Multifamily REITs Expect Income To Drop In 2026 But Cling To Demand Recovery Hopes

It's shaping up to be another disappointing year for apartment landlords.

Operating expenses have increased faster than revenues, and several multifamily REITs signaled that their net operating incomes could decrease this year, even as they project limited new supply and high renewal rates will buoy the market in the second half. 

Mid-America Apartment Communities, which is focused on the Sun Belt and owns more apartments than any other REIT, reported a decline in net operating income of 1.4% last year, down from its midpoint expectation of 0.2% growth. It now expects same-store NOI to decline 0.75% in 2026, with operating expenses climbing nearly 2.7% and rents growing less than half a percent. 

Equity Residential, which owns more than 85,000 apartments largely on the coasts, reported its net operating income grew by 2.2% in 2025, down from 3.1% the year before. Meanwhile, same-store expenses increased 3.7% last year. 

The 2025 NOI results matched Equity’s initial guidance, but the path to get there was hindered by decelerated momentum in the latter half of the year, particularly in markets where there has been ample new construction, CEO Mark Parrell said during an earnings call Friday.

“2025 was a challenging year for the rental housing industry, including Equity Residential,” Parrell said.

Next year will be slower, Equity predicted. Its earnings guidance projects same-store NOI growth of 0.5% to 2.5% this year, putting the midpoint of 1.5% well below the prior two years’ growth. 

“We believe heightened policy and geopolitical uncertainty took a toll on consumer and employer confidence, causing an abrupt slowdown in job and rent growth in the second and third quarters,” Parrell said. 

Investors have taken notice of the math problem. Multifamily REIT returns were negative 7.8% over the past year, according to Nareit, compared to the all-REIT average growth of 7.2%. Only office and single-family REITs, at negative 12% and 9%, respectively, have seen their public values tumble further, while retail, industrial and hotel stocks have all generated positive returns of 9% of more. 

AvalonBay Communities, which owns more than 84,000 apartments, posted 1.9% same-store residential NOI growth in 2025 — down from expectations of 2.4%. In 2026, the REIT expects just 0.3% NOI growth. 

AvalonBay expects a 1.4% increase in same-store revenue this year and a 3.8% increase in same-store operating expenses. High retention rates helped AvalonBay achieve 2.1% revenue growth in 2025, CEO Benjamin Schall said.

But in response to the sluggish rental growth picture, AvalonBay plans to commence $800M in new developments this year, down from more than $1.6B in 2025. 

AvalonBay Chief Operating Officer Sean Breslin also said that despite supply coming down, it isn’t being leased up as quickly as expected.

“Why we're expecting the first half to be a little bit weaker is some of that lingering standing inventory in some markets that's carrying over from the back half of '25 through the first half of '26. Even though deliveries will be down meaningfully in both the first half and the second half, there is some standing inventory to absorb,” Breslin said.

The AvalonBay executive also said several markets, including Denver, Washington, D.C., and Seattle, had flat or negative job growth, hurting demand.

What the REITs have going for them is a sharp decline in new supply and strong renewal rates. Deliveries are down more than 60% this year from the recent peak, MAA CEO Bradley Hill said.  

“Against this improving backdrop, we anticipate demand across our markets to remain solid,” Hill said during an earnings call last week.

MAA, AvalonBay and Camden Property Trust executives all mentioned improving rent-to-income ratios as a tailwind for demand as homebuying remains out of reach. Camden residents’ rent payments now average only 19% of their incomes, Camden CEO Ric Campo said during a Friday earnings call.

“We are certain that apartments are significantly more affordable than owning a home, and will be for the foreseeable future,” Campo said. 

Camden executives confirmed on the call that they are looking to exit California. The sale will allow Camden to focus on its Sun Belt markets, where it expects significant growth and values the absence of regulatory and legislative obstacles.

“In the last five years … 92% of our spend on political efficacy was in California,” Campo said. “Once we close that portfolio, the political efficacy in the Sun Belt is pretty much zero.” 

The REIT is marketing its 11 California properties — worth $1.5B to $2B — while California’s investment demand is strong, unlike in oversupplied markets like Austin, he said. 

California-based Essex Property Trust, which reported NOI growth higher than its peers, also made note of the declining-supply environment. It doesn't plan to start any new projects this year. 

The REIT expects operating expense growth to ease from 3.5% last year to 3% this year as the property insurance market improves. The expectation is “the lowest rate of expense growth we have seen in several years,” Chief Financial Officer Barb Pak said during an earnings call Friday. 

Essex Chief Investment Officer Rylan Burns, while declining to comment on Camden's properties, said there have been $11B of transactions in Southern California over the past two years as buyers have noted the relative lack of construction compared to the Sun Belt markets.

“This is a healthy environment where there's a lot of capital coming in that I think they're going to do quite well,” Burns said.