What does that mean for the rental business? And I think, by and large, if you look at all the data, there are less single-family homes for rent on market today than there were 2 or 3 years ago. Many homes get sold back in as MLS inventory. And candidly, it’s not enough. And I think what we’ve experienced, we see it on both sides of the transaction, right? We are active in the MLS market as a buyer trying to buy assets at what we think are clearing price of capital is at any given point. We are not finding a lot of transactions in that environment because we get outbid. And so there is ample demand for homes in the marketplace on a resale basis as evidenced in the data that we have around selling. And that’s been really consistent. So we feel really comfortable.
As Jon talked about before, our values are up dramatically over the last several years. As we go to sell homes in the market, we’re having little to no problem selling a home for any particular reason that we deem from an asset management perspective. And we’re selling those at really great marks. And then being able to accretively invest that capital back into homes at much higher cap rates, as we talked about in the release, we view as a very good capital allocation strategy for our business going forward. We’re selling older homes, maybe they have some form of CapEx risk and generally recycling those into newer homes with very little CapEx long-term risk at much better yields on cost. So I don’t know the answer as to how long that can — that market can be out there.
But it feels like there is a homebuyer market even at today’s mortgage rates, albeit it’s much more muted. However, the absolute lack of supply in the marketplace is a very real factor. And we don’t see that changing anytime soon.
Operator: The next question comes from Austin Wurschmidt with KeyBanc Capital Markets.
Austin Wurschmidt: You guys have highlighted some of the unique challenges this year from kind of normalizing conditions. And you’ve had tough year-over-year comps in lease rate growth. You’ve had the lease compliance backlog to work through and just higher turnover. I guess, are those challenges behind us? And when you referenced occupancy and lease rate growth above the 2018 and 2019 period, do you expect you can sustain occupancy above those periods as well as lease rate growth, given some of the tailwinds to the business?
Jonathan Olsen: Yes, I’ll let Charles speak to the occupancy piece. But I think as far as your question, if I heard you right, are we through this transitional period? I think the short answer is not yet. Charles and his team have been doing yeoman’s work on the ground. We’re really pleased with the progress we’ve made working through our delinquency backlog. Quarter-over-quarter, bad debt was down 20 basis — sorry, year-over-year, bad debt was down 20 basis points, but rental assistance was down 80%. So the health of our customer as we get those homes released is quite strong if you look at our income-to-rent ratio. So I think we’ve still got a little bit of wood to chop. Certain of our markets have been able to move more quickly than others.
But we’re certainly heartened by the fact that it seems as though court systems are now moving a little bit more quickly. California, in particular, is becoming a little bit easier to navigate. But it’s going to take us a little bit of time yet before we truly can say we’ve returned to normal. But I think the results that we’ve posted and what we’re seeing in our portfolio in light of that transitional experience we’ve been going through all year, I think, really underscores what a great business we have and how strong the underlying fundamentals are.
Charles Young: Yes, this is Charles. I’ll just add a couple of thoughts. You’re asking around some of the tailwinds. Look, there’s more positive that we’re seeing. We knew for this year, we had the least compliance backlog to go through and it was going to elevate turnover temporarily. Given that backdrop though, we’ve had tremendous new lease rent growth all year long. We’re just returning to normal seasonality, as I discussed. We’ve been in occupied north of 97% all year long. Q3, normal seasonality, 96.9%. As I look at the portfolio going forward, this is what typically happens, Q4 will bottom out on occupancy and start to rise back up. And we are doing this in a backdrop where we’ve had higher turnover that will ultimately start to — we see it as transitory and start to normalize as we go into next year.
So there’s a lot of really good things going on. And we’re seeing good — still seeing really good demand across the way. Again, it’s around the balance of new lease and renewals. And just to highlight the renewals, for November, we went out at over 9% for November and December on new lease — renewal asks. So ultimately, I think that leads to the steadiness of the business, the demand that we have. And ultimately, I think it puts us in a more kind of stable footing that we know what to expect, especially as we work through this lease compliance backlog. And as Jon said, many of our markets are back to normal. We’re still working through it in a few markets like Atlanta and California and a couple of others. And once we do that, then those tailwinds will get even better as easier comps for next year.
Operator: The next question comes from Steve Sakwa with Evercore.
Stephen Sakwa: I guess, I’ve got a — just a follow-up because I’m getting hit by a few people on this number and just trying to nail this down. You’ve been very clear about where, I guess, renewals are coming in and where they’re going out. But it seems like there’s a little bit more opaqueness on the new leasing. So Charles, I think you said that historically this time of year, the range would normally be in kind of the 1.5% to maybe 3% range. So are you in that range for, say, October? And are you kind of towards the higher end of the range or the lower end of the range? Because I think folks are just trying to get their arms around where new leasing is today.
Charles Young: All right. Very good. This is Charles. Look, we are — the month is not over for October. So this is all preliminary on both numbers. We are comfortably in that range. And it will be what we expect to be, above 2%, for October. We’ll see where it settles out. But that again is normal in terms of the seasonality and also given a little bit of elevated turnover, given the seasonality and what we’re doing on the lease compliance backlog. So I like where we are. And I think if you’re looking ahead, it’s the renewals that should give a lot more optimism. Given that the new lease is only 25% of what we do on our leases, the renewals is what’s going to drive the blend as we go forward and keep our occupancy steady and high.
Operator: The next question comes from Juan Sanabria with BMO Capital Markets.
Juan Sanabria: Just on the lease compliance or COVID era issues, when do you think we’ll work through that? And do you have a sense of what the expense profile would be if those items — if those homes that churn over is kind of stripped out, just to think about what the cost growth would normalize to once that debt is cleared out?
Jonathan Olsen: Juan, it’s Jon. That’s a good question. I think a couple of things to bear in mind. Historically, bad debt for us has run, give or take, 50 basis points if you go back to the pre-COVID period. For the third quarter, we came in at 133 basis points, which was down materially from what our experience has been over the last several quarters. So we’re absolutely heartened by that. We do believe that over time and distance, we can get back to those pre-pandemic levels. That said, it’s hard to predict the timing. There are a lot of factors that come into play. Certain of those factors are out of our control in terms of how quickly courts can work through their backlogs. The various steps in the process of resolving those delinquency issues can sometimes take longer than we would hope.
That said, I think we do see a path to a return to normalcy. I think the other thing I would note is turnover has been elevated for all the reasons Charles talked about. I think roughly 19% of our move-outs in the third quarter were related to skips or eviction move-outs. That’s up, I think, 400 basis points year-over-year. And those skip and evict turns can cost 50% more than a regular way turn. So if you adjust for sort of the — both the elevated turnover, the higher cost of a larger subset of those turns, the fact that those skip and evict turns on average are going to take a few days longer, which has an additional impact on occupancy beyond the impact of turnover already, I think when you put it all together, we feel really good that as we continue this march towards a return to normal, if you will, that we see a path to getting back to a portfolio that operates in a manner very similar to what we experienced before the sort of anomalous last few years of COVID.
