• Headline Rent Declines Understate Reality: Reported rent declines of ~6% likely understate the true correction. Concessions—free months, discounts, incentives—can push effective rents down materially more than public data suggests.

• Concessions Are the Silent Rent Cut: One “free month” equals an 8.3% rent reduction. Two or three months free can translate into double-digit effective rent declines, especially in oversupplied high-growth markets.

• Supply Imbalances Drive Behavior: In balanced markets, landlords don’t negotiate. In oversupplied markets, they compete. And competition compresses effective income faster than most models anticipate.

• Population Growth Is the Real Engine: Real estate performance is not just about rates—it’s about people. Remove population growth (or worse, reverse it), and investment assumptions quickly unravel.

• Deportation Risk Is an Underpriced Variable: If a meaningful portion of Arizona’s renter base were removed, vacancy rates would rise, development would stall, and lending stress could ripple through both multifamily and single-family markets.

• Cycles Turn When Pressures Converge: Artificially low rates, supply surges, inflation erosion, and potential population contraction form a layered risk environment. Markets rarely break from one force—they shift when multiple forces align.

Well certainly a lot of exogenous events have unfolded since I first outlined the long-term impact of the rapid rise in interest rates, along with the deleterious effects of stubborn inflation in consumer goods and services.

Multifamily has been in a rut. Rents have declined for nine consecutive quarters, delivering roughly a 6% drop in reported rental rates. But take that data with a grain of salt.

In supply-constrained markets — which lately tend to be tertiary, lower-growth areas spared the mass infusion of new builds — rents are likely stable to slightly lower. In contrast, in high-growth markets — the favored destinations for developers — rents might effectively be off 20–30%, whether through lower asking rates or, more commonly, through rental concessions that tenants apply across the term of their lease rather than solely toward move-in costs.

In a strong market, landlords don’t need to offer concessions. Supply and demand are in balance, or ideally demand slightly exceeds supply, ensuring steady rent growth. But as supply rises, properties must entice renters to “choose them.” The specials begin. Perhaps a discounted move-in. Then a month free. Then two. Sometimes even three. Occasionally giveaways — TVs, iPads, or outright cash incentives.

Keep in mind: each free month on a 12-month lease equals roughly an 8.3% rent reduction. Two months free equates to more than 16%. We are talking about meaningful decreases in real effective rents — potentially far steeper than what statistical reporting agencies publish.

How? Because if the face rent is $2,000, that is what goes into the rent roll and what agencies report. But that number can be largely irrelevant if the tenant chooses — as they often do — to apply their concession across each month of the lease term. There is no comprehensive survey that I’m aware of tracking this behavior, but in my experience, when given the option, tenants prefer to lower every month’s payment rather than apply the concession solely at move-in.

For example, if rent is $2,000 per month for 12 months and one month is free, the effective rent is approximately $1,834 per month. Food for thought the next time you see a headline stating rents are down 6% year over year — because it most likely does not include the free rent.

Speaking of exogenous events, why isn’t the industry discussing the potential consequences to landlords when a tenant is deported?

According to the American Immigration Council, there are somewhere between 270,000 and 305,000 undocumented individuals in the state of Arizona. Roughly 70% of them rent their homes, whereas approximately 64% of U.S. citizens in the state own theirs. In round numbers, 70% of 300,000 equals 210,000 undocumented individuals residing in apartments. For the sake of brevity, I will defer diving into household sizes.

As I understand it, ICE is ramping up staff, infrastructure, and manpower. Leaders of this administration — including the President himself — have publicly stated their intention to deport 15–20 million people nationally. Whether one agrees or disagrees is beside the point. If taken at face value, the majority of undocumented immigrants would be removed.

I am no data scientist, but I can tell you that what makes a market good, mediocre, or bad for real estate investment is highly dependent on a growing population — not just stable, but growing.

Well, 210,000 people represent approximately 3% of the combined Phoenix and Tucson metropolitan population. Three percent may not sound like much, but context matters. If those individuals skew younger and are active in the workforce, the impact could be profound. An aging population combined with a shrinking labor base strains healthcare systems and broader economic productivity. The Dallas Fed has published research addressing the challenges posed by declining birth rates and demographic aging. Population contraction compounds those issues.

Put simply, if Arizona posted a 3% population decline, investment activity would adjust quickly. Development would correct — significantly.

Furthermore, if I were writing this for single-family investors or developers, I would point out that if 70% rent, that implies 30% own. If those homeowners are deported, what happens to their mortgages? Defaults would rise. Yet I hear little from policymakers regarding how consumer lenders would be supported. In a sense, landlords are lenders as well. We finance our buildings with debt and rely, at least in part, on rents to service that debt.

I sold my entire portfolio. I did so largely because I felt the market had been too good for too long — driven by artificially low rates courtesy of quantitative easing, a development shock following the Great Recession of 2007–2009, and inflation that I believed would materially impact renters’ purchasing power.

What I did not foresee was mass deportations as a potential headwind.

Food for thought.