Starts within close proximity to our properties in our coastal markets are still at or below pre-pandemic levels. In addition, it seems likely to us that over the next few quarters, new apartment starts should decline due to reduced availability and higher pricing of construction financing, increasing construction costs and continued supply chain disruptions, lengthening construction times and increasing developer risk. Recently elevated inflation numbers are certainly a concern, especially if efforts to rein in inflation lead to much weaker job growth. On the positive side, our affluent renter base should be able to better weather rising inflation in part due to lower relative rent-to-income ratios and higher amounts of disposable income. As in the past, if inflation does persist, we would expect the apartment business to perform relatively well. As we look at our resident income, the average incomes for our residents who signed new leases with us in the last 12 months is 13% higher than the group who signed with us in the 12 months ended June 2021. These new residents are paying us approximately 19.8% of their incomes versus 19.2% last year in rent. They are not rent stressed and they are willing to pay these rents to live in locations that support the lifestyles they seek to enjoy. On the larger topic of affordability, we see a continued need for more workforce housing and continue to support market-based affordable housing supply solutions, including zoning reform, public-private partnerships and other programs that assist in affordable housing preservation and creation. As part of this support and in addition to the more than 2,600 apartment units that we already operate in affordable programs, we have funded about half of our $5 million commitment to a privately held affordable housing preservation fund that expects to preserve approximately 1,600 affordable housing units when it’s fully deployed. Now, switching gears to the investment side of our business, we saw a material slowdown in the transactions market during the quarter. Higher interest rates, especially for the floating rate debt used by many value-add buyers as well as general uncertainty about the path of the economy and valuations led most buyers to pause. We did recently close on the sale of two properties in New York, one property for $266 million at a 3.3% disposition yield in the second quarter, and another New York property for $415 million at a 3.4% disposition yield this month. The properties are adjacent to each other on the Upper West Side. Both properties represent pricing contracted for before the recent volatility in the apartment transaction market and our continuation of our stated strategy of lowering our New York market exposure. As we have said before, we will continue to have a meaningful exposure to the New York area, but intend to better balance our urban versus suburban exposure in our established markets like New York, while adding over time to our exposure to our expansion markets, which are attracting increasing numbers of affluent renters and have lower regulatory risks. For our part, we are very comfortable letting the transaction market sort itself out and have reset our transaction guidance so it reflects only buys and sales completed to date plus one smaller disposition that is under a long-term contract that should close in the fourth quarter. While apartment values are not immune from the more general revaluation of risk assets going on across all asset classes, we expect apartment assets to remain in high demand from institutional buyers and for rising NOIs to partially cushion increases in cap rates. We have the balance sheet and the team ready to take advantage of any opportunities we do see as we have done in the past. Moving on to development, we started two new developments in the quarter. The first project is a $153 million densification of an existing property we own in Santa Clara, California, about 1.5 miles from Apple’s headquarters. We will be demolishing 40 units in buildings built in 1972 in a highly desirable area, with little supply of high-quality rental housing and replacing them with 225 new units plus significant amenities that will benefit the remaining 224 units at the property that are undergoing renovation. We are very excited about this project and expect a 6% development yield when it stabilizes. At a cost per unit of about $675,000, we also like our basis as compared to recent sales comps. We are also pleased to have started this quarter our first development project with Toll Brothers. This $82 million, 362-unit project is being built just west of downtown Fort Worth, Texas in a rapidly gentrifying area with good access to job centers and to the increasing number of nearby lifestyle amenities like restaurants, bars and entertainment venues that are appealing to young well-off renters. We expect to build this property for about $225,000 per unit. We like our expected basis and we love working with a high-quality, financially strong developer like Toll that has the experience to capably manage construction in a climate with significant inflationary cost pressures. That said, this deal is approximately 75% bought out, reducing our risk. On current rents and costs, this deal has approximately a 5.5% development yield. And with that, I will turn the call over to Michael.

Thanks, Mark. Let me start with a huge shout out to the entire Equity Residential team for their continued dedication and hard work. They remain relentless in serving our customers and working together to deliver the strongest results in the history of our company. As expected, we had a very good second quarter. Resident turnover remains at all-time lows with strong demand driving robust pricing power and high physical occupancy at 96.7%. Pricing trend, which is the net effective price of our units inclusive of concessions, has grown almost 10% since the beginning of the year, which is well above the 6% range that historically characterized a very good year. This pricing strength has contributed to an unprecedented new lease change with July expected to be about 16.5% and a significant loss to lease of 12.5%. July’s moderation in the new lease change is less than we expected and is caused by a more challenging 2021 comparable period, not a loss in operating momentum as our sequential rents continue to grow. Our current position will contribute to continued above-average second-half revenue growth and strong embedded growth for 2023. Our residents are well employed, and as Mark just mentioned, seeing their incomes rise. The unemployment rate for the college educated continues to be below 3%. And while we see the same headlines that you do about slowdowns in hiring or even layoffs, we are not seeing any impact on new leases or renewals. Our operating dashboards continue to flash green. Given the amount of hiring that the tech firms have done over the last few years, even with the moderation, they are still employing more people than they did pre-pandemic. The tenure of our residents has also improved to 2.3 years on average compared to 2.1 years last year and we are losing fewer and fewer residents to home purchase as single-family homeownership gets more and more challenging. In fact, in the second quarter, we had a 22% decrease compared to the second quarter of 2021 in the number of residents who moved out to buy a home. We remain aware of the economic headwinds and we will position the portfolio more defensively if need be. But given the significant loss to lease, strong retention and healthy demand we are seeing, we remain optimistic. That said, as is true every year in our business, we expect rent growth to peak and then moderate seasonally in the summer, but we are happy to report that has not yet occurred. In sum, our operating metrics and forecast for the balance of the year remain beyond historical norms and Bob will provide more color on the building blocks of our revised guidance in his remarks. Let me take a minute and provide some color on market performance. In Boston, demand ramped up in both the urban and suburban submarkets driving a 90-basis improvement in physical occupancy over the first quarter along with robust pricing power that came earlier in the season than usual. Rents have begun to moderate in this market. However, it is not uncommon to see modest reacceleration in August as students typically return then and are an important source of demand for our portfolio. We are definitely bullish on second-half performance, particularly in the suburban submarkets and remain cautiously optimistic on the city of Boston and Cambridge’s ability to absorb some of the new units that are scheduled to be delivered later this year. The market continues to have strong employment with life sciences continuing to expand their footprint. New York continues with very healthy pricing power and demand. After significant impact from the pandemic, New York same-store revenue and NOI are now fully recovered back to 2019 levels. Physical occupancy is 97%. New lease change and renewal rate achieved were robust in the second quarter, with a vibrant environment continuing to attract our affluent renter demographic who is well employed and can afford to pay our rents. Despite these rental increases, our new residents are still paying us only approximately 18% of their income and our data indicates that our rents in this market have grown more slowly over the last three years for our new renters. The Washington, D.C. market continues to perform well, with physical occupancy at 96.7% and good growth in both new lease and renewals in the quarter. The absorption of new supply was good in the first half of the year, but we are keeping an eye on it as the year progresses. There are more than 12,500 units being delivered in 2022 with over 7,000 of them coming in the back half of the year from a competitive leasing standpoint. The absorption rate slowed a little in the second quarter, but still remains very strong and at current levels should support continued pricing power. While this market has historically shown high levels of supply, it is also one of the most resilient in the country during periods of uncertainty. The D.C. area unemployment rate has returned to pre-pandemic levels and sits below the national average with good growth in the professional services and education health categories, where many of our residents are employed. Heading West, Denver has solid demand and good pricing power, stronger occupancy in the suburban portfolio and we expect some pressure from new supply in the downtown submarket. The Denver job market continues to enjoy healthy growth across a number of sectors, including the professional and business services. In Seattle, continued improvement on quality-of-life issues is helping drive the comeback in the city, which now has rents that are just over pre-pandemic levels. Physical occupancy is above 96% and we continue to see strength in new lease rates and renewals. Concession use is isolated to the city and continues to moderate with approximately 20% of our applications receiving just under a month. This is down from over 50% in the first quarter and occupancy in the downtown submarket is now just over 96% as compared to 93% in March. Supply impact for us in 2022 is limited to our high-rise communities in the city, while 2023 shows less direct competition from new supply overall. This market continues to demonstrate high wage job creation. And while job postings from the major employers did moderate this quarter, the number of available positions is still near all-time record highs. The San Francisco market continues to improve with high occupancy supporting growth in both new lease and renewal rents. The issues around quality of life are improving, but downtown San Francisco is still taking more time to return to pre-pandemic conditions than other markets across the country. Remember that the city was one of the last areas to ease COVID rules and just recently stepped up its focus on crime issues. While rents continue to be below pre-pandemic levels in the downtown submarket, they are working their way back. All of our other submarkets in San Francisco are at or above pre-pandemic pricing levels. Overall, I would say we are very optimistic on current trends in San Francisco, but have an eye on new supply that is expected to be delivered in the back half of the year and could erode pricing power if demand slows. Finally, Southern California continues to perform well, with physical occupancy at nearly 97% driving strong rental growth in both new lease and renewal rates. Specific to Los Angeles, the market is seeing elevated new supply as compared to the past several years, but the overall market remains undersupplied. Even in submarkets like Koreatown, where we expected pressure this year, the new supply is being quickly absorbed, leaving us better pricing power than we anticipated. On the delinquency front, we saw modest improvement in the second quarter in the payment behavior of our residents and continued rental relief receipts. As we look into the second half of the year, we don’t expect rental relief receipts to be as material, which will lead to revenue growth moderation despite strong continued fundamentals. Before I turn it over to Bob, I just want to give a quick update on some of our innovation initiatives. Innovation is a major contributor to our ability to create operating efficiencies, while continuing to maintain a high level of customer service. Despite meaningful progress, we continue to have a lot of opportunity ahead of us as we integrate our initiatives, continue to leverage technology and advance our overall skill set. Just over half of our properties now operate without fully dedicated staff. We continued to invest in and implement software and processes that further enable the autonomous leasing experience, allowing customers to tour a community and interact with a member of our team or our AI leasing agent as much or as little as they desire. Self-guided tours continue to dominate as a preferred tour option, with just about 90% of all tours in the second quarter being self-guided. We are extremely excited about the future as we innovate to maximize revenue and minimize expense growth, while continuing to provide a great experience for our residents and employees. I will now turn the call over to Bob.

Thanks, Michael. A quick comment on the quarter before moving to guidance on the balance sheet. Q2 normalized FFO was $0.03 above the high end of our quarterly guidance range. This beat was almost entirely driven by better same-store NOI through a combination of better revenue growth, including lower bad debt expense and modest overall expense growth. Now, for our revisions to full-year guidance, as you saw in the release last night, we significantly revised same-store revenue and normalized FFO upwards while maintaining our existing same-store expense growth guidance. Starting with same-store revenue, strong first-half performance, coupled with the constructive ongoing operating environment has led us to raise our same-store revenue projections above the top end of the prior range. We now expect our same-store revenue to grow between 10% and 11%. Our new 10.5% midpoint sits at 150 basis points higher than the prior midpoint driven by continued stable physical occupancy of 96.5%, record resident retention and earlier as well as stronger pricing power, both the new lease change and renewal rate achieved across all of our markets, but particularly in New York, where recovery from the pandemic has been a positive to the upside. Our revised full-year same-store revenue guidance implies a slight deceleration in same-store revenue growth in the back half of 2022. This is the result of the significant governmental rental relief payments we received in Q3 and Q4 of 2021 and the almost complete absence of relief payments we expect to receive for the rest of this year, not any expectation of a slowdown in the core business. We expect third- and fourth-quarter same-store quarter-over-quarter revenues without the impact of rental relief payments to be more in line with the reported Q2 number. On the expense side, we left our already strong guidance unchanged with June year-to-date expense growth of 2.8% and a number of innovation initiatives underway, we feel confident in our ability to deliver second-lowest expense growth for the full year. As you can see in our reported results, both real estate tax growth and payroll are aiding in our ability to accomplish this goal with some offset in utilities and repairs and maintenance. We remain laser-focused on reducing or eliminating exposure to inflationary labor pressures, whether we feel the impact from our own employees through the payroll line item or from contractors through the repairs and maintenance line. We strive to reduce any pressure from higher efficiency and better decision-making along with utilization of technology that can eliminate or permanently reduce labor hours needed. In a category like utilities, we do our best to maximize our resident reimbursement income, reduce usage through both education and technology initiatives and hedge our commodity exposure. Thus far, our approach has significantly buffered growth, but we acknowledge this is a long game if the current inflationary environment continues. Putting it all together, the revenue and expense adjustments that I just outlined resulted in a 225-basis-point increase for same-store NOI at the midpoint. For normalized FFO at the midpoint our guidance changes added nearly 3% or $30 million to normalized FFO growth, which results in an approximately 18% increase year-over-year for the company. A final note on the balance sheet before Q&A. Equity Residential continues to have one of the strongest balance sheets in the REIT sector, characterized by low floating rate exposure and a long weighted average maturity. Subsequent to quarter end, we sent a notice to redeem the $500 million unsecured notes that are due in 2023 with proceeds from the dispositions of the two New York properties. This use of proceeds will mostly offset the normalized FFO impact of net dispositions for the year while also significantly reducing our refinancing needs in 2023. There is no prepayment penalty associated with the payoff, but there will be a modest write-off of historical discounts and costs, which is estimated on the guidance page. This write-off will be included in EPS and FFO, but not in normalized FFO. With that, I’d like to turn the call over to the operator to begin Q&A.

Thank you. The operator provided instructions on the Q&A process. And we will take our first caller from Nick Joseph with Citi.

Thanks. Mark, you touched on the transaction market a bit in the pause that you have seen there. If you were to estimate, how much do you think asset values have moved and maybe cap rates as well, obviously, NOIs are up? And then are you seeing any difference between markets maybe between expansion markets and some of your established markets?

Hey, Nick, this is Alex. Well, as you know, the market is certainly unsettled right now and there is a lot of a feeling-out process going on. So, there have been some transactions that closed. Some of those though were had been under contract prior to the rate hikes, some of those maybe a buyer had 1031 needs. So, it’s a little hard to get great clarity on that question. But clearly there are these countervailing forces that you mentioned: interest rates up, economic uncertainty offset by just these tremendous property operations. So, I would say somewhere 5% to 8%, maybe up to 10%, where we are certainly seeing buyers scrutinizing things that might have a little bit of hair on them, maybe a lesser location, maybe a physical challenge that they might have overlooked before. So the range could get higher, but we also don’t see a lot of distressed sellers, which a lot of people are happy to keep enjoying the great performance that their properties are generating. So, it’s a bit of a range, but we will see how it plays out, particularly come fall. It’s a little slow in the summer as it typically has been.

And just to supplement that for just a second, just talking a little bit about replacement cost. I mean, that’s a big differentiator. It’s a mark between the coastal markets where the premium to replacement cost and a lot of assets were sold at was not significant or even in places like New York, there was a little bit of a discount. And in some of the Sunbelt markets where there was a pretty significant premium to replacement cost and you saw us really slow down our acquisition activities when we saw some of those premiums go up into the 20%, 25% and up range over current construction costs. So, I guess one of the things Alex and I are going to be looking at as we think about starting to buy the machine up again is those Sunbelt markets start to make more sense on a replacement cost basis. That maybe because construction costs keep going up, that maybe because values come down a little bit, but that is another input that’s important. And it was one of the things that made us go a lot slower towards the end of last year and the beginning of this year, Nick.

Thanks. That’s very helpful. And then maybe just on operations, you talked about July rents accelerating in the more challenging year-over-year comps and kind of the normal seasonality that we have seen historically, but maybe not yet. How is guidance thinking about kind of pricing in or kind of contemplating seasonality in the back half of this year?

Yes, hey, Nick, this is Michael. So I think right now, where we sit and I said this in the prepared remarks that the moderation that we saw in some of the stats in July is actually much less than we expected and that’s really just given the speed of that concession burn-off and rate growth from last year. And when we started looking at the modeling for the back half of this year, we are kind of just assuming normal seasonal trends. And we have data going all the way back to 2008 to benchmark this rent seasonality that includes the exact week when rents peaked each year. And when we went back and looked, and I said this in the prepared remarks, our rents have not peaked yet. And you see it over time where you have had years where rents peaked in early July all the way until like the very first week of September, but the most common peak week has been somewhere in that first or second week of August. So as we were modeling, we just assume we are going to have rents peak somewhere in this first or second week of August and then have a normal kind of trail off in rents until you get to that January period.

Thank you very much.

Thank you. And next, we will move on to Chandni Luthra with Goldman Sachs.

Hi, good morning. Thank you for taking my question. Mark, could you talk about some early reads, give us a lens into 2023, how should we think about the earn-in given just really strong back half that you are seeing right now, especially if we go into a tougher economic scenario like how should we think about the business and the cadence in 2023, because we obviously have a very good starting point and a foundation, but what if things get really bad from a macroeconomic standpoint?

Yes. This is Michael. Maybe I’ll start, and Mark, you can kind of add on if you’d like. But I think what you should expect is somewhere on our October earnings call, we will probably provide a little bit more of a range of the building blocks into 2023, that would include the earn-in. And by earn-in, for me, I use the term embedded and what that would mean is on 12/31 of this year, you would freeze the rent roll and assume that nobody moved in, nobody moves out and what does that revenue growth look like? I would tell you that in normal years, we would start January one-off with an embedded growth somewhere around 1% in the rent roll. And even with the forecasted moderation, it is pretty clear that our expected embedded growth is going to be well above that average amount. So I guess I would point to the longer we go without having rents peak, right? It’s just adding more growth to this embedded as every new lease and renewal gets written here in August, September and even October. And as you think about turning the corner, just factor in moderation and then your views for what intra-period growth could look like in 2023, and that’s how we will be doing the building blocks for our guidance for next year. But we’re not at a point yet where we’re willing to share those numbers because we still have a lot of transactions to write.

And you asked — it’s Mark this time, Chandni. You asked a very good question of let’s say the economy does fall down a bit more and we do have a recession and how do we feel? Well, certainly that would affect our numbers negatively. I mean job growth and economic growth are vital to the apartment industry’s success over the long haul. But the supply-demand environment for us is very favorable right now. And so the fact that single family is pretty pricey, that means to us that our older millennial demographics are going to stay with us longer, and you see that in our retention numbers. This Gen-Z group that’s pretty large that’s coming through the system — there just aren’t enough jobs even right now. So if there are a few fewer because a lot of what we’ve seen about the job market isn’t that there are so many fewer jobs and people are unemployed, it’s more that the excess is being taken out of the system. So I guess our sense is the supply-demand balance is pretty good for us, and it will likely be pretty good unless a recession, if a recession occurs, is very severe. So the setup for 2023, it just really is quite excellent, even if there is a recession. It just won’t be as excellent, but on a relative basis, it will still feel, I think the revenue growth for us and for most of the industry will be really, really good.

Very helpful. And if I could just get a quick follow-up. So obviously, the acquisition environment has taken a huge back seat here across the board. As we think about your expansion plans in the newer markets, how long do you think that gets pushed? And what are the levers? Can development at some point become a bigger tool in your arsenal as you think about getting scale in those newer markets?

Yes, it’s Mark again. Development is one of the tools in the toolkit. One of the things that’s happening now that makes us happy not to have too large a development pipeline is if values do go down a bit here, Chandni, and there are portfolios for sale and there is a discount available to us, you’ll see us be very active and very aggressive in going out and grabbing those deals. So I think you’re going to see it be pretty quiet for a few months here. My guess is that buyers and sellers will decide that this is the new market. And towards the end of the year, we might get considerably more active. We will continue to do development. We like a lot of the deals. We’ve got a couple more we’re likely to start this year. But I guess what I’m most excited about is to see some of these acquisitions come in at a little bit more reasonable price, to be able for us to act on that and act in volume on that. So again, to us, it seems like it’s going to be quiet kind of through Labor Day for sure, and then it might pick up a bit. Alex, what would you — I don’t have a deadline for completing the transformation of the portfolio. I mean we will be reactive to the market opportunity. Do you have any...

I would just add that in environments like this, we have a competitive advantage over some higher-leverage buyers. So it’s been very competitive. Everyone’s bid was more or less the same in the last couple of years; now the ability to transact very quickly matters. We have our own management company, our due diligence is very fast, and we’re all cash. So — and we have great relationships. That’s the thing we’re doing right now is maintaining our relationships with our brokers and with principals. And when the time is right, we will move quickly and the machine will get ramped up again.

Great, thanks and congrats on a strong quarter.

Thank you. Now we will move on to Steve Sakwa with Evercore ISI.

Yes, thanks. Good morning. I was just wondering if you could talk a little bit about where renewal increases went out for August, September, I assume October is maybe a little too far out. But maybe talk about that? And then could you also talk about maybe, Bob, what’s in guidance for the back half of the year in terms kind of blended spreads either by quarter or maybe for the second half in general?

So Steve, this is Michael. I’ll just start and talk a little bit about the renewals. So yes, we definitely have renewal quotes put out into the marketplace through the end of September and even into October. I said in the prepared remarks, we have a lot of confidence in this renewal process that we put in place. So right now, the quotes that have gone out in July and August, on a net effective basis, we’re right around 12%. And we’re negotiating somewhere right under that 200-basis-point spread. So we expect to achieve around 10%. I think that’s a fairly good number to think about for the next several months. And even as you think about the balance of the year, you will see some moderation in that achieved renewal increase rate, but it’s not going to be this material drop off. It’s going to stay somewhere in that high single-digit and maybe even this low double-digit range. But I think as we think about our process right now, we’ve centralized all of the renewal negotiations, which has really helped facilitate these renewal conversations and giving us a lot of confidence as we put out these quotes to really be able to project what to expect from them.

And Steve, before Bob just gives you a little more elaboration on blended spreads and such, one of the things that’s really interesting here on renewals is because in a fair number of jurisdictions, mostly in California, we can’t raise rents to market — we’re limited up to some jurisdictional limits — you’re going to have some energy even if rents do decline a bit as they will seasonally and as they may due to the economy, I think renewals will be another positive in 2023 because we’re going to have markets where we continue to be significantly, in some cases even 20% below the market even after an increase. And so if that 20% becomes 15%, it’s still a pretty sizable increase. So I think the fact that we haven’t been able to meet the market on renewals probably leaves a little bit of gas in the tank in 2023 too even if rents do moderate for seasonal reasons or for economic reasons.

So I think Mark and Michael kind of gave you the blended perspective, which is in our guidance, so maintaining that kind of high single-digit renewal component. So they gave you the renewal piece, and I’ll give you the blended, which really is the new lease. So we talked about the seasonality and the trend of seasonality in rents, coupled with that just hard comparable period in the back half of 2021 and that’s going to lead your new lease and as a result, correspondingly, you’re blended to moderate as you get into the back half of the year, which is what we’re including in our guidance. That’s very normal. I think the only abnormal thing here is what we’ve modeled is something that remains positive on the new lease side. In a normal year, kind of pre-pandemic, new lease change often would go negative in the fourth quarter, and that’s not what we’re incorporating in our guidance.

Great. And then maybe just a second question, sort of following up on the transactions and sort of change in cap rates, either Mark or Alex, where do you guys think unlevered IRRs are today or where do you sort of targeting? And what do you think the market is targeting, realizing that cap rates can kind of be all over the board, but where do you think the current hurdles are?

Yes. As I said, it’s a little bit tough to know because it’s pretty unsure footing right now. That is an answer we’re looking for. On our end, we look a lot at what we can sell properties for. So we have some transactions in the market that we’re considering, and we will see how pricing comes out on that, and that dictates it a lot. But clearly, it’s higher than it was. I don’t know if I have an exact number on that.

Great. Thanks.

Thank you. And next, we will move on to John Pawlowski with Green Street.

Thanks. Alex, a follow-up question on the lack of price discovery, could you just help quantify the magnitude of the bid-ask spread right now, kind of the ranges you’re seeing? Are sellers’ expectations 5% above buyers or 20% above buyers right now?

Yes, John, it’s Alex. As I said, it varies a lot and well-located, clean properties I think are closer to the 5-ish. On something that’s more complicated, maybe a physical issue or a lot of vacant retail, it’s going to be higher than that. But that’s the number people are feeling each other out with and they really don’t know. And I think it’s a time just to be patient, which is what we’re doing and most sellers and buyers are doing that right now. So there are some assets that have just been pulled off the market because there is not a lot of traction, but there is a whole bunch of money on the sidelines and there is a lot of people that are, frankly, right now hiring up because they expect to buy more apartments in the future. So I think that this will settle itself out but there is a range right now to answer your question of pricing variance between buyer and seller expectations.

Okay, thanks. Bob, one question for you on expenses, can you just give us a little bit of color on the real estate tax backdrop right now, basically 0% growth year-to-date. Is there any unusual appeals benefiting the expense line item in real estate taxes? And any color on what type of step changes we could expect going forward would be helpful?

Yes. To be honest with you, it’s less about appeals in 2022 than it probably has been historically and more about just lower assessed values we came into the year, particularly in a place like Washington state, where we had lower assessed values and where the rate wasn’t particularly high either on the real estate tax side. So that’s really been the driver of keeping it more modest. The real estate tax market is typically a laggard. So it’s usually delayed relative to market values in other places. So that’s what you’re seeing play out in 2022. As we look forward into 2023 — and not giving guidance — I think it will become more about appeals because I think the recovery and what’s happening in the broader valuation market is more apparent. And so I think it will be more what I call hand-to-hand combat with the assessors of you think that value is X, I think value is Y and let’s appeal. So I think that’s going to change the dynamic in 2023 and going forward.

Alright. Thanks for the time.

Thank you. Next, we will move on to Joshua Dennerlein with Bank of America.

Hey, guys. Thanks for the question. I just kind of wanted to hear your thoughts on the supply outlook for 2023, any kind of markets where you’re seeing more supply or less supply?

Yes, there is a range. Certainly New York is the poster child for lower supply. But there are other markets too like Orange County and San Diego that are seeing a drop off in supply. Markets that have continued high supply include Washington, D.C., Denver has a lot of supply, Austin and Dallas, and more moderate are Atlanta, Seattle and Boston. So it varies a lot across the markets. Overall it’s pretty steady. Looking at 2024 though, it gets more complicated and harder to project. We see a lot of permits that have been pulled. Historically when times get a little uncertain like this, there is a big drop off. Permits translate into starts at like 80% to 90%, but when times get tough that drops to 40% to 50%. So that’s what might happen over time here as the 2024-2025 deliveries decrease.

One follow-up on that with New York City, the 421a program expired. Just kind of curious if you’re hearing anything maybe if there is any kind of replacement program that might come to influence the supply outlook on a longer-term basis or just how you might think about some of the projects that might have been relying on that program?

No, it doesn’t feel super optimistic. There was a proposal that got rejected. So at this point, there is some discussions, but nothing imminent.

Okay, I will leave it there. Thanks, guys.

Thank you. And next, we will move on to Brad Heffern with RBC Capital Markets.

Hi, everybody. I was curious if you could talk about the use of the disposition proceeds to take out debt versus something else like a repurchase or an alternate use of capital?

Hey, Brad, it’s Mark. So we certainly have the capability to buy the stock back, and we get that. As we’ve talked about on these calls in the past, it’s a bit of a different thing for REITs than it is for most corporates because we don’t retain earnings. So to do a real buyback, again, it requires you to sell a bunch of assets, which we did do or incur a bunch of debt. And from our perspective, paying off the debt helped us address the 2023 maturities. It gave us optionality to buy the stock back later. We used up really all of our capability. So we have a little bit of a flex each year in our ability to sell assets and retain cash. And we really used all of that up with these two sales. So we thought, you know what, we will pay down this debt, we will retain this capability. If the Board decides it wants to buy some stock back later, we will have that opportunity. But those opportunities are just so few and for REITs, you start to descale the enterprise. It’s just not as easy a decision as it is for, say, a big technology company with tons of retained earnings. And we got a big $900 million-plus dividend. And that’s really where we think the cash return to the shareholder is. A lot of these other folks that talk about buybacks more readily are corporates that don’t have dividends and do a lot more buyback activity. So we did consider it, it’s an option and by paying some debt off, we retain that option.

Okay. Got it. And then I was wondering if you could talk about what’s happening with sort of the deal seeker tenants in New York, the new lease change was 38% in the second quarter. I know across the portfolio, turnovers remain low, but are you seeing those people leave?

Yes. So I would say, look, our record low turnover — we had 11.1% reported turnover in the second quarter, which is the lowest turnover we’ve reported for a second quarter in the history. You are starting to see, and we even said this, acknowledge this a little bit in June through some of the conversations we had, you are starting to see a little bit of price resistance from some folks that came in with the deal early on in this recovery; they were renewing at the exact same pace. By deal seekers, I mean people that came in that received concessions, really discounted rent. What we saw right now when we looked at the move-out behaviors in the second quarter, we saw a slight uptick in people citing that the increase was too expensive, and that was the reason they were moving out. And I think specific to New York, we definitely saw some folks from Manhattan give us that notice and then move over into Jersey City and take advantage of some of the rent arbitrage there, just at that lower price point. But overall, I would say the renewal percent, the percent of residents renewing remains really strong. We’re either at or right above these historical averages for this time of the year. And we really just haven’t seen us bumping up against this affordability question that’s been out there. And the rent as a percent of income in our portfolio remains very constant which means that the income for our residents is definitely keeping pace with the rent increases that we’re seeing across the markets.

Okay, thank you.

Thank you. And next, we will move on to Adam Kramer with Morgan Stanley.

Hi, guys. Thanks for taking the question. I appreciate the time. I just want to maybe ask a bigger picture question a little bit. Look, I think when we kind of think about historical rent growth, it was in a different inflationary regime. I think we’re certainly not expecting inflation to continue at these year-over-year levels. But even if we kind of do settle out at a higher year-over-year inflation than maybe what we’ve seen historically, maybe walk us through how you would view rent growth in that type of environment relative to historical rent growth?

Hey, it’s Mark. I’m going to start, and I think some of us might supplement because we’ve been thinking a lot about this over time. We went back and looked at periods of time when there was more significant inflation. So again, this will be more like the ‘80s and parts of the ‘70s and even into the ‘90s. And I’d say our ability to reset rents every year, the pretty good supply-demand dynamic — in fact, very good — we have currently. I don’t have a precise number for you. I would have normally said that normal trend growth for EQR on the revenue line is 3.5%. And I would tell you that with inflation the way it is, the numbers are likely to be a fair bit higher because supply and demand are still also good. We could have a ton of inflation. If you have a ton of supply in a submarket, you’re still not moving your rents. But we’ve got good demand — single-family sectors not drawing residents away. So the way we’re feeling about it is that we’re going to be able to provide a pretty good margin to whatever the inflation numbers are especially as we expect them to sort of settle down. There is also this little bit of a circular reference thing where rent is something like a third of the CPI. So we feed into that number, and that number feeds into our number. And so there is a little bit of that as well. But I think you should expect that apartments, especially our portfolio, are optimized in a way with our pricing engine that we can continue to have a real return that exceeds the rate of inflation. So if you think inflation is 5%, then I think our growth is going to be a margin to that number, above it. I think the other part of that question or that answer is what are you doing with your expenses, because we do feel the pressure on wages and other things. That’s why we had both Michael and Bob address that issue with you because we need to keep our margins constant or growing and not just give it all away on the expense side, and I think we’re doing an exceptionally good job of that.

That was really, really helpful. I appreciate all the color. I think just a quick follow-up, if I may. Physical occupancy that’s held in here with the market well at 96.5% in July is a pretty notable number. Just wondering how you guys think about the renewal versus occupancy trade-off? Renewals have decelerated a little bit; they can maybe stay at this 10% growth here, but a little bit of a deceleration versus what they were in Q1 and Q2. Just maybe walk us through the trade-off between occupancy and pushing renewals a little bit more?

So Adam, this is Michael. We’re always pushing on the renewal front because we’re quoting where street rents are and then we’re having these dialogues and pretty much holding the line. When somebody does move out, you are absorbing vacancy loss. So that definitely starts to come into some of that equation. If you just step back and think about the occupancy of this portfolio, when demand is strong and the front door is strong, you have a lot more confidence to hold the line into this renewal process because if that resident does move out, you’re able to fill them very quickly at these high rates. So for us, if the demand picture stays as strong as it is, I would expect our portfolio is going to maintain strong occupancy. I think we should allow occupancy to probably trail off a little bit into that fourth quarter, but I think it is going to remain relatively strong. So when we look at the difference between new lease and renewal, we want to retain our residents at a fair price. If the front door is not as strong, you will see us start to negotiate more into that renewal process. But if the demand stays as strong as it is, you’re going to see us hold the line with these renewals.

Thanks for the time.

Thank you. Next, we will move on to Nick Yulico with Scotiabank.

Thanks. I just wanted to touch on bad debt for a minute. I think you said that was part of the beat versus your guidance on the quarter. And I know you break that out and the supplemental I think was about a 2.5% net benefit to same-store growth on a GAAP basis this quarter. How should we think about the back half of the year and that level — is it still a benefit year-over-year just from a modeling standpoint, how we should think about that?

So I’ll start with the last part first and then highlight a couple of things about the quarter. From a year-over-year standpoint, our guidance assumption is that it has no impact to growth meaning that we think that bad debt, net of governmental rental receipts and all of the above is the same in 2022 as it was in 2021. What you’re seeing in the second quarter is really the volatility in timing because you will recall from the first quarter that we had a little bit of a harder time with bad debt and then we had a better time in the second quarter, etc. So this number can be fairly volatile. As you get into the back half of the year, and as I mentioned in my prepared remarks, the rental relief programs are winding down. So we don’t expect a lot more rental relief money in the back half of the year. We got a lot of it in the back half of last year. So it’s going to be a little bit of a headwind to year-over-year growth in the back half. But from a full-year standpoint, again, it shouldn’t have any impact.

Just to add, Bob will correct my specific numbers here, but I think we got in the back half of last year about $34 million or so in rental relief, and our modeling is something like $2 million for the back half of this year. So when we talked in our prepared remarks about how we see the strength continuing, what obscures some of these numbers is just these pretty significant rent recoveries from the government that tend to be lumpy. So to see in the back half of the year a negative impact year-over-year on all this bad debt stuff, you’re going to see the continued strength in the underlying occupancy business, rate, all of that stuff, occupancy is staying high, that’s going to offset that and keep those numbers pretty consistent, Nick, going forward.

Okay. That’s helpful. Thanks. Just one other one is on renewals and just how to think conceptually about how you guys are thinking about that ability heading into next year? I mean you talked about high occupancy, not that much supply impact. It’s been low turnover in the business. So as you’re thinking about the numbers right around 10% right now on renewals, what pushes that number down at all over the next year? When do you start thinking, hey, we’re pushing for too much of a renewal notice here?

This is Michael. I think it’s really a function of where our market rents are. What happens to intra-period rent growth next year is really going to dictate a lot around where these quotes go out. But I think Mark mentioned earlier on the call, when you think about some of these regulations that we’ve been bumping up against this year, those regulations are actually going to help fuel renewal growth next year because it’s clear we’re going to be able to be quoting increases beyond what intra-period rent growth is just to catch up to the market through that. So in our modeling, you’re going to have a little bit of this tail off in the achieved renewal increase because you have to assume that market rent prices seasonally do decline. They have declined every single year since 2008. At some point, you hit a peak and then you have some sense of moderation through 12/31 of the year, and then you start the cycle all over again. So that moderation is going to yield some softness in the quotes that go out the door. But again, it’s very marginal. It’s still going to be very high single-digit and then as we get into this October call, we will give you our view as to how we think this is going to play out into 2023. But again, we got a little bit of a boost coming to us from just being able to catch up from all the regulation restrictions that we’re faced with today.

Thanks, guys.

Thank you. And next, we will move on to Michael Goldsmith with UBS.

Good morning. Thanks a lot for taking my question. As we look at the rent growth over the last several quarters and also looking forward, there are kind of three factors at play, which we’ve talked about, which is the overall rental market, tougher comparisons and the presence or lack of government subsidies. So we’ve touched a little bit about the government subsidies through the back half of the year. But as we think about going forward and the ability for rents to continue to grow on these tougher comparisons, what’s the thought process on the continuation of this and how much of the deceleration can be expected just based on these tougher comparisons as you move past some of the stronger growth?

This is Michael. I think you are hitting on a couple of points. When you look at the data and you see some of that rate growth deceleration that occurred like on the renewal quote, a lot of this is just a function of that comp period from last year. Just to remind everybody, last year when we hit July, that was the first time that our new lease change went positive. June of 2021 we were negative 50 basis points, July of 2021, new lease change went to positive 6.9%. So a huge 740-basis-point improvement in one month in just that new lease change. And then from that point forward, it sequentially improved every single month for the new lease change and then fueled blended. So as we think about where we sit today, you have to allow for rents to moderate. The price in the market will moderate between now and the end of the year. In a normal year, I would say it’s somewhere in that 3% to 3.5% range where market rents after you peak will moderate to the end of the year. But when you look at where we are with the changes that we were seeing last year sequentially, that is what’s going to fuel this moderation in our blended rate that we will be putting up in the third quarter and fourth quarter. But all that being said, where we land after the moderation, where we land after these tough comps is still significantly above historical norms.

Got it. And my second question is on the expectation of expenses. You are coming off of some of the lowest expense growth in the market. The expense comparisons get a little bit tougher in the back half, and you have been able to manage it quite well. Just as we think about the sustainability of controlling the expense line in the intermediate term, especially in an inflationary environment, do you have any thoughts on how you can sustain the strong performance over the intermediate term?

I think the core driver that will be consistent throughout is just reducing our exposure to labor pressure, whether it’s in the payroll line item where it’s the most obvious, which you see us having put up were literally probably on the fourth year in a row of either sub-1% or negative payroll growth. We still have opportunity there, and so I think that’s the engine of innovation, utilization and technology and we will be able to continue to sustain that lower-than-inflationary growth going forward. That should also parlay itself into repairs and maintenance to a degree, too, because there is a labor component embedded there with contractors, etc. So I think that’s the driver of where I think we have the most containment opportunity. Clearly, as you move into future years, real estate taxes will get harder from a comp standpoint and probably won’t be as sustainable. But comps like utilities should get better; we hope that the commodity inflationary pressure that exists in the world today is more temporary than permanent. And so that should help us and hopefully offset other line items that might return to more normal growth. But again, the controllable part is really the labor hours, the payroll, the technology, the innovation, and that’s where we are focused.

And just a quick follow-up on that. How much more runway is there? Is this like another year or two years, or is this kind of a multiyear pathway where you should continue to benefit from that?

This is Michael. When we think about payroll benefits and operating efficiencies, I would say we are probably getting closer to the middle innings of our runway. We have identified $25 million to $30 million that’s going to roll in over the course of 2023 and 2024, front half-loaded with more of the expense opportunities and then it kicks into initiatives focused on enhancing revenue. So I look at the expense stuff and I would say we are probably in the middle of the innings there, but we are in the very early stages of the benefits from the revenue lifts on many of the initiatives that we are focused on.

Thank you very much. Good luck in the back half.

Thank you. And next, we will move on to John Kim with BMO Capital Markets.

Thank you. Hey, Mark. On your commentary on the market dynamics in the Sunbelt, with pricing above replacement cost, this dynamic continues and it seems like both public and private peers are very active in the market. How will that impact your repositioning strategy? Will you focus more on development, or do you perhaps look at suburban markets or other markets in Sunbelt?

Hey John, it’s Alex. In terms of pricing moderating so that makes acquisitions look relatively more attractive, if that continues and construction costs go up, then we would lean more towards acquisitions, but we are also focused on development too as an important component of fleshing out the portfolio. So I would expect we would do a little bit of both depending on the circumstances.

To add, we are buying in suburbs of places like Dallas too. It isn’t mostly or even close to mostly an all-urban portfolio. We are trying to construct in Atlanta or Austin or Dallas or Denver. So we are spreading our capital out. And that’s where development can be really handy — in some of these suburban locations where it might be hard to find a property to buy.

Okay. And then Michael mentioned in the Q&A about effective lease growth trending around 10%, give or take, maybe 200 basis points in the next few months and softening towards the end of the year. But my question is, is this already embedded in your same-store guidance, or have you accomplished this as an upward bias to your same-store revenue?

This is Michael. Let me clarify. The numbers I was quoting before are the achieved renewal rate off of the offers that we put out there, where we believe that is going to be around 10% for the next several months. And when we think about the midpoint of our guidance, Bob pointed to this earlier, we are allowing some moderation in the new lease change and we are factoring in a fairly consistent achieved renewal rate increases based on what we can see with a little bit of moderation in the fourth quarter just based on normal seasonal decline in rate.

Great. Thank you.

And next, we will move on to Rich Anderson with SMBC.

Hey. Thanks. Good morning. I want to get back to what you said earlier about normal embedded growth for the following year is 1%, and so you are thinking it will be something more than that. How linear is the relationship between blended rate and embedded growth? In other words, for the 1% typical embedded growth described, what does that assume or imply in terms of the blended rate in the previous year? If it’s 5x more this year, would the embedded be 5x more or is it not that simple?

It’s not that simple. I did say we’re going to be well above average. Look, we are still writing a lot of leases; you still have a lot of activity coming through the rent roll. I think it’s clear that we have got the right setup in place for a really strong year next year based on the fundamentals of loss to lease, looking at where this embedded growth is today, looking at the strength in the market, knowing that rents haven’t peaked out yet. I think you just have to hold off and give us until October and we will give you a little bit more clarity into the ranges of these building blocks, but I don’t think it’s as pure as a direct one-to-one relationship between blended rate and where that embedded growth is on 12/31.

I am aware there are many more variables, I was just trying to get to perhaps a more precise number. And then the second question I have is you talked, Mark, about single-family rental and affordability helping the apartment business. Do you have your eyes on any sort of replacement competitive pressures? Single-family rental as an option for people that need more space seems somewhat new. Do you have it on your radar as a competitive trend?

Yes, Rich, thanks for that — that’s a very insightful question. We thought a fair bit about it. We wondered if it isn’t similar to buying something you do as a lifestyle decision. People mostly buy homes for lifestyle reasons — they have the second kid, they get married or have some other life change that requires them or makes them feel the need to have the lifestyle they now need to have with the family situation. I think that single-family rental feels the same way: people will be similarly attracted to it, not because they have always decided to rent single-family, but because they are at a point where they have two kids and they are living in an urban environment and that’s more challenging for them. So I think about SFR as more of an additional competitor for sure, but having the same drivers as just purchasing a home. In terms of other competitive threats, we have definitely benefited from people wanting more space; we do see that people will accept roommates and live in other situations. So switching to another thing that could be a demand negative for us, it’s possible that people decide to take on a roommate. We are not seeing any of that materially, but that would be another way you could see demand decline. But I don’t see SFR as a fundamentally new substitute that will massively erode our demand; it’s more of a replacement for single-family owned housing, not an entirely new source of competition.

In the past, Equity Residential got in front of some of these things. Whether it was rent-to-own programs or what have you. What do you think about single-family rental as a segment where you and your peers might dip your toes in over time?

We have had versions of this conversation before. It’s part of our job to look across residential subsectors. Single-family rental has established itself as a legitimate long-term business. Many industry executives have worked in that space. We do pay attention to the space. Our primary focus right now is running this large apartment business. But we will keep our eyes open, and if something interesting comes by, we will act on it. For now, our focus remains on benefiting from the return of people to cities and running our apartment portfolio.

Thanks so much.

Thank you. And next, we will move on to Haendel St. Juste with Mizuho.

Hey there. Thank you. Appreciate the time. A couple quick questions. First on expenses: technology and operating efficiencies are helping offset pervasive cost headwinds. Can you remind us or update us on how far along you are in the technology implementation and efficiency plan you talked about in the last few quarters? Secondly, are you seeing any distinction in OpEx between your urban and suburban assets? Are you finding it more efficient perhaps to operate urban high-rise versus suburban assets given perhaps less acreage to maintain and fewer HVAC systems?

Haendel, this is Michael. On where we are: I would say we are probably in the middle innings of the operating platform implementation. We have a lot of the base technology installed. We are still working through some of the smart home technology and access into units that will add more efficiencies. About half the portfolio is running today without fully dedicated on-site teams. So we have some more opportunity to layer in technology and create more efficiencies in property management. We are also excited about the revenue uplift from layering technology into the income side; we are in the very early innings of that and expect benefits to come in late 2023 and into 2024. Regarding urban versus suburban OpEx trends, high-rise properties typically have more staffing needs — concierge, more services — and more contractor dependency for things like elevators. I would expect a bit more growth pressure in high-rise portfolios versus suburban garden assets.

Fair enough. Thanks for that clarity. One more — a follow-up on the Toll partnership and the new Fort Worth project you started. Is that 5.5% yield you outlined locked in, or can that be adjusted if yields or cap rates move significantly? And you mentioned that 75% of the costs are locked in; what about the remaining 25%?

So the 5.5% is our projected development yield; it’s not locked in. We’re a partner with Toll — we have 75% of the equity and they have 25% — and the property will yield what it yields and they will receive promote structures relative to that. Regarding cost lock: 75% is bought out. Toll has bought out from their contractor and they have guarantees to us that they can perform at the contracted number. There is still some incremental work to get to 100% buyout, but Toll’s involvement provides additional assurance.

Okay. Thank you.

Thank you. And next, we will move on to Alexander Goldfarb with Piper Sandler.

Hi. Thank you. Two quick questions. On residents: last year, cities benefited big time as people flooded back in and took apartments. Are you seeing that same phenomenon this year? In other words, are your rent increases being driven by people continuing to flood into the markets or is demand more from within the market? Also, how has new resident profile changed year-over-year?

Alex, it’s Mark. I’ll start and Michael will supplement. Seattle and San Francisco are less recovered compared to New York and East Coast markets, so we still have a tailwind of people returning. If public safety and quality-of-life issues continue to improve in those markets, that could be a tailwind for us later this year and into next. There’s relative value in downtown Seattle and downtown San Francisco because rents there are still not fully back to pre-pandemic levels.

We track previous addresses of applicants. In a normal environment like 2018-2019, about 60% of our new residents came from within the same MSA and about 64% from within the same state. In Q2 this year, 55% of move-ins came from within the same MSA — about a 500-basis-point decline — and 59% from within the same state, also down about 500 basis points. When we drilled in, this was fragmented, not concentrated from any single origin. We view this as a positive indicator that our markets are continuing to draw affluent renters from all over the U.S., and we even saw a small uptick in international move-ins.

And you would say those stats are pretty uniform across markets, or biased in certain places?

It was pretty systemic across our markets and submarkets. Some places like Southern California had more inbound residency from within the state and MSA, so the shift was less pronounced there.

Okay. And then on the asset sale, you only quoted the IRR for the second quarter sales. I don’t know what the IRR was on the July sale, but you mentioned a 6.6% unlevered IRR — how does that compare to your historic IRR? I would have thought it could be better given cap rate compression and long ownership. Any perspective on that and the July sale?

We bought some of those properties a long time ago — 2005 in some cases — so IRRs compress over a long hold period. New York has had a challenging recovery since 2005 with the GFC, the pandemic, and changes in rent laws impacting certain value drivers like condo conversions. So all of that combined constrained IRR expansion despite cap rate movements elsewhere. Also, cap rates started low in New York, so there was less compression to be had.

Thank you.

Thank you. And next, we will move on to Pedro Cardoso with TCW.

Hi. Thanks for taking the call. Congratulations on the quarter. Just curious if you’ve been noticing any shift in tenant behavior, perhaps people looking to shift to smaller units or trying to find something more affordable. Any shifts in trends?

Pedro, this is Michael. On reasons for move-out we did see a slight uptick in residents citing increases as a reason for moving out, but remember our turnover is still very low at 11.1% in Q2. We haven’t seen material changes in unit-type preference or adults per occupied home. Pre-pandemic we were at 1.65 adults per occupied home and today we are at 1.57, a slight decline, more pronounced in one-bedroom households. It’s not a dramatic shift. Overall we haven’t seen material behavioral change among our affluent renter demographic.

Got it. That’s very helpful. One follow-up: you noted rent-to-income in New York around 18%. How many tenants in New York have rent-to-income above 30%?

I don’t have that exact breakdown in front of me, but across our markets we generally range from 18% to 24% rent-to-income. It’s very few, if any, that are above 30% because our underwriting criteria generally prevents that from being a significant portion of the tenant base.

Got it. Very helpful. Thank you.

Thank you. And there are no further questions. I would like to turn your conference back over to Mark Parrell for any additional or closing remarks.

Well, thank you, everyone, for your time today and enjoy the rest of the summer. Thank you again.

Thank you. And that does conclude today’s teleconference. We do appreciate your participation. You may now disconnect.