Demand Destruction: The Multifamily Risk That’s Not Recession, Not Oversupply, and Not in Your Underwriting Model A Florida landlord just watched his vacancy rate explode from 2% to 30%. Not because of oversupply. Because his tenants vanished. Bisnow reports that 40% of apartment owners now say immigration enforcement is killing their occupancy. In Florida? It’s 67%. The obvious damage: ICE raids a property. Occupancy drops 10% overnight. Tenants disappear mid-lease. Units go dark. The hidden damage: Foreign-born residents who are here legally start avoiding anything that puts their name on paper. They move in with relatives. They don’t renew leases. They stop showing up to wire money home. One operator: tenants went from paying on time to “living month to month trying to figure out if they’re going to be here or not.” Most operators saw no impact. But for those in immigrant-dense markets, its a real problem. In a typical year, 100,000 to 200,000 immigrants rent apartments. Last year? 600,000 people were deported. Another 1.9 million self-deported. Immigrant population growth dropped 50% year-over-year. That’s demand destruction. The article calls it a “one-sided risk.” Zero upside, unlimited downside if you own in the wrong zip code. The Miami landlord offered free rent. FREE. Still can’t fill units. When free doesn’t work, the problem isn’t pricing. The customer base disappeared. “The water has reached our noses,” he said. This is the market shift most underwriting models don’t capture. How do you project “government policy makes 30% of your tenant base vanish”? You don’t. You can’t. You just eat the loss. The concentration risk matters. Class C product in immigrant-heavy markets? This is your problem now. Class A in different submarkets? You might not feel it. The survey also showed 30% of operators reported staffing problems. Maintenance techs. Groundskeepers. Turnover crews. Gone or harder to find. Falling occupancy AND rising operating costs in the same markets. That’s the double-tap. HUD just gave landlords 30 days to verify citizenship status for 200,000 tenants or face sanctions. More pressure. More documentation. More reasons for people to avoid putting their names anywhere official. If you own multifamily in markets with high foreign-born populations, your risk profile just changed. Underwriting assumptions built on steady immigration growth don’t work anymore. Occupancy projections based on historical norms don’t work anymore. Labor cost assumptions don’t work anymore. For 2021-2022 vintage deals already choking on rate resets, this will send many more deals back to lenders. Not might. Will. [Link to full Bisnow article] https://lnkd.in/erN5DnnV