What a 9-Year-Low in Rent Growth Actually Does to Your Deal
Negative 1.7% rent growth isn't a headline. It's a repricing of every multifamily refinance in your portfolio.
The number came in on a Thursday.
National rent growth: -1.7% year over year.
Lowest reading since 2017.
Peak leasing season — April, May, June — is supposed to deliver lift. This one isn’t.
If you own multifamily, fund multifamily, or lend against multifamily, the number should have stopped you cold.
It got scrolled past.
The Reality:
I’ve been sizing bridge and hard money loans for nearly a decade.
I watch rent growth the way a cardiologist watches EKG printouts.
A -1.7% YoY reading doesn’t mean rents dropped for everyone. It means the AVERAGE, across a market already bent by oversupply in the Sun Belt and softness in the midwest, is now below flat.
Some submarkets are worse. Some are better.
But the underwriting assumption baked into almost every 2023 and 2024 acquisition deck was 3% annual rent growth — minimum.
A 4.7 point swing between “assumed” and “actual” is not a rounding error.
It’s a complete exit-assumption reset.
The Double-Hook:
Here’s the part the headline didn’t carry.
Rent growth doesn’t just hit the top line of the P&L. It hits the sizing of your loan.
Lenders underwrite to trailing revenue, stabilized NOI, and projected growth.
When trailing revenue flattens or drops, the DSCR on the loan you needed to refinance with stops working.
When stabilized NOI revises down, the cap rate your lender was willing to accept on exit tightens.
When projected growth turns negative, the bridge loan you closed 12 months ago on a 24-month plan is no longer going to exit cleanly.
You don’t have a rent growth problem.
You have a refinance problem.
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The Insight Stack:
The smart operators I lend to stress-tested their portfolios against a -2% rent growth scenario two years ago.
Not because they predicted this. Because they knew their exit math had to hold in multiple worlds, not just the one the broker showed them.
Here’s the rough shape of what the -1.7% actual does to a typical $10M multifamily bridge loan written in 2024:
Projected 12-month stabilized NOI assumed in the original model: down 4-6% vs. pro forma
Implied property value at exit (same cap rate): down 6-9%
DSCR at today’s refinance rates: tighter by 15-25 basis points in coverage
Refinance sizing: meaningfully less than the existing loan balance
That delta is where the lender and the borrower start having uncomfortable conversations.
The loans written at 75% LTV in 2024 are now effectively 82-88% LTV against today’s valuation.
Lenders don’t take those out at par without a pay-down.
The pay-down has to come from somewhere.
That somewhere is usually either a capital call or a discounted sale.
Why It Matters:
If you’re an LP, this is the moment where some of your GPs are going to send emails that begin, “We’re going to be needing a little more capital to get across the finish line.”
If you’re a lender, this is the moment where the playbook shifts from growth underwriting to workout-aware underwriting.
If you’re a borrower, this is the moment where the refi conversation gets real and the clock on your current loan starts feeling a lot shorter than it did 90 days ago.
The Resolution:
I’ve been running my lending book against -2% rent growth since 2024.
Not because I’m a doomsayer. Because that’s the discipline a short-duration lender has to run.
My bridge loans are 12 months with extensions. Short-duration capital with clear exit paths. That structure only works if I underwrite what can actually happen.
The average apartment loan delinquency jumped 30 basis points last month.
That number is also not a headline. It’s a signal.
The Bottom Line:
-1.7% rent growth isn’t a macro story.
It’s an underwriting memo.
If your capital structure assumed more, the next 18 months are going to be a reset.
The reset isn’t catastrophic. It’s an invoice.
Pay it now with clarity, or pay it later with interest.
— Jon
P.S. The short version is on LinkedIn today. This is the math.