UDR Inc
NYSE:UDR
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
33.28
47.13
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
UDR Inc
Earnings Call Analysis
Q3-2024 Analysis
UDR Inc
UDR reported solid third quarter results with year-over-year same-store revenue growth of 1.2% and NOI growth of 0.8%. This performance exceeded expectations, benefiting from a blended lease rate growth of 1.8%, spurred by a renewal rate increase of over 5%. The company achieved a remarkable 55% annualized resident turnover, which is significantly lower than the prior year and better than its 10-year average. Moreover, average occupancy for the quarter was 96.3%, and improved resident retention strategies contributed to lower turnover costs.
UDR has raised its full-year FFOA per share guidance for 2024 to a range of $2.47 to $2.49, indicating positive year-over-year growth despite a challenging operating environment characterized by high supply and elevated interest rates. Notably, this marks the third time this year that UDR has adjusted its guidance upward, cumulatively increasing by 3% since February. For Q4, the company projects FFOA per share in the range of $0.62 to $0.64, signaling sequential growth driven by improvements in same-store NOI and reduced interest expenses.
The company is committed to three primary growth drivers: innovation, a responsive customer experience project, and maintaining a capital-light strategy. UDR's value-add initiatives have consistently driven revenue growth in the high single-digit range, adding 50 basis points annually to same-store growth. The customer experience project leverages extensive data to enhance resident satisfaction and retention, with expectations of improved cash flow as these strategies mature.
Employment and income growth have exceeded expectations, with over 450,000 newly delivered apartment homes absorbed nationally. As new supply begins to slow, UDR anticipates a beneficial environment for rent growth in the coming years. The company's updated blended lease rate growth expectations have improved, projecting a contribution of approximately 140 basis points to 2024 same-store revenue growth. Additionally, UDR expects to bolster rent growth by improving occupancy and reducing bad debt losses.
The company's disciplined approach to expense management has resulted in same-store expense growth of just 2% in Q3, below expectations, largely due to savings in real estate taxes and insurance. For 2024, UDR has revised its expense growth midpoint down by 60 basis points to 4.4%. This operational efficiency, coupled with increased other income from innovative services, positions UDR favorably for continued profitability.
Regionally, the East Coast has outperformed, exhibiting a strong blended lease rate growth of approximately 2%, while the Sunbelt markets are under pressure with blended lease rate growth of around negative 3.5%. Despite this, UDR maintains healthy occupancy levels across its portfolio. The company projects that heightened demand along with reduced new supply will support a decline in concessions and pricing pressures, with a return to equilibrium expected by mid-2025.
UDR's balance sheet remains robust with over $1 billion in liquidity as of September 30. With reduced refinancing risks due to proactive debt management, the company has extended the maturity of its revolving credit facility to 2028. These efforts have resulted in a low average interest rate of 3.4%, considerably enhancing the company's financial stability and flexibility to pursue growth opportunities in the future.
UDR is optimistic about long-term growth prospects in both the multifamily sector and the broader economy. The company continues to evolve its innovative culture and leverage data-driven insights to enhance the customer experience. Management aims for improved margin expansion and operational efficiencies that can yield between $10 million to $25 million in incremental run-rate NOI over the coming years, reflecting UDR's commitment to creating sustained shareholder value.
You don't have any saved screeners yet
Greetings, and welcome to UDR's Third Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. And it is now my pleasure to introduce your host, Vice President of Investor Relations, Trent Trujillo. Thank you, Mr. Trujillo. You may begin.
Welcome to UDR's quarterly financial results conference call. Our press release and supplemental disclosure package were distributed yesterday afternoon and posted to the Investor Relations section of our website, ir.udr.com.
In the supplement, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. Statements made during this call, which are not historical, may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met. A discussion of risks and risk factors are detailed in our press release and included in our filings with the SEC. We do not undertake a duty to update any forward-looking statements.
When we get to the question-and-answer portion, we ask that you be respectful of everyone's time and limit your questions to one plus a follow-up. Management will be available after the call for your questions that did not get answered during the Q&A session today.
I will now turn the call over to UDR's Chairman and CEO, Tom Toomey.
Thank you, Trent, and welcome to UDR's Third Quarter 2024 Conference Call. Presenting on the call with me today are President and Chief Financial Officer; Joe Fisher; and Senior Vice President of Operations, Mike Lacey. Senior Officers, Andrew Cantor and Chris Van Ens are also available during the Q&A portion of the call.
Our year-to-date results continue to exceed our prior expectations, due to the operating strategies we utilized to drive strong same-store and earnings growth in tandem with improving industry fundamentals. As a result, we raised our full year FFOA per share guidance for the third time this year, while also improving our same-store revenue, expense and NOI growth expectations for the second time this year, in conjunction with yesterday's earnings release.
Strategically, we remain focused on three drivers of growth that differentiate us from peers. First, we continue to innovate, which has added to our bottom line in 2024 and will do so for many years to come. This is evident in the results from our value-add initiatives, which have consistently grown in the high single-digit range and added 50 or more basis points annually to our same-store revenue growth.
Second, we continually listen to our associates and residents which influences our operating tactics and long-term strategy. The customer experience project is a great example of this. The insight we glean from hundreds of thousands of daily touch points with existing and prospective residents has translated into data on satisfaction. We use this information to orchestrate and enhanced UDR living experience, improving retention and lower turnover costs and capital expenditures.
We are just scratching the surface and expect further enhancements in the customer experience project will support additional retention advantages versus peers, and drive future margin expansion and cash flow growth.
And third, although we remain in a capital-light mode, we maintain an investment-grade balance sheet with substantial liquidity. This positions us well to take advantage of growth opportunities when we have an attractive cost of capital. We continue to explore the various forms of external growth, including joint venture acquisitions, OP unit transactions and development to drive future accretion.
There's also a variety of positive fundamental drivers for our industry. These include: first, demand remained strong. Employment growth continues to surprise the upside and income growth has outpaced consensus expectations. This has led to more than 450,000 newly delivered apartment homes being absorbed nationally during the first 9 months of the year, which is approximately 50% above long-term average.
Second, the pace of new supply is slowing. 2024 multifamily completion marks a 50-year high, but absorption has been robust, and pricing on lease-up communities has remained rational. Total housing deliveries through the end of the year appears stable relative to the third quarter and start to continue to decline. We expect the trend of lower starts to persist due to the cost of capital and availability of capital. A future supply pipeline that is below historical average levels bodes well for rent growth in the years ahead.
And third, renting apartment is approximately 60% more affordable than owning a single family home in the markets where we operate, the best level of relative affordability in two decades.
These fundamental trends, combined with our operating tactics that have improved resident retention, have led to further revenue expense growth outperformance. Mike will provide additional details in his remarks.
Moving on, we continue to build on our position as a recognized leader in stewardship. With the release of the sixth annual ESG report, which we published earlier this month, we detailed the leadership UDR has continually exhibited in setting and achieving various environmental, social and governance goals. Chris Van Ens and our sustainability team deserve credit for advancing our long-term environmental strategy.
Collectively, our efforts have enabled UDR to become a more sustainable and resilient company, one that can thrive across a multitude of economic environments and overcome challenges head-on. Together, we have created a desirable workplace with an engaging employee experience that thrives on innovation and collaboration. To my fella associates, I look forward to sharing more success with you in the years to come.
As a final thought, macro volatility, election uncertainty, the path of the Fed and their collective efforts on interest rates, the economy and the employment market are all out of our control. However, I remain optimistic about the long-term growth prospects for our country and the multifamily industry. We will continue to focus on what we can control, enhance our dynamic and innovative culture and empower our associates to deliver attractive results that create value for UDR's residents and stakeholders.
With that, I will turn the call over to Mike.
Thanks, Tom. Today, I will cover the following topics: our third quarter same-store results and early fourth quarter results, including regional operating trends, and our improved full year same-store growth guidance, including underlying assumptions.
To begin, third quarter year-over-year same-store revenue and NOI growth of 1.2% and 0.8%, respectively, were better than expected, given difficult prior year comparisons. Our third quarter results were driven by, first, 1.8% blended lease rate growth, which was driven by renewal rate growth of over 5% and new lease rate growth of approximately negative 2%.
Second, 55% annualized resident turnover was nearly 200 basis points below the prior year period and more than 600 basis points better than our 10-year average. This has enabled us to maintain healthy renewal rate pricing and led to more favorable blended lease rate growth.
Third, occupancy averaged 96.3%, which is lower than our historical third quarter average. This was strategic as we implemented enhanced AI screening and fraud identification tools used by our associates to enhance the overall credit quality of our residents and mitigate bad debt over the longer term. Healthy levels of traffic and leasing volume combined with higher revenue retention enabled us to increase occupancy in September, and we finished the quarter at 96.5%.
And fourth, other income growth was approximately 5% and was driven by our continued innovation along with the delivery of value-add services to our residents.
Shifting to expenses. Year-over-year same-store expense growth of 2% in the third quarter came in better than expectations. These positive results were driven by favorable real estate taxes, insurance savings and constrained repair and maintenance expenses due to our improved resident retention.
Moving on. Core operating trends have remained resilient in October, and key metrics have largely followed typical seasonality. First, October blended lease rate growth is roughly flat. On a like term basis, which excludes the impact of short-term rentals, October blended lease rate growth is approximately positive 1%, which is slightly below September results and follows normal historical sequential rent growth trends.
Given the heightened volume of short-term lease expirations in the September to October time frame, we expect the impact of short-term rentals on our lease rate growth should ease through year-end. Effective new lease rate growth appears to have stabilized from September to October in the negative 5% range, while we have continued to have success executing renewal lease rate growth in the mid-4% range.
Regionally, the East Coast is showing the most strength with blended lease rate growth of approximately 2%. This is followed by slightly positive blends on average in our West Coast portfolio, and the Sunbelt at approximately negative 3.5%. Based on current trends, we expect East Coast leadership to persist through at least early 2025.
Second, resident retention continues to compare well against historical norms, and October represents the 18th consecutive month our year-over-year turnover has improved. Relative affordability compared to other forms of housing is a benefit to the apartment industry in total.
Given the level of home prices and mortgage rates, the average cost of only a home across UDR markets is nearly $5,600 per month. By contrast, the average rent for an apartment at UDR is approximately 2,600 per month, thereby creating annual shelter cost savings of $36,000. This disparity has led to a record level of resident moving out to buy a home.
We estimate that in order to return to historical average of relative affordability between renting apartment and buying a home, mortgage rates would need to decrease approximately 150 to 200 basis points, all else equal.
Furthermore, with the success of our ongoing customer experience project, our resident retention over the past year has improved by approximately 200 basis points relative to the peer group average. This is a testament to our team's focus and execution on our innovative data-driven approach to customer service. Ultimately, improved retention should drive better pricing power, higher occupancy, increased other income, reduced expenses, lower CapEx and margin expansion. We remain in the early innings of capturing these benefits and believe the opportunity in 2025 and beyond is to capture $10 million to $25 million of incremental run rate NOI.
Third, occupancy has trended higher to 96.6% on average in October, a 40 basis point improvement from our year-to-date low of 96.2% in June. Traffic is higher than the same time a year ago, and our 30-day availability is less than 4%, which supports our expectation of occupancy remaining in the mid-96% range through the remainder of 2024.
And fourth, other income is growing in the mid- to high single-digit range, slightly higher than what we achieved in the third quarter. As a reminder, other income constitutes roughly 11% of our total revenue.
We remain pleased with the trajectory of our other income initiatives, such as the rollout and penetration of building wide WiFi, as these contribute significantly to incremental same-store revenue growth as well as our resident experience.
When considering these factors and more moderate prior year comparisons as compared to the third quarter, we expect year-over-year same-store revenue and NOI growth to accelerate in the fourth quarter.
Turning to regional trends. Our coastal results continue to exceed our expectations, while our Sunbelt markets have performed largely in line. More specifically, the East Coast, which comprises approximately 40% of our NOI, was our strongest region in the third quarter and Washington, D.C. was our best-performing market, driven by continued strength in Northern Virginia. Third quarter weighted average occupancy for the East Coast was 96.5%. Blended lease rate growth was nearly 4% and year-over-year same-store revenue growth was approximately 2.5%. With continued healthy demand and relatively low new supply, we expect this region to be our strongest through the rest of the year.
The West Coast, which comprises approximately 35% of our NOI, has performed better than expected year-to-date. Third quarter weighted average occupancy for the West Coast was 96.3%. Blended lease rate growth was slightly higher than 2%. And year-over-year same-store revenue growth was approximately 2%.
Recent return to office mandates and increased office leasing activity in the Pacific Northwest has supported relative strength in our Seattle portfolio. While incremental public safety and quality of life improvements have led to improved leasing traffic and occupancy in San Francisco. Absolute levels of new supply remain low at less than 2% of existing stock on average across our West Coast markets, which we expect will lead to a favorable supply/demand dynamic in the coming quarters.
Lastly, our Sunbelt markets, which comprise roughly 25% of our NOI, continued to lag our coastal markets. Year-to-date revenue growth is largely in line with our original expectations and is supported by other income growth from our value-add initiatives. Third quarter weighted average occupancy for the Sunbelt was 96.1%, blended lease rate growth was negative 2% and year-over-year same-store revenue growth was negative 1.5%.
Among our Sunbelt markets, lease rate growth in Florida is holding up the best while elevated new supply is negatively impacting our Texas portfolio. While our Sunbelt markets broadly have more robust job growth than our coastal markets and absorption of new supply has been tremendous, it has come by the way of concessions and a deterioration of pricing power.
Based on existing inventory, forthcoming supply and leasing activity trends, our analysis suggests pricing stability in Denver, Dallas, Tampa and Orlando in mid-2025. The timeline for Nashville and Austin are elongated and we would expect supply/demand equilibrium in late 2025 and into 2026 in those markets.
Based on our year-to-date results, we raised our full year 2024 same-store growth guidance for the second time this year in conjunction with yesterday's release.
Starting with same-store revenue growth, we raised our midpoint to 2.2% from 2.0%. The 20 basis point increase is driven by: first, a 10 basis point improvement in full year blended lease rate growth, which we now forecast to be approximately 140 basis points. Using a midyear convention, our updated blended lease rate growth expectations should contribute an incremental 5 basis points to 2024 same-store revenue growth.
Second, we expect the combination of occupancy and bad debt to contribute approximately 10 basis points to same-store revenue growth, an improvement compared to our prior expectations of flat.
And third, a 5 basis point improvement in full year revenue contribution from innovation and other operating initiatives.
Moving on to same-store expense growth. We lowered our midpoint by 60 basis points to 4.4%. The improvement was driven by constrained insurance, repair and maintenance and real estate tax growth. As a reminder, same-store expense growth of 7.5% in the first quarter was elevated due to comping off a onetime $3.7 million employee retention credit we realized at the beginning of 2023. Absent this factor, we would expect same-store growth for the full year to be in the mid-3% range or approximately 80 basis points lower than our updated midpoint.
Looking ahead, the building blocks for 2025 same-store growth are coming into focus. Based on our revised outlook, we are forecasting a 2025 same-store revenue earn-in of approximately 60 to 70 basis points, which is in line with our 2024 earn-in and is approximately half of our historical norm.
We will provide 2025 guidance in February, which will address our outlook for market rent growth, occupancy, bad debt, contributions from other income and expense growth.
In sum, our diversified portfolio enables us to tactically adjust our operating strategy to maximize revenue and NOI growth, while continued innovation sets us up well for further margin expansion. My thanks go out to the UDR associates nationwide for your steadfast commitment during a period of unprecedented new supply. Together, we've delivered attractive results and have positioned ourselves for future growth.
Finally, a special thanks to our teams in Tampa and Orlando for their immense efforts during the recent hurricanes. You undertook tremendous preparation to ensure the safety of our residents and fellow associates, minimize downtime at our properties and promptly restored them to operable conditions. I have full faith that our people can continue to make a difference, as we collectively work to return the vibrancy to these cities and improve the lives of many who have been affected by these storms.
I will now turn over the call to Joe.
Thank you, Mike. The topics I will cover today include our third quarter results and our updated full year guidance, a summary of recent transactions and capital markets activity and a balance sheet and liquidity update.
Our third quarter FFO as adjusted per share of $0.62 achieved the midpoint of our previously provided guidance. This flat sequential result is typical between the second and third quarters when looking back at our history, and was due to nominal changes across NOI, interest expense and G&A. With our most difficult prior year comparisons now in the rearview mirror and a constructive operating trajectory in the year-end, we have raised our same-store growth and FFOA per share guidance ranges.
Our updated full year 2024 FFOA per share guidance range is $2.47 to $2.49. The $2.48 midpoint would result in positive year-over-year growth despite record high supply and a more elevated interest rate environment. Since providing initial guidance in February, we have raised FFOA per share guidance 3x by a cumulative $0.06 per share or approximately 3%, and have improved the midpoints of our same-store guidance ranges twice, which Mike discussed in his remarks.
Looking ahead, our fourth quarter FFOA per share guidance range is $0.62 to $0.64. The $0.63 midpoint is $0.01 or 1.5% higher sequentially and is driven by same-store NOI growth, additional lease-up NOI from recently developed communities and lower interest expense.
Next, a transactions and capital markets update. During the quarter, we executed several transactions under our Debt and Preferred Equity Program, which we have renamed from Developer Capital Program given the shift in investment and risk profile towards stabilized operating assets.
First, we fully funded a $35 million preferred equity portfolio investment at a 10.75% rate of return on four stabilized communities located in Portland, Oregon as part of a recapitalization. The risk profile is lower than a typical new development project and positive cash flow allows for approximately 2/3 of our contractual return to be paid current in cash.
Second, we received an approximately $17 million paydown on our preferred equity investment in Vernon Boulevard, located in Queens, New York. In conjunction with the pay down, we agreed to lower our rate of return from 13% to 11% to reflect the reduced risk in our remaining investment due to the development being completed and more secure positioning in the capital structure, and an increased proportion of the contractual return to be paid current in cash.
Third, we originated a $31 million senior loan affiliated with our investment in junction located in Santa Monica, California. The proceeds were used to repay in full the prior senior construction loan, which was scheduled to mature in January 2025. This activity enhances cash flow to the property and better positions UDR to control future outcomes. Simultaneously, we recorded an approximately $8 million noncash impairment loss due to a decrease in the value of the operating community.
Finally, our investment grade balance sheet remains liquid and fully capable of funding our capital needs. Some highlights include: first, we have more than $1 billion of liquidity as of September 30. By extending the maturity date of our $1.3 billion senior unsecured revolving credit facility to August of 2028, we have insured ample liquidity for years to come.
Second, we have only $536 million or 9% of total consolidated debt and approximately 2.5% of enterprise value scheduled through mature through 2026, thereby reducing refinancing risk. Our proactive approach to managing our balance sheet has resulted in the best 3-year liquidity outlook in the sector and the lowest weighted average interest rate amongst the multifamily peer group at 3.4%.
And third, our leverage metrics remain strong. Debt to enterprise value was just 28% at quarter end, while net debt-to-EBITDAre was 5.6x, which is approximately half of a turn better versus pre-COVID levels.
In all, our balance sheet and liquidity remain in excellent shape. We remain opportunistic in our capital deployment, and we continue to utilize a variety of capital allocation competitive advantages to drive long-term accretion.
With that, I will open it up for Q&A. Operator?
[Operator Instructions] And our first question comes from the line of Jamie Feldman with Wells Fargo.
I appreciate all the color on other income and some of the initiatives you have on improving tenant credit. But as we think about '25 and think about what growth contributed to '24 or what other income contributed to '24 growth, do you think it will be the same, more or less, as we build out our thoughts on '25? I know you talked about a multiyear view, but just in terms of the specific growth rate, what do you think you could do?
Jamie, it's Mike. I'll tell you first, when you think about 3Q, that 5% number was a little bit lower than we expected. I can tell you going into October and for the rest of the year, we're back in that plus or minus 8% range, and a lot of that's around the success of the initiatives that we're rolling out. And so, as we move into next year, my anticipation is that it's actually going to be pretty similar. I'd say in that 7% to 8% range again.
And a lot of that has to do with the initiatives around WiFi rollout, the success that we're having there. And just to size it, we had about $5 million in NOI from the initiative in 2024, my expectation right now is that's going to be close to double that number next year. So that alone is a big initiative for us as it relates to other income.
Jamie, Joe. Just maybe one other thing to add there because I do think we've always been known for our ability to drive other income to a higher growth rate than the rest of the portfolio. But when you do look at a couple of our big initiatives out there, Mike mentioned one with WiFi. But to the other biggest initiatives we have going on, both customer experience and fraud prevention, these have material bottom line impacts, but probably won't show up to the same degree in other income. And so, while other income gets a lot of focus, we do think customer experience between increasing retention and occupancy, pricing power, lowering turn costs, kind of the same thing with fraud, with keeping some bad actors out of the front door, having an impact on a multitude of line items. You'll see it be a little bit more dispersed in terms of where we're focusing our initiative efforts right now versus just other income. So just keep that in mind on a go-forward basis, too.
That's very helpful. And then, I guess, as we think about the debt and preferred equity book, I know you said you had some redemptions. How do we think about '25? Like do you think you'll be able to maintain the balance? Do you think that you'll have more redemptions than ads you think or vice versa? Just trying to think about the impact on the growth rate there.
I think you'll probably see us be able to plus or minus maintain it. It can be a little bit, I guess, episodic from period to period. You can see it come down for a quarter, back up for another quarter, but we do have a good amount of opportunities that we continue to evaluate. They are primarily on the operating recap side. And you saw us rename that part of the platform here in the quarter to just Debt and Preferred Equity Program, as we continue to see that shift from just funding development assets to more operating assets. So I think, you'll see some payoffs as we go into next year. And as we continue to monitor those, we'll look at redeploying within that space. And continue with that platform at plus or minus the level it's at today.
And the next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets.
Mike, could you just clarify how you would define, I guess, stability with respect to your comment about some of the Sunbelt markets you referenced? And then also, you highlighted same-store revenue growth is reacceleration -- is reaccelerating into the fourth quarter, but I'm wondering if you expect kind of effective lease rate growth or total revenue per occupied home, that you quoted, to also reaccelerate?
Yes. A couple of things there, Austin. Let me back up a little bit and just give a little bit of a high level on what we're seeing, with kind of trends today and how we see that playing out by region as well as thinking about next year a little bit. But I'd say, first and foremost, our blends are ahead of our original expectations for the year, and our occupancy back up in that high 96% range. And so when you think about what we've communicated all year, first half, our blends were higher than what we expected. The back half of the year, they're pretty much right in line with where we thought. And I would tell you, when you look at the different regions, they're all playing out where we'd expect it today.
That being said, looking at our blends today, we're about 1.6% blended growth year-to-date. As I mentioned in my prepared remarks, expectations are -- will be around 1.4% for the year. So that implies flat blends through the fourth quarter. And specific to what we're seeing in October, this is playing out as expected.
I'd tell you one thing, I mentioned in my prepared remarks that had a little bit of a change on us is 20% of our leases were impacted by short to long terms. And when I say that, that means a short-term lease typically has a premium associated with it. And then those people are coming off of, call it, September time frame from the summer months. We're signing 12-month leases today. That impacted our blends by about 100 basis points.
But when we fast forward and we look at November and December, it's actually about half of that exposure. So less than 10% of our leases should be impacted by this, and it's going to be about a 50 basis point impact to our blends. And so again, things are playing out kind of expected.
Today, I would tell you it's not a trend. But when I look at the Sunbelt compared to the coastal market, we've actually picked up about 60 basis points in occupancy. So we were running around 96.1%, 96.2% during the third quarter. We're actually back up around 96.7%, 96.8% today. And our blends, while they've decelerated a little bit, they've actually decelerated at a slower pace than what we've seen in the coastal markets. And some of this has to do with the short to long phenomenon that I just spoke to.
I appreciate all the detail there. And then also, thank you for some of the stats on turnover and especially from a historical perspective. I mean, how are you guys thinking about that trend in 2025? And I don't know if you have this at your fingertips, but could you just give us a sense how much a 1% swing or so in turnover impacts expense growth?
Yes. Austin, I think this one is another one where maybe I'll back up a little bit and just talk more about what we're doing with the customer experience project, because we are still early innings as it relates to this initiative. We think there's a lot more room to gain.
And so if I start there, and then I can go into some of your specific questions, but for us right now, we have about 800 million data elements in the system that we've gathered over the last 7 or 8 years, and we're adding nearly 1 million data elements a day, and so a lot of information here. And I would tell you over the last 12 months, so not even just this year, we've had about 1,800 less move-outs on a year-over-year basis. And for us, that translates to about $9 million in NOI.
When you think about going forward, we still think this is a 5% to 10% sustainable advantage that we can have over our competition. That's about $15 million to $30 million in value. And again, we know that this can be successful because 50% of turnover is control. When you have forwarding addresses and you see individuals that are just going across the street, they effectively failed us, we failed them, and they're moving out, and we need to change that trajectory. And that's what we've been working on. That's what's playing out with the customer experience project.
So yes, when you look at that -- those numbers I quoted earlier were about 600 basis points better than our historical averages for this time of the year. A lot of our peers and a lot of the competition are seeing this success as well in terms of just affordability. But when you look at our numbers versus the peers on a relative basis, we were behind them about 170 basis points in the time frame of, call it, 2022, '23. Today, we're about 70 basis points better. And so you can see that the difference on our focus on the customer is paying dividends.
Again, we think that this is going to continue to just get better as we continue to learn more with all the data elements in the system. And so what we're experiencing today when you look at R&M down around 3% to 4% growth, our expectations would have been around 7% to 8% growth. And so not having all the turnover definitely impacts R&M, but it also impacts our vacant days, our other income as well as CapEx, and so, for every individual that we save, it's approximately $5,000.
And the next question comes from the line of Eric Wolfe with Citi.
You mentioned a handful of markets like Orlando, Tampa and Dallas, that could be an equilibrium. I think you said something like that by the middle of next year. Just curious what the implications of that are? Like, does that mean that rent growth is going to a more normal level, like 3%? Does that mean spring [indiscernible] should be sort of more normal? Like what does that mean in equilibrium?
Yes. I'd tell you right now, we're riding the thick of the process of trying to figure out what our budgets look like next year. And so we typically do a top-down, bottom-up approach, working with the individuals out in the field, understanding what's happening at their specific sites within the markets, what supply is going to do to us and then just having an understanding of the demand that's out there. And so we're working through that process now. We typically button that up at the end of the year.
But we have been having lots of conversations around the supply impacts especially as it relates to the Sunbelt, we do see that that's going to be an impact to the, call it, first 3 to 6 months of next year. Ideally, we do get back to that 2% to 3% range as you move throughout the year, and maybe in the back half of the year as you have easier comps, it starts to get even better. But in the first 6 months, we do expect to see more of the same of what we're experiencing today in terms of blends in those markets.
Eric, this is Toomey. Just to add a little bit more color there, and it's a very good question. Mike highlighted the key elements of it. We know what the supply looks like. We know how it's getting priced. It's been very rational at this point in time. What really is the variable on the table is job growth. And we've had a great number in '24, even after revisions pretty solid. I think we're all kind of scratching our head and wondering what '25 brings. So it's going to be an adjustment based off of that. But every other part of the market, supply-demand aspect of it seems to be in balance. And that's why I think Mike can say it looks like it's stabilizing.
Understood. That's helpful. And then I think you also mentioned that there's 10 bps of that embedded bad debt improvement for next year. Maybe I just misheard that. But I was curious if that means that you're expecting to end the year around 1.4% in bad debt? And how you're thinking about any potential improvement from that level going forward?
Eric, so yes, the incremental improvement really relates to '24, we kind of started out the year on our original forecast [indiscernible] kind of mid-98s collected, kind of 98.5, 98.6. So kind of just under 1.5% of bad debt. Where we're likely to shake up this year is probably just over 1%. So we had a little bit of a benefit in this year's numbers. I'd say, as you go forward to next year, Mike talked a little bit about that proactive approach that we took on some of the screening on both income and ID verification. We do expect that to have a continued benefit. We got some of it this year, some will come next year. And it's not just in that revenue line item. Obviously, it's an occupancy and term cost and CapEx, et cetera.
But there's probably more to get there. We don't believe we're going back to the long-term average, though, I'll say that. So when you hear us say we're kind of in the low one today. If historical average is 40 to 50 basis points, very unlikely we get all the way back to that, not necessarily due to having more bad actors. It's really just the bad actors we do have. It takes a lot longer to get them out of the units than it did historically given some of the regulatory restrictions. So still a little bit of a tailwind there, but we'll see how it shakes out next year.
And the next question comes from the line of Josh Dennerlein with Bank of America.
I'll try to bring back the enthusiasm. I've spoken to a dead mic. So if I missed this in the opening remarks, but were your short-term leases like much higher than normal. Is that what you meant by like 20% of leases were impacted by that short- to long-term lease? I just want to make sure I understand that dynamic there.
Josh, that's a really good question. What I would tell you is it's a little bit higher than what we normally experience. And I'd tell you a lot of that points to the job and demand dynamics that have occurred over the last 6 months or so, compared to kind of moving through COVID and then right after it. We did see a little bit more, especially in our coastal markets where you had interns coming back to work, you had a little bit more job growth in these markets where people are coming for the summer and then they are leaving in the first part of fall. And so yes, a little bit more and it definitely impacted us more on the Coast than it did in the Sunbelt.
And then maybe like tying that to the customer experience, is that something that maybe you want to reduce like those short-term leases? I would assume if you have more short-term leases or maybe just in turns in general, many creates a little bit more friction with the customer experience, maybe?
It does impact our turnover for sure. So when you have these short-term leases coming off, it does impact those stats. But at the same time, when we look at this, it's all about profitability. And so an example I would give you is our short-term furnish program. Not only are we getting a premium for the short-term lease versus a 12 to 14 month lease, but you're also achieving that positive income on that as well also [indiscernible] our fee income. And so for us, at the end of the day, it's a very minimal number. I'd tell you, it's less than 1% of our total units at any given time, probably closer to 50 bps. And so we manage this by market, by property to make sure that we don't have any overexposure to it. But we do go for the profitability piece.
And the next question comes from the line of Nick Yulico with Scotiabank.
I just wanted to talk about capital allocation for a second. I know Tom you talked earlier about capital-light sort of focus of the company right now. And so I'm wondering, you guys had that heat map, which I think was last updated in September, but in terms of capital deployment, how are you thinking about stock buybacks right now? Because it does feel like there's a fair amount of interest in the private market to get asset sales done at potentially better pricing than where your stock is. So what are some latest thoughts on that?
Nick, so we are still in that capital-light mindset and I'd say you've seen us do stock buybacks a number of times in the past. And I think we've done them from a pretty good perspective on timing, we've generally seen some upside appreciation whenever we have done that. It's not necessarily on the menu at these prices today, though. We've been kind of oscillating in the mid 45s here for a while, which kind of puts us in a plus or minus mid-5 cap type of number. We don't think that's fair by any stretch.
Andrew can talk about where transaction pricing is today, but we kind of settled into that plus or minus 5 cap world here for a while. That said, where we do want to deploy, I mentioned earlier, we're kind of in recycling mode within the DPE program. So as maturities come up, we'll do [indiscernible] deploy there.
The other two areas that we're primarily focused on right now: one is on the joint venture acquisition side. We continue to show opportunities to our joint venture partner that we put in place last year and have had some pretty good constructive conversations of late. So we're hoping in '25, we start to get some traction on that front again. Those are really driven by what do we view from a market and submarket opportunity, but also can we find those deal next door opportunities that are under managed to put onto the ops platform. So definitely want to deploy it there.
The other piece is, as you've seen previously, we tried to get creative with some of these OP unit transactions. So deals where we can name our stock price and look at that more as a 1031 type of trade or a cash accretion trade. We are looking [indiscernible] last year. We're looking at a couple of those right now. They are very long lead time typically and not all get to the finish line. So TBD on if anything comes with that. But that's really where we're spending most of our time today.
All right. That's helpful. Just following up on the joint venture acquisition. So that now in the guidance is for none this year, there was some potential in [indiscernible] this year. Can you just speak to what's driving that sort of, I guess, delay in getting some of those acquisitions done if it's your cost of capital, your partner's thinking? And then also, is there an opportunity to expand to additional partners in that program, given that feel [indiscernible] capital that wants to get into the sector with a good operating platform?
No, good question. We did originally have acquisitions in our original guidance throughout the year, which we've now taken to zero within the joint venture bucket. I wouldn't say that it's a lack of opportunities. There's plenty of opportunities out there that can check a lot of boxes for us. That said, our partner and their source of capital, they go through every 5-year or so big mandate review of all global mandates. And we just happened to catch it during that period of time where kind of what pencils down in the middle of the year as they reevaluated everything. We're expecting in the next 60 days to come out of that just fine and continue to get back to work with them.
Given that fact, as you asked about other potential joint ventures or partners, we selected this partner for a lot of really good reasons in terms of alignment with them, in terms of operational thinking, transactional thinking and a really good and deep source of capital long term. So really like the partners that we have and not really looking to add to that platform today.
And the next question comes from the line of Rich Anderson with Wedbush.
So on the former DCP platform now renamed for the reasons you explained doing more from a stabilized asset point of view. Why is that happening? Is that what the market is giving you? Or is there some sort of new governor you're placing on yourself in terms of the risk profile of what the money you want to put out? I'm curious as to why that change has happened and affected the name change as well?
Rich, it's good to hear your voice. It's real simple, there's not a lot of development going on that pencils it make sense. And we're going to always be thoughtful about the market and where the sweet spot is. And the transactions that we're doing, we get current pay, we get a good return. And we still are at the table when the asset ultimately is going to trade. And so it still has a good alignment with shareholders. and capital allocation makes certainly a lot of sense at this juncture. When we're back at '27 and everybody has announced a new wave of development, we'll probably rename the damn program and get back to that.
Okay. Maybe we'll have the word Toomey me in it.
I think so. And good luck with Halloween tonight, my friend.
The second follow-up question is -- bigger picture, as I normally do. Like you have some interesting disagreement amongst your peers about the timing of the Sunbelt recovery? I think you said pricing power returns in some cases, mid-next year to late next year. And that's probably a more optimistic view than what Equity Residential is saying and some of the others that are making their way into the space. You guys are already kind of at that efficient frontier, 75 - 25. Do you have a view as to why there's a difference of opinion in terms of when we actually start to see cash flow regenerate in the Sunbelt, whether it's next year or the year after? I'm just curious where you stand? I know you're saying pricing power returns, but does that mean cash flow also starts to return next year?
Rich, I guess I'd say, number one, when we went through the analysis, when did we reach equilibrium, and we're really talking about some of these markets like Dallas and Nashville, Austin, that have been a little bit more hit by high supply, we looked at typical absorbing rates, what's available from a stock perspective today and what's being delivered on a go-forward basis. And we kind of got back to equilibrium plus or minus, middle of next year, kind of 2Q, 3Q. So that's why we say we expect to see some pricing power return at that point in time.
So renewal has been strong, but you will see supply coming down. And I think supply overall in the Sunbelt probably comes down from 4% to 5% of stock next year, down upwards of 30%. So you're down into that 2.5% to 3% of stock range still above long-term averages on a full year basis. So not back to typical pricing power for a full year basis but you do get back to a better number potentially by the second half of next year.
A lot of that's going to depend, as Tom said earlier, on the wildcard out there what takes place with jobs and wages, household formation, et cetera. But the time tell you next year, second half, you start to get a little bit more pricing power than we have this year. It takes a while to obviously work its way into the rent stack and get through all the lease turns and get end of cash flow. So it's bit by bit and works its way into same-store revenue growth, but we think we'll start to see the signs of it mid-second half.
Joe, if I could just add one thing, too, because -- one thing we've seen success in this year and compared to our peers and others that are talking about the Sunbelt, it's our other income. The initiatives that we have going on in those markets today. When we sit here and we talk about 7% to 8% growth on our other income line, our Sunbelt has been performing around the 12% to 13% growth compared to the cost around 5% or 6%. So significantly more coming from our initiatives down in those parts of the country. So that's been allowing us to do a fairly good job as it relates to relative performance, and we expect more of the same as we go into next year.
And the next question comes from the line of John Kim with BMO Capital Markets.
I think in your prepared remarks, you mentioned an improvement in blended lease growth rates to 140 basis points this year. That's up 10 basis points from prior. But at the same time, earn-in expectations are now 60 to 70 basis points. And last quarter, it was 70. So I know this is only 10 or 15 basis points, but I thought those two items would have been correlated positively and it seems like they're not. I'm just wondering why that's the case?
Yes, John, the way that I think about this and where our earning is tracking today is -- give you an example. If you go back to 2Q through 4Q of last year and you look at our blends, our 2Q growth was 3.1%, 3Q was 1.6% and 4Q was negative 0.5%. So when you add all those up, you're right around 1.6% growth. When you look at this year, our 2Q was 2.4%, 3Q was 1.8% and our expectations right now is flat growth in the fourth quarter. That's about 1.5% growth. And so very similar blend on a 9-month trailing basis as you go into the new year. So earning today feels very similar to what we saw and experienced as we went into this year, as we said in the prepared remarks.
Yes, John, let me ask Mike, a follow-up question because I think sometimes we get, it's great to be precise. But when you're talking 10 bps or 100 bps on a $2,600 a month rent, what does that equate to?
Yes. You're looking at $26 on average for our rent. So it doesn't take much, and it's not a whole law on the absolute number for rents.
And Mike, you mentioned new lease rates in October of minus 5%. I think we all understand the supply pressures in the Sunbelt. But what other markets are you seeing deterioration of new lease rates that were maybe a little bit surprising?
Yes. I'd tell you, first, maybe start out with the regions. And again, for us, the East Coast still performing the best on an absolute basis. And so for October, what we're experiencing, and again, this is blend. I'll get into some of the new lease growth here in a second. Our blends in the East Coast were around 1.5% compared to 3% in the third quarter. West Coast is closer to, call it, 0.5%. That compares to 2% in the third quarter. The Sunbelt dropped a little bit, about 100 bps. I'd say in October, we're seeing around negative 3% blends, and that compares to negative 2% in the second -- in the third quarter.
But again, all of these regions are seeing an increase in our occupancy. So that's only helping that line item, but it also helps our other income. That's leading to that increase from 5% other income growth to 8% as we move forward. And so -- that's what we're seeing on a regional basis. But to your question, new lease growth kind of in the regions. It was actually the coast where we saw a little bit more pressure on our new lease growth.
And again, a lot of that has to do with what I referenced with short-term leases going to long-term leases. In those markets, you typically have more interns, you have more individuals that are coming in for the summer, and we've been working through that. And again, just to remind everybody, our blends, we include everything. And so we don't typically talk about the short to long phenomenon. It's usually, it is what it is.
But in this case, it did have an impact on those coastal markets' expectations again. It impacted October to a greater degree. It's probably going to be about half of that going forward. And then as you go into next year and you start to sign more short-term leases, it typically helps you out in the leasing season months.
And the next question comes from the line of Michael Goldsmith with UBS.
There's been some choppiness in rental growth rates relative to typical seasonality over the last couple of years. Is this variability within the normal range when you look back at the pre-COVID years? Or is there something that's leading to increased seasonal volatility? And do you expect that to kind of continue going forward?
Yes. For us, it goes back to the supply. If you look at places like the Sunbelt, again, we've been talking about this all year long. We knew that this was going to continue to be a headwind for us. It's playing out exactly like we saw, but that is the difference between just normal seasonality. You are dealing with peak supply right now, and you're probably going to deal with it through the first and second quarter of next year in a period of time where demand starts to fall off. So I'd say trajectory-wise, it feels pretty seasonal in nature, but at the same time, you do have a little bit more impact just coming from the supply markets.
I appreciate your thoughts there. And while you don't have a lot of lease-up exposure, I'm wondering, how has the absorption pace has been trending on new developments in UDR markets or at properties which compete with the UDR properties? How much of the -- how much are you feeling that pressure?
No, it's been pretty incredible. I'll give you an example. This time of year on our stabilized asset, we typically see about 1.2% of our homes being leased in a given week. On our development deals and one in particular, down in Tampa, we are seeing about 3x that. So we've been leasing about 3% of our homes per week over the last few weeks. And so again, we don't have a lot of it today, not a lot of exposure. But what we do have is been leasing up, I'd say, fairly well.
And I think for the broader market, when you look at some of the stats that are out there, obviously, from a deliveries perspective, nationally, we're kind of a 30- or 40-year highs. But when you look at absorption, we're also a kind of a 30- or 40-year high. So when you look at private market deliveries and what they're seeing absorption, they're generally getting about 15 to 20 units a month, which is pretty standard on their side. And so that's what's leading to better rent growth than we originally forecast. It's leading to better absorption, a little bit less of a concessionary environment than we forecast originally. I think a lot of that has to do with that relative affordability piece.
Obviously, jobs have been there this year. Wages have been there, but rentership has continued to take well more than their fair share, just given how incredibly expensive it's become to own a home. I think, if you go back to pre-COVID, single-family home prices are up 50% going back to 2019. At the same time that mortgage rates are up materially. You look at what's going on with multifamily rents during that period, it's about half that amount, basically and exactly in line with income growth during that period of time. So rent-to-incomes really haven't changed. It's that relative affordability of the alternative option in single-family housing. So that's, I think, probably the biggest story this year that we've seen from people coming in the front door and then not leaving the back door.
And the next question comes from the line of Adam Kramer with Morgan Stanley.
When you're thinking about potentially starting your own new developments here, how close would you say you are in terms of kind of potential yields on developments relative to your cost of capital? What's that spread and what would that spread need to be for you to kind of start a new project?
Adam, it's Joe. I'd say we're having a lot of active discussions on that topic right now. We've got a number of good parcels and projects that are shovel-ready and ready to go. What we continue to debate is the current yield and the stabilized yield relative to that cost of capital. The fact that we haven't started any, thus far this year, can tell you we're not quite there. But we do feel that we're getting close. Obviously, with a somewhat volatile interest rate environment, it creates a little bit more volatility in what that source of capital is and the price of that capital. So you want to make sure that you've accounted for that. And then obviously really locking into what we think the rents are from a tangibility perspective. And so I think we're close. We'll probably see some starts going forward. They may not be this year, but definitely in '25 most likely.
A good follow-up, Joe. I might be explaining our approach on redevelopment because redevelopment pencils a heck of a lot quicker than development.
Yes, we've continued to have a lot of success both on the redevelopment side and then NOI enhancing front. So we're spending plus or minus $75 million this year just on redevelopment opportunities. So going in and doing from kind of a renovation light, just kind of the K&B type of upgrade to more of a fulsome repositioning of assets. And so we've had really good opportunities on that front. We got a good pipeline there that will take into next year and probably have another $75 million, maybe upwards of that into 2025 as well. So deploying capital on that front, refreshing the portfolio and trying to get the consumer a better product, also raising the NOI profile.
Great. I appreciate all that color. And I was going to ask about kind of capital allocation priorities here given the development comment. It seems like this redevelopment program is high on that list. Is that right? I mean I think you guys talked a little bit about repurchases earlier too, it seems like that's lower on [indiscernible] at this point?
Correct. Yes, the redevelopment generally is a pretty core part of the business that we're always going to be doing in some way, shape or form. We'll pivot it a little bit higher, a little bit lower depending on cycle and opportunities. From a bigger picture perspective, though, it's still that recycling of the DPE looking for joint venture acquisition opportunities and focusing in on some of these creative OP unit transactions that we're finding out there in the market.
And the next question comes from the line of Alexander Goldfarb with Piper Sandler.
Just two questions. First, Joe, just going to the Queens, the Long Island City project, can you just walk us through the decision to take the coupon down? Yes, there are other players [indiscernible] that do deferred equity. And this -- it stood out. So you guys are a pretty big company, plenty of liquidity. So it's not like you couldn't take control of the project if you had to. So can you just walk us through the strategy of reducing the coupon?
Sure. Alex, this is Andrew. It's good to talk to you. So I think it's important just to go back and just start from the beginning on this project. When this project started in the fourth quarter of 2019, it was raw land, the construction on this deal was completed in 2022, and it stabilized in the first part of '24. Our partner came to us and wanted to recapitalize the deal. As a reminder, they put in $42 million into this deal. They paid off $25 million in pref and then reduced our accrual by about $10 million. The way that it's structured, about 70% of our coupon will be paid current. The top dollar on this deal is in like the 60 -- the kind of mid-60% LTV. And our basis is at our dollars are about -- is below $500,000 a door.
So for us, we like our partner. We like the product. We know it well. And so this was an opportunity for us to reinvest in something we wanted to reinvest in, not something that we had to reinvest in. And as Joe talked about, we are in the situation where we get paid back, and we have to go find new opportunities we felt this opportunity was one we would invest in. And so we made the decision to lower the rate because we're in a much lower risk situation than we were when it was under development.
So just to drive that home, Alex, I want to make sure you understand it's not one of the watch list deals that we had. This wasn't a deal that was under distress. There was simply a choice on our part of do we take the last $50 million back in our investment and get paid off fully and take that $50 million and go find a new opportunity and put our team to work on something new. Or just take a deal that we know with a partner we know and say, we'll let $50 million stay out there. But given the change in risk profile, the market rate for that investment has definitely come down from when it was in development.
Okay. So what you're saying is the guy could have -- he had the capital, you're saying he had the capital to pay you off, you just chose to not effectively to put back in rather than getting paid off fully. Is that what you're saying?
Correct. Correct.
They put $42 million of additional fresh equity into that deal, paying down a portion of our pref, but we also had a pref partner in our position that was [indiscernible] with us. So pay down that entire partner's position. So our last dollar risk came down materially with a lot of fresh equity coming into the deal. And as Andrew said, at 60-plus percent LTV, 70% current pay the risk profile changes materially from a new development that was earning 13% to now a stabilized deal earning [indiscernible].
Okay. Second question is on the short-term leases, this isn't new, like this is part of always happens in terms -- the short-term leases or other reasons. So was there something unusual about this year's short-term leases? Or it's just -- it was part of the normal budgetary mix and the whole discussion about short-term mix leases is just walking us through. I'm trying to understand if there was something unusual about this year with the short-term leases or if it's just a discussion of explaining why some of the rent trends happen the way they happened?
Yes, it's kind of both, Alex. I'll tell you, we get a lot of questions just around blends in general. And since everybody kind of has different definitions, some people do the like-for-like, some people do everything. We want to make sure that we're clearly showing what it looks like on both a like-for-like as well as all-in basis. And then for us, like I said earlier, it was a little bit more of a factor than we would have expected this time of the year, just because we did have more interns coming in. We actually did see more people that were taking short-term furnished rentals throughout the summer.
And so I'll tell you, for that program alone, I saw about a 20% to 30% increase in our fee income, which tells me that we did have significantly more people doing those type of leases. And so we're just cycling off of them. And so just in full transparency, that's what we're providing.
Alex, a little bit more color. I mean how often do you have this type of supply being delivered at the same time that you're losing the short-term rental play. And so that's why you see it's probably more, if you will, exaggerated than it is a reality. And as I expect it to go forward, it will probably start looking a lot like the last 30 years.
The next question comes from the line of John Pawlowski with Green Street.
Just one question on expenses for me. So I can get a handle on two line items that have been really volatile over the last several years, personnel and repair and maintenance. So obviously, personnel saw a pretty big cumulative decline, 21% to 23%. Some of those costs were pushed into R&M and then you had pandemic impacts on R&M.
So the question, Joe, is, is the operating model in terms of the bodies, UDR bodies, on the ground both in personnel and R&M functions, stabilize today? Or should we continue to expect to see above inflationary costs continue for personnel and R&M?
Yes, John, it's Mike. I would tell you, it's better than stabilized going forward. And so we've been working through a lot of those changes, as you alluded to, with personnel and R&M. The difference what we're seeing today is a couple of items. First, we had to anniversary off of the Cirrus refund this year. So our personnel was significantly higher than it would have been, we would probably be in that 2% to 3% range. So just under inflationary numbers there. As we go forward, I expect more of the same.
But I'd tell you for this third quarter, we do pay our teams based on performance. And so when you look at our relative performance versus our peers through the first 6 months of the year, they were doing a really good job in terms of top line revenue against the peers within their markets. And so some of our personnel costs were due to that.
And then I'd say on turnover going forward, we're going to continue to lean into that customer experience project. We expect that our turnover will continue to be down. And I'd tell you, in fact, looking at October numbers, we're looking at probably the 19th consecutive month with year-over-year reduction in turnover. So I think going forward, these line items will be more muted than they have been in the past.
Okay. Is there any -- is there still a tail on basically heavily damaged units from evictions that will prop up the -- basically the repair and maintenance expense growth next year a little bit more than typical inflationary levels?
I don't think so. When we look at kind of that population of squatters, if you will, it's back to those historical norms of plus or minus a couple of hundred and we're not seeing people that are near damaging to the same degree that we saw during COVID. And so I don't think that that's going to be as much of a factor as we move forward.
And the next question comes from the line of AlexanderKalmus with Zelman & Associates.
I know we covered a lot of ground today, but I just wanted to ask about the wider third quarter spread recorded between your renewal move-in rent growth figures, with kind of new supply still impacting front-end pricing. At what point do you think that spread returns to like the pre-COVID average? And are there any additional drivers to consider?
That's a really good point. It's something that we watch very closely. And I can tell you as you get into the shoulder quarters, the fourth quarter and the first quarter every year, you typically see your new lease and your renewal spreads gap out. And so we've been watching it. I'll tell you what gives me a sense of relief, if you will, is going back to those turnover numbers again. The fact that we're about 600 basis points better than historical norms. We're not seeing people hand in their keys. We're not seeing our move-out reasons for rent increases, increase. And so we are going to continue to send out plus or minus 4% to 4.5% into the future here, because our turnover looks great. We think everything we're doing on our customer experience project is paying dividends. And so not only will our turnover be better, but we do believe that we can maintain a pretty high renewal growth as we move forward.
And the next question comes from the line of Linda Tsai with Jefferies.
Just one for me. In terms of the $5,000 benefit from saving customers/reducing turnover, are there any upfront costs associated with improving that churn? And if so, does that go down over time?
No. Right now, what we're finding is it's pretty minimal. And so when we're going through all these data points, and again, we have a dashboard for every individual resident. We understand when they moved in with us, when they've had a good experience or a bad experience. We're proactively reaching out to them now and just trying to identify what those issues are, how we maybe all solve them, can we do it quickly. And then at times, we are offering gift cards, small concessions here and there, if there's something that we did wrong that we can improve on. And so they're minimal cost today, but it's something that we're continuing to learn from.
And so as we move forward, I think we're going to find the sweet spot on what those gift cards are. And I don't think it's equal for everybody. We have residents that have been with us for multiple years that house level rents versus some that have been with us for a short period of time, and they may be in a studio. It's not a one size fits all, but it is something that we're identifying and we're proactively reaching out on.
I think, too, with all the data that we have now that Mike was talking about earlier, it's less about additional cost. I think it's being smarter with the resources that we do have. So what were the things that we thought were value-add, that we were doing that perhaps a customer didn't find value in. And so pivoting on our individual people resources, but also on the capital side, trying to figure out where we can spend our capital in a smarter way to address recurring issues that pop up, either at an individual level or at a property level that have caused some consternation and therefore, turnover. So it's not necessarily added cost, but I think the data that we have is making us much smarter on where we do expend resources today.
Linda, just because I love this topic and you can hear the passion from the team on it, and the potential of it. I mean we set out on a goal really to just change how this business is done. And if it's historically always been 50% turnover and you can find a path to 40% or lower, you dynamically change the margin, your pricing power, your cost structure, your CapEx, you changed how the whole damn business is done. And we have now the resources, the capability and the culture to actually drive through this and expand that margin. And ultimately, who wins in margin usually wins the long game. So it's a long journey. We're in the early innings of it. You can see the early innings results, and we're encouraged by the long prospects of this project effort and its value for our shareholders.
And the next question comes from the line of Haendel St. Juste with Mizuho Securities. Apologies, he is no longer in the queue.
There are no further questions in the queue. I'd like to hand the call back over to Chairman and CEO, Mr. Toomey for any closing comments.
Thank you for all your time and interest and support of UDR. I know the call went a little long today, but I find it very beneficial when we expand upon, how we think about the business, how we're running it and how we are going to continue to improve it. So, we look forward to seeing many of you at NAREIT conference in November and certainly a lot of other upcoming events. With that, take care.
Ladies and gentlemen, that does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.