Mark Parrell: Rich, it’s Mark. I’m trying to answer that. I mean there are tons of rules about who you can and can’t rent to. And California, as you sort of implied, as more rules than most, and we’re certainly going to comply meticulously with all of those rules. But this is, again, an issue when you create this regulatory framework where delinquency is more expensive, you do motivate us, and we are using our data analytics tools and other means to try and determine whether our credit standards should be raised even further because now the marginal cost of delinquency, which is what your question was getting at, is higher. So, we need to decide whether instead of, call it, three times income to rent, we need 3.5. But we need to do that thoughtfully.
We need to do that in a way that doesn’t completely tank occupancy. So again, we’re rational actors like all the operators are in that market. And we have the advantage of having a great team and a lot of good analytics, but we’ll certainly comply with the law, but we’re going to look really hard at is there a different cutoff, but there is no group of bad actors. There’s not like some particular percentage that’s causing this problem. It’s more that the processing of delinquencies takes longer. So therefore, just the normal delinquency is in the building three months instead of two. And so now I have one extra month, that’s real money, what do we do to address that? Maybe nothing, but maybe it is a change, too. But I think are already pretty stringent credit standards.
And so, we’ll see where we go with that.
Rich Anderson : Is there an AI application to this possibly?
Michael Manelis : Yes. Rich, this is Michael. So, I guess I can just answer a little bit on that and tell you, as an industry, it is exciting. Mark mentioned a little bit around the data and analytics. But what you’re seeing within our industry is there is a lot more available data around this. There are new kind of screening tools that are coming to the market, screening processes that do leverage kind of different data points than conventionally the industry has looked at. There’s clearly identity verification tools that are coming into play, not only for the touring side, but the application side. And you’re starting to see more and more of this alternative security deposit kind of programs come into play. I think all of these things together in the blender actually do help start mitigating some of what I would characterize as fraud or bad actors in the system.
Rich Anderson : That’s great. Thank you, very much.
Operator: We’ll go next to Adam Kramer with Morgan Stanley.
Adam Kramer: Thanks for taking my question. Just wanted to ask about the earnings, which I know you guys put in from your slide deck, I always find the deck to be really helpful. I guess if I’m just looking at that 1.3% to 1.5% range, I’m assuming that’s kind of your assumption today for what the earning will be going into next year, so on January 1? So just to confirm that. And then maybe just thinking about over the last two months of the year, what could kind of change that number, right? And maybe a focus on San Francisco and Seattle specifically, would there be some risk to that number? Or is kind of further softening in those two markets already kind of embedded in that embedded growth?
Michael Manelis : Yes. Adam, this is Michael. I think right now, we put the range out there because it is hard to move that number much more than 10 basis points. And it is our assumption as to where do we land on 12/31. So, you start 1/1, what does that rent roll look like? And what is the embedded growth from the leases that you have in place. Typically, we wouldn’t really give a range, we’d give a number, but you do have some volatility sitting out there right now, not on kind of the renewal front, the growth that we’re going to get from renewals feel pretty stable. But you could see concessions tick up. You could see rates decelerate a little bit more or the inverse. You could see things pull back a little bit. And that’s why we’re giving you that 10 basis point spread. The midpoint of our guidance is PEG at the 1.4% which is the middle of that embedded growth.
Adam Kramer: That’s really helpful, Michael. And then maybe just a follow-up on the — kind of the pricing trend seasonality charts in the deck. I always find this would be really helpful. I guess I’m just trying to kind of square this with the kind of year-over-year new lease numbers that you talked to. I think it’s going to be minus 4%, minus 5% as we kind of progress through the rest of the year for new lease. I recognize that, obviously, there’s seasonality here, right, things on a sequential basis are going to worsen. I guess I’m just a little bit surprised that the minus 4%, minus 5%, that should be a year-over-year figure, if I’m not mistaken, right? So, it should kind of already include the impact seasonality? Again, apologies, it’s a little bit of a conceptual question here maybe, but just trying to kind of square the kind of seasonal versus sequential, I guess, kind of discussion here.
Robert Garechana: Yes. I’ll start and maybe Michael can augment, if you will. So, I think if I understand your question right, you’re kind of looking at the pricing trend looking at the spread between the lines, and saying, like, how does that square with my new lease change? And I guess I would tell you to start on your new lease change. There is a lot of noise around mix, and we do all terms. So, we report all terms in our new lease change. So that means that you could have had a lease that was signed in August that was for — at a premium rent that was for three months reset in October. And therefore, you’re going to have a much bigger change than what would be reflected if you just looked at those lines and said, everybody is on a 12-month lease, everybody’s on a year-over-year basis, and that does create a decent amount of noise.
If you look and dig into the numbers, there. You also have some level of — even though these are small as a percentage of total, meaning most of our leases are 12 months, there’s enough noise in there and enough volatility in the transaction base to not make that comparison kind of apples-to-apples. What we do think is really helpful for the price — in pricing trend and why we present it is just to look at the overall kind of directionality of where prices are going and where they are relative to seasonal trends overall. So, I would say the pricing trend is best suited for a directional viewpoint and the new lease change is really what’s going into the revenue line and it’s really what’s supporting your GRP and your revenue overall.
Operator: And at this time, there are no further questions.
Mark Parrell: Thanks, Jennifer. I want to thank everyone for their time and interest in Equity Residential today, and look forward to seeing everyone on the conference circuit over the next few weeks. Thank you.
Operator: Everyone else had left the call. This does conclude today’s conference. Thank you for your participation.
