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American Homes 4 Rent (NYSE:AMH)
Q3 2021 Earnings Call
Nov 5, 2021, 3:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to the American Homes 4 Rent Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

I will now turn the conference over to your host, Nick Fromm, Senior Manager, Investor Relations. Thank you. You may begin.

Nick Fromm -- Senior Manager, Investor Relations

Good morning. Thank you for joining us for our third quarter 2021 earnings conference call. With me today are David Singelyn, Chief Executive Officer; Bryan Smith, Chief Operating Officer; Jack Corrigan, Chief Investment Officer; and Chris Lau, Chief Financial Officer. Please be advised that this call may include forward-looking statements. All statements other than statements of historical fact included in this conference call are forward-looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements. These risks and other factors that could adversely affect our business and future results are described in our press releases and in our filings with the SEC.

All forward-looking statements speak only as of today November 5, 2021. We assume no obligation to update or revise any forward-looking statements whether as a result of new information future events or otherwise except as required by law. A reconciliation of GAAP to non-GAAP financial measures is included in our earnings press release and supplemental information package. As a note, our operating and financial results including GAAP and non-GAAP measures are fully detailed in our earnings release and supplemental information package. You can find these documents as well as SEC reports and the audio webcast replay of this conference call on our website at www.americanhomes4rent.com.

With that, I will turn the call over to our CEO, David Singelyn.

David P. Singelyn -- Chief Executive Officer and Trustee

Thank you Nick. Good morning and thank you for joining us today. American Homes 4 Rent delivered a strong third quarter consistent with what we have seen throughout 2021. We continue to set ourselves apart from our peers with a platform that is unmatched in it's totality, highlighted by our 2021 core FFO growth expectation exceeding 17%. As we begin to turn our focus to 2022, our diversified portfolio is well-positioned to benefit from the country's migration patterns. America remains in the midst of a housing crisis that will last for many years to come. It is estimated that more than five million households need housing that is not available today. As one of the largest homebuilders in the United States, we continue to address this issue through our innovation of the SFR space by building new Class A home communities. With our superior property management and customer care, we're delivering an exceptional single-family home experience, while contributing to the appeal and character of local communities. We continue to invest in our homebuilding operations to expand this significant growth channel in future years.

Our 2021 build-to-rent delivery target outlined at the beginning of the year remains unchanged. Through advanced planning and strategic sourcing, we have successfully navigated the well-publicized supply chain headwinds to maintain our new home development and delivery schedule. Jack will elaborate more on this later. Given that all areas of the business are performing extremely well, we are raising guidance for the remainder of 2021. As I close, I remind you of what I said at the beginning of the year. Our top strategic priorities are to deliver strong and consistent operating results and sustained growth. While we are about to close out arguably the best year in company history, I am even more optimistic about our future in 2022, 2023 and beyond. Robust rental demand and our pipeline of more than 16,000 development lots positions us for a predictable industry-leading growth. I think our teams across the 22 states we operate in for their commitment to providing quality housing for our residents and making our growth strategy a reality. Your continued hard work and dedication have earned the trust of our residents, while enabling the company to deliver superior results.

Now I'll turn it over to Bryan for more details on our operations. Bryan?

Bryan Smith -- Chief Operating Officer

Thank you, Dave. Our outstanding momentum continued through the third quarter where we achieved same-home core revenue growth of 7.3% and core NOI growth of 8.2%. These impressive operating results were driven by robust demand and solid execution, which resulted in strong occupancy and rate growth. Same-Home average occupied days for the third quarter was 97.4%, representing a 40 basis point improvement over the same period last year.As expected, we saw a sequential uptick in move-outs in the third quarter but faster cash-to-cash turn times enabled us to maintain occupancy. This year demand showed little sign of slowing as we set records for new lease rate growth at 15.9%, renewal rate growth at 5.7% and blended rate growth at 9.1% in the third quarter. On the collections front, our practices are returning to normal and we expect our bad debt to return to pre-pandemic levels over the course of 2022. Our team has done a great job supporting our residents when they needed it most, including helping them access nearly $14 million in government rental assistance over the course of the pandemic.

Looking forward to the balance of the year, we continue to see strong demand and leasing results in October. Same-Home average occupied days held steady at 97.4%. And on the REIT side, we posted new lease spreads of 12.7% and renewal spreads of 6.6%. This equates to blended rate growth of 8.9%, which represents an improvement of 400 basis points over last October. We expect the strong blended rate growth to continue through the end of the year.

For the full year, we now expect Same-Home average occupied days to be around 97.5%. This represents an improvement of 120 basis points over 2020, and 100 basis points over our estimate at the beginning of the year. Quickly touching on expenses, there is little debate, that inflationary wage pressures and rising material costs are prevalent.However, the efficiency of our platform coupled with favorable property tax changes has helped to offset these incremental costs. And our full year expectation for Same-Home core operating expense growth remains unchanged. With the strong momentum from our outstanding third quarter operating results, we are raising our 2021 Same-Home core NOI guidance by 200 basis points to 8%. In closing, our team has done a great job producing strong, consistent results in this rapidly changing environment. This is a testament to the hard work and dedication you can expect from American Homes four Rent for years to come.

I will now turn the call over to Jack.

Jack Corrigan -- Chief Investment Officer and Trustee

Thank you Bryan and good morning everyone. I am happy to report another solid quarter of external growth. During the third quarter we added nearly 1,600 homes to our wholly owned and joint venture portfolios for a total investment of over $550 million. This marks our strongest external growth quarter since 2016 and demonstrates the power of our three-pronged growth strategy, which enables us to nimbly deploy capital across multiple channels and our diversified national portfolio. Taking a step back, I've overseen our growth programs at American Homes four Rent since our inception. And I've never seen a more attractive time to invest. The combination of, one, our country's national housing shortage, two, shifting consumer preferences toward the freedom of rental living and three, today's stellar operating landscape have created the optimal environment to lean into our external growth programs.

With that in mind, and considering our current attractive cost of capital, coming into the third quarter, we made the strategic decision to reduce going and yield targets across our growth channels by 25 basis points to 50 basis points. This decision enables us to capture more of today's growth opportunities. And because of our superior outlook for cash flow growth going forward, total returns for these investments are expected to be in line with historical level. Given our strong year-to-date performance and recent strategic decisions, we now expect to acquire approximately 2,600 properties through our traditional and National Builder Channels for a total investment of $900 million this year. Our AMH Development program delivered 569 homes in the third quarter and remains on track to deliver between 2,000 and 2,100 homes this year. Even with the well-known supply chain and labor issues impacting construction across the country, we are proud of our ability to maintain our delivery guidance from the start of the year. Our differentiated build-to-rent strategy allows us to control costs through effective inventory management, standardized floor plans and creative solutions. Our diversified footprint allows us to manage availability of materials across different markets. And our predictable production cadence and lack of change orders has created loyalty from preferred trades. On the land front, we continue to feed our growing development program with the acquisition of high-quality land across our footprint.

During the quarter we added 1051 lots to our pipeline, which was ahead of our expectations. And now I believe, we're on track to own or control, approximately 16,000 lots through the end of 2021. As I mentioned at the start, I've never seen a more attractive time for external growth. Although I'm very proud of our accomplishments this year, I'm even more excited for the future as we accelerate our growth programs further.

Now I will turn the call over to Chris.

Christopher C. Lau -- Chief Financial Officer

Thanks Jack and good morning everyone. I'll cover three areas in my comments today. First, a brief review of our quarterly operating results and growth programs. Second, an update on our balance sheet and recent capital markets activity and third, I'll close with a summary of our updated full year 2021 guidance. Starting off with our results, we reported another strong quarter with net income attributable to common shareholders of $36.9 million or $0.11 per diluted share, $0.35 of core FFO per share in unit, representing 17.8% growth over prior year and $0.30 of adjusted FFO per share in unit representing 20.7% growth over prior year. Driving our results was another quarter of consistent operational execution within our Same-Home portfolio where we generated 6.6% growth in rental revenues, which was further benefited by 60 basis points of contribution from higher ancillary income and 10 basis points from lower bad debt, translating into an overall 7.3% core revenue growth. Coupled with a 5.7% increase in core property operating expenses, this translated into an impressive core NOI growth of 8.2%. And now turning to our external growth programs. During the third quarter, we added a total of 1,583 homes to our wholly owned and joint venture portfolios, 569 of which were delivered from our AMH Development program.

Specifically for our wholly owned portfolio, during the quarter we added 1,382 homes for a total investment of approximately $494 million, which was ahead of our expectations and included 368 homes from our AMH Development program and 1014 homes from our other acquisition channels. And on the disposition side, we sold 90 properties during the quarter, generating total net proceeds of approximately $27 million. Next, I'd like to turn to our balance sheet and share a few brief updates. As we discussed on our last earnings call, during the quarter we closed a $750 million dual-tranche unsecured bond offering comprised of both 10- and 30-year bonds. And then during September, we settled 11.4 million common equity forward shares from our May 2021 offering for net proceeds of $399 million. At the end of the quarter, we had 1.8 million forward shares remaining, representing approximately $65 million of net proceeds that we expect to utilize during the fourth quarter to fund a portion of our growth programs. Additionally, at the end of the quarter, we had $64 million of cash, our $1.25 billion revolving credit facility was fully undrawn and our net debt including preferred shares to adjusted EBITDA was 5.9 times. Finally, I'd like to share some additional color on our revised 2021 guidance, which continues to reflect the robust demand environment and consistently strong execution from our operating platform.

Starting with the Same-Home portfolio, recognizing our year-to-date results and record-breaking seasonal demand heading into the fourth quarter, we've increased the midpoint of our full year core revenues growth expectations by 125 basis points to 6.75%. Additionally, the midpoint of our core property operating expense growth expectations remains unchanged at 4.75% and contemplates a few puts and takes as we now expect full year property tax expense growth of approximately 4% and a 5.5% combined increase on all other expenses. Coupling together our updated Same-Home expectations, we have increased the midpoint of our full year core NOI growth guidance by 200 basis points to 8%. Next, with respect to external growth, for full year 2021, we now expect to deploy approximately $1.7 billion of total AMH Capital, which now includes between 3,700 and 4,100 wholly owned inventory additions. And when coupled with our joint venture programs, we now expect to deploy total gross capital of approximately $1.9 billion. Putting all the pieces together we have increased the midpoint of our full year 2021 core FFO per share expectations by $0.04 to $1.36 per share, which represents 17.2% year-over-year growth and continues to lead the residential REIT sector. And in closing, I'd like to quickly reiterate our bullishness looking forward. 2021 has been one of the best years in American Homes 4 Rent history, but the true excitement lies ahead. Our portfolio is already positioned for today's migration patterns. Our operating platform is performing at the highest levels in company history. And when coupled with the power of our three-pronged growth strategy, differentiated by AMH Development, American Homes 4 Rent is positioned for an exciting and long runway of outsized shareholder value creation ahead.

And with that, we'll open the call to your questions. Operator?

Questions and Answers:

Operator

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Nick Joseph with Citi. Please proceed with your question.

Nick Joseph -- Citi -- Analyst

Thank you. I was hoping you can give some more information on the supply chain and labor cost pressures that you're seeing across the business, particularly on the development side? Obviously, the rent growth is probably more than offsetting that, but just if you can frame what you're seeing on the ground there?

Jack Corrigan -- Chief Investment Officer and Trustee

Yes. Thanks, Nick. This is Jack. Yes, we definitely are seeing some inflationary pressures on construction costs and we -- and on land. So -- but we're also seeing similar inflationary pressures on rent which is offsetting the construction costs in terms of yield.

But what I would say also is that, while we're seeing some costs go, we're seeing lumber prices come way down. So lumber prices peaked at $1,700 in the third quarter. So what we delivered in the third quarter and part of the fourth quarter will be at the peak. But lumber prices currently are between $600 and $700. So you're going to see some tailwinds as far as lumber offsetting some of the other costs.

Nick Joseph -- Citi -- Analyst

Thanks. And when you blend that all together with the movement in rents, how does that change kind of the current pipeline expected yields?

Jack Corrigan -- Chief Investment Officer and Trustee

The current pipeline expected yields are going-in yields are probably 25 basis points lower for stuff we're underwriting today, but I don't expect to see those things -- those projects that we're underwriting today won't come to fruition until 2023, 2024. So, the ones that are coming into existence today were underwritten three years ago. So, the land prices were lower, the rents are higher, and it's basically offsetting in terms of yield what we expected. So we're basically yield neutral on those houses.

Nick Joseph -- Citi -- Analyst

Thank you very much.

Operator

Thank you.

Jack Corrigan -- Chief Investment Officer and Trustee

Thanks Nick.

Operator

Our next question comes from the line of Steve Sakwa with Evercore ISI. Please proceed with your question.

Steve Sakwa -- Evercore ISI -- Analyst

Yeah. Great, thanks. Chris, I was just wondering if you could talk about the guidance and where you have sort of implied 4Q, based on the acceleration that you saw in leasing spreads in the third quarter. I think you've got sort of flat revenue in the fourth quarter against the nine months. And NOI, I guess at the midpoint, I think is down slightly from the nine months. So maybe just talk about sort of what's in there and the pressure points maybe both positively and negatively?

Christopher C. Lau -- Chief Financial Officer

Sure. Good morning, Steve. Good question. Yeah, I mean just to take you through the general points of what's included in the guide. Keep in mind, midpoint from a revenue perspective is now 675 on a full year basis, general components for the fourth quarter that Bryan largely covered in his prepared remarks. Our view is that, we think we'll probably hold the line and continue to see occupancy in the 97.4% or so area in the fourth quarter pretty similar to what we saw in the third quarter. We see nice opportunity from a rate perspective both from where spreads are going in the fourth quarter but also the pull-through from the strong spread environment we've seen recently especially in the third quarter. So in terms of the pull-through of that to average monthly realized rent, I could see that tick up a little bit from 3Q into 4Q. And then also keep in mind, fees are -- and ancillary income is contributing nicely this year as well. From a full year perspective, we could see those contributing in the area of call it, 50 basis points or so on a full year basis.

And then, bad debt to your point around kind of puts and takes, I think bad debt is going to be an area that we're watching closely as I think we all can tell. We saw some improvement this quarter. Bad debt actually tracked a little bit better than what our prior expectations were as we're beginning to see some modest improvements in our collections as our practices and tools have started returning to normal. And as we've shared recently in our last investor update and then of course this quarter, we saw an uptick in rental assistance payments in the third quarter. And so, all of that contributed to bad debt coming down a touch in the third quarter to the 1.7% area. And as we think about the fourth quarter, so far collection trends have been pretty consistent into October. And so, best view right now is that we could see fourth quarter bad debt looking fairly similar to third quarter. But hopefully there might be opportunity to do a little bit better than that. But all in all, Steve those are the components. And actually when you essentially squeeze the fourth quarter delta between year-to-date and full year, you'll see that that actually implies some modest top line acceleration from 3Q into 4Q.

Steve Sakwa -- Evercore ISI -- Analyst

Great. And then, just maybe one question on sort of the land and your desire to continue to replenish, I'm just curious how -- I guess how is the footprint changing? Or how much more challenging is it to find land parcels in the submarkets that you want them? Are you being sort of forced to go further afield to find the land at the right price to continue to replenish the lots?

Jack Corrigan -- Chief Investment Officer and Trustee

Well, we're definitely not sacrificing location. So we're buying similar land that we've always -- that we've been buying in our footprint. So that has not happened as far as the sacrificing location. And it is competitive. We're out there competing with all the national builders. But -- you can tell from our activity, we're getting our share of the pie. And it's competitive and we're competing.

David P. Singelyn -- Chief Executive Officer and Trustee

Steve, this is Dave. One other thing I would mention, if you go back and you look at our last investor deck that we have posted on the Investor page of our website, you will see a few maps in there as to where the communities that we are building are physically located. And you will see that they are in the communities, in the areas that we have existing homes. And actually all of our peers have existing hubs. So, it's not that we are building far out. We are building where the residents and our prospective residents want to be where the better schools are, et cetera. But you can actually physically see on the map where we are building today.

Steve Sakwa -- Evercore ISI -- Analyst

Great. Thanks. That's it for me.

Operator

Thank you. Our next question comes from the line of Buck Horne with Raymond James. Please proceed with your question.

Buck Horne -- Raymond James -- Analyst

Hey thank you. Good morning guys. I was wondering we've had some recent news here with Zillow making an announcement about their exit from the iBuying space and starting to sell off their portfolio of homes. Open questions whether or not other iBuyers might be running into trouble as well? I'm just wondering if those types of homes that iBuyers control whether it's Zillow or other players would those be of interest to you? How do you think about going into the market for those? Or do you think that those iBuyers are getting into trouble that could create inventory challenges out there?

David P. Singelyn -- Chief Executive Officer and Trustee

Yes. Buck this is Dave. Good morning. I don't know about -- I don't want to speak about other iBuyers at this point. But with respect to Zillow absolutely there's opportunities there. And we have been in contact with Zillow are evaluating the opportunities that are available today. And hopefully, we will find a large number of those homes that fit our buy box. Those would be incremental to the normal buying patterns but they do have quality homes in their portfolio. And we will evaluate all of those opportunities and make bids as we see fit.

So one other thing I would mention about Zillow that's a positive for us is, we have talked about the labor market is a tight labor market today. And there are a number of individuals that have reached out to us in the last couple of days looking for opportunities at American Homes 4 Rent. So that's going to be beneficial to us as well as to the prospective employees as they look for new employment.

Buck Horne -- Raymond James -- Analyst

Very interesting. I appreciate the color. And with the strength of rental demand out there and the increases you guys are getting I was wondering if you could add any extra data or color you have on household income trends in terms of whether it's your new applicants or if you can break it out between new lease applicants versus existing tenants? Are the households able to keep up with these rent increases? And to the extent, you've got any data on out-of-market renters anything extra that you could add there?

Bryan Smith -- Chief Operating Officer

Buck this is Bryan. We're really pleased with the applicant profile and the improvement in their income through this year. So year-to-date our approved applicant incomes documented incomes are up about 10% which is pretty close to our new lease rate growth. So, the incomes are keeping pace with this fantastic growth. And a little bit has to do with exactly what you said in the second part of your question and that is the migration trends. We're still seeing strong migration from California into the Western markets like we've talked about before. We haven't seen that slow down at all. If you look at the number of applications from California they're up about 60% to what they were pre-pandemic levels for the last quarter. Similar trends on the East Coast with New York and New Jersey. And then the other thing that's interesting too, we took a very close look at move-outs for the year and to figure out whether the people who are moving out whether there are any changes as to where they are going. For the third quarter, move-outs to buy new homes was down slightly in the low 30% range. But we're encouraged that we're not seeing any change in behavior and patterns people returning to these coastal cities. So that outward migration is very consistent to what it was pre-COVID levels and is relatively low. So, net-net we're seeing really good migration into our markets and not seeing a corresponding outflow that some people have alluded to.

Buck Horne -- Raymond James -- Analyst

That's great. Awesome color. Thank you guys. Good luck.

Operator

Thank you. Our next question comes from the line of Richard Hill with Morgan Stanley. Please proceed with your question.

Richard Hill -- Morgan Stanley -- Analyst

Good morning. My afternoon. Hey guys, I wanted to maybe get a little bit more disclosure from you about loss to lease across the various different markets that you're in. I'm really asking the question from a perspective of your turnover is only 25% which is a great thing and it just leads me to believe that you have quite a sustained runway for same-store revenue growth all else being consistent. So, I'm just wondering if there's any differences between loss to lease and maybe if you can comment on your ability to capture that as some of your apartment cousins had mentioned that they could only capture call it 60% to 70% of lost to lease in a given year?

Bryan Smith -- Chief Operating Officer

Hi Rich, it's Bryan. Very good question. We're obviously seeing a divergence between renewal rates and releasing rates. I would estimate that our loss to lease for the portfolio right now is somewhere in the low double-digit ballpark. It's exactly as you said though it gives us a lot of confidence going into next year that we can continue these really nice rate growth both on the renewal side and on the releasing side. Exactly how much of it we're going to be able to capture next year I don't have a great estimate for you there. Our retention is a little bit better than the multifamily peers. So it may not be as quick to catch up. But you'll notice too that we've seen some nice improvements in our renewal rates sequentially as well. So in a nutshell we're really excited and optimistic about our ability to push rents next year. Loss to lease will have some contributing effect to that.

Richard Hill -- Morgan Stanley -- Analyst

Got it. And maybe if I can just follow-up just a bigger more strategic question. As you think about the dynamics there are obviously a ton of tailwinds right now. But as you think about what could make this an even better environment versus maybe a little bit of a weaker environment what are you looking for? How much does home price appreciation matter? I'm just trying to frame the environment how much more upside there is versus this just the new stable normal versus a potential slowdown?

Bryan Smith -- Chief Operating Officer

Yes, the upside

David P. Singelyn -- Chief Executive Officer and Trustee

Go ahead.

Bryan Smith -- Chief Operating Officer

Yes, the upside is really a function of being able to sustain these really record levels of demand. And HPA is a factor of that. There are supply constraints in our market. There's a shortage of housing as we've talked about. We don't see any quick fix to that in the short run. So the expectations are that if demand holds we're going to have fantastic runway. The upside would be a continued depreciation for our value proposition. We've talked about that at length. The pandemic accelerated some trends that we saw going into the pandemic that really talked to the benefit of our platform the convenience of the leasing lifestyle the changing demographics. So I think the upside would be to have demand maintain or even accelerate from where it is today.

Richard Hill -- Morgan Stanley -- Analyst

Great. Thank you, guys. That's really helpful. I will jump back in the queue.

Operator

Thank you. Our next question comes from the line of Haendel St. Juste with Mizuho. Please proceed with your question.

Haendel St. Juste -- Mizuho -- Analyst

Hi, there. Thanks for taking my question. So Bryan you mentioned just now the widening spread between new and renewals good for the loss to lease. But I'm curious about some of the deceleration we're seeing here the blended rate in October little bit below the third quarter as a contrast to your resi peers cousins seeing acceleration. So maybe can you talk about pricing power renewal pricing strategy? Obviously renewals are a key piece of the story with retention being so high. And maybe share some color on what you're sending out for November-December and if you're capping renewals anywhere? Thanks.

Bryan Smith -- Chief Operating Officer

Sure. Thanks, Haendel. Yes, the deceleration that you're talking about is I think, 9.1% to 8.9% it's still extremely strong. The October numbers that we posted show a 400 basis point improvement over last year. So we're still seeing really good pricing power especially in the time of year where traditionally we've seen some seasonality. We've been able to buck that trend with the robust demand. But you're exactly right. The position that we're in with strong occupancy and good execution on turns and excellent demand has given us confidence to continue to push renewal rates. In terms of absolute caps, I don't think there's any specific data points to provide there. But we've been thoughtful on our renewal process. We're managing to optimize revenue. That's one component of it. Re-leasing rate growth is another component. But putting all those together we're really happy with the progress that we showed in the third quarter and still the strong results that we posted for October.

Haendel St. Juste -- Mizuho -- Analyst

Great. That's helpful. Can you actually share what the renewals that you're asking for November-December are?

Bryan Smith -- Chief Operating Officer

Yes, sorry about that. We are -- the renewals for the remainder of the year are going to be consistent with October and the renewal offers that we're mailing out for the beginning of next year are a slight increase, but nothing dramatic.

Haendel St. Juste -- Mizuho -- Analyst

Got it. Got it. Thank you. And then maybe one on the cost outlook given the inflationary pressures you talked about. I'm curious how you guys are feeling about your ability to contain some of the costs that the trunk are more controllable like the R&M the wages, the material? And then maybe on the real estate side given the rise in values and particularly the run in the Sunbelt expectations that real estate taxes are heading up. So any color on that? I think you mentioned that you had some recent successes here. But I think into next year there's a general expectation that while taxes should be -- at least real estate taxes should be going up right?

Bryan Smith -- Chief Operating Officer

Yes, Haendel I'll start with that and maybe pass it to Chris for the tax commentary. We're really happy and proud of the execution that we've had in this current environment. Our scale and our platform efficiencies have allowed us to continue to turn homes quickly despite supply pressures.

The focus that we have on soft performance has allowed us to mitigate some of the really inflationary increases on third-party vendor work. So there are a number of things in place that are protecting us from those issues that I think most people are feeling. We're going to continue to focus on it. We're doing this in an environment to where we're still working out some of the COVID-related distressed residents. Those are turning at this time. We've talked about that in the past. So overall, I think we've done an excellent job being efficient in a challenging environment. I would expect that, to continue for us, but we're paying close attention to it. And it's really, a testament to the strength of our platform that we've been able to mitigate a lot of these increases.

Christopher C. Lau -- Chief Financial Officer

Yep. Hey, Haendel and this is Chris. I'll jump in on the property taxes, and I'll talk a little bit about, what we're seeing this year and then tie it into next year as well. But as I'm sure you'll recall the third quarter is typically a really active period for us for receipt of property tax information. In particular, on the assessed value front we now have information on pretty much the majority of our portfolio. And I'm pretty happy to report some good updates, almost all the way around.

Assessed values have come back modestly better than what our expectations were at the start of the year. We've actually seen a couple of municipalities end up reducing rates that we actually were not expecting. And then the deals program is going really well. So all of that combines into the new full year expectation that, we've been talking about around 4% or so, which as a reminder is about 50 basis points better than our expectations at the start of the year.

And then on 2022, look it's definitely the right question. Of course, I'll tread a little bit carefully here as we're still in the middle of our 2022 property tax budgeting and forecasting process. But in general, look, we agree with you and recognize that we're in a strong HPA environment, and that's great for asset values, but it's obviously also a factor for property taxes. So again, I can't comment with specific numbers just yet. But given the strength, we've been seeing in HPA, this calendar year, and the fact that property tax is commonly run in arrears, we could see 2022 taxes being a touch higher than our 2021 estimate of 4%. But I wouldn't really expect them to be in a materially different ballpark. And as always, we'll leverage our robust appeals machine to make sure, we aren't leaving any dollars on the table.

And then just to tie all this together obviously, your question was around expenses. But I would just remind us all to think about expenses coupled against, as we're thinking about 2022 coupled against what we expect to be another really strong year from a top line perspective for all the reasons that Bryan, was talking about, setting up real nicely for another year of occupancy and rate performance. And then you couple that with all the good stuff to come from our growth programs, and the AMH machine is just set up real nicely for another strong year in 2022.

Haendel St. Juste -- Mizuho -- Analyst

That's really helpful. Great. Thank you.

Christopher C. Lau -- Chief Financial Officer

Thanks, Haendel.

Operator

Our next question comes from the line of Dennis McGill with Zelman & Associates. Please proceed with your question.

Dennis McGill -- Zelman & Associates -- Analyst

Hello, guys. Thanks for taking the questions. I think the first one is on -- there are a couple of comments about preferences for single-family rentals. And I just wanted you to maybe elaborate a little bit on, what you guys look at to assess that, because obviously from the outside looking at the homeownership rate data that's been going up for several years, particularly among young adults. So how do you guys think about that when you talk about the preferences?

David P. Singelyn -- Chief Executive Officer and Trustee

Yeah, Dennis, it's Dave. And what -- we have seen -- we have mentioned as you will recall each and every quarter, we've talked about how the demand for single-family rentals has continued to get stronger and stronger. If you go back 10 years ago, when we had 13 million single-family homes, what we had seen at that time is demand that was in the 1990s, but much lower than it is today. And today we have many more homes that are single-family rentals. It's 17 million by most accounts and the demand is far, far stronger. And I attribute that to basically the education the value proposition of residents and prospective residents, understanding what single-family rental living is today versus what it was more than a decade ago. A decade ago, it was in the hands of mom-and-pops American Homes and some of our peers have elevated the quality of the single-family rental experience both the quality of the housing, as well as the quality of the customer service. And we see that driving demand. That's the tailwinds that, we continue to talk about. We do not see that getting any softening up at any time in the future.

And then the other piece that really drives, the strong demand is the fact that, there is a shortage of quality housing in the United States. We talked about in the prepared remarks there's -- depending on which survey you want to look at they're all in the same area, but there's somewhere between four million and six million households looking for quality housing. And we are building quality housing, and solving part of that problem. And -- but the demand for it is extremely strong today and I expect it to be extremely strong for many years into the future.

Dennis McGill -- Zelman & Associates -- Analyst

We could probably debate the shortage another day. But I think what you're seeing from a demand side, I'm not sure, we would disagree with, but there's also incredible demand for for-sale single-family too. So I guess, what I'm trying to get at is, is there a mix shift between owned single-family and rented single-family and the macro data would suggest that owned is gaining share because the ownership rates going up. So that's what I was trying to understand, recognizing that there's demand strong demand for all housing, how you would maybe articulate that there's a preference for rental over owned?

David P. Singelyn -- Chief Executive Officer and Trustee

Well there's two groups of individuals and those that are looking to buy and those that are looking to rent. And we are in markets where people are moving to where they're migrating to. We hear about some of our multifamily peers, repositioning to where the migration patterns are. We're already there. And the other piece here is, is that when you think about 17 million single-family rentals and you think about us owning between 50,000 and 60,000 and our peers institutional peers also owning thousands but not millions, and we have a better product we are going to continue to see very very strong demand. And we are in the markets where the demand is extremely strong. All of our markets, I think other than one are the employment growth and the population growth exceed the national average. And so that's going to provide strong demand for us for a long time going forward.

Dennis McGill -- Zelman & Associates -- Analyst

Okay. I appreciate it. Maybe shifting gears just a little bit to the development program. What was -- I really this will vary quite a bit by geography and so forth. But if you just looked at all, of the development completions this year, what's the average rent on those units? And what would you say the average rent would be next year on deliveries?

David P. Singelyn -- Chief Executive Officer and Trustee

The -- well the average rent for the third quarter was in is in the supplement at $2,120. It's actually slightly -- it's higher than that. But if we hadn't rented it yet we used the pro forma rents and we're exceeding pro forma rents by about 5% to 10% on average. The -- for the year, I would say it's probably a $2,000 to $2,100 range but I don't have that statistic in front of me.

Dennis McGill -- Zelman & Associates -- Analyst

And then for next year just based on. how you've underwritten what's coming to market?

David P. Singelyn -- Chief Executive Officer and Trustee

Based on underwriting, pro forma rents probably in the same range $2,000 to $2,200 but again we're achieving higher than pro forma rates in almost every development.

Dennis McGill -- Zelman & Associates -- Analyst

Thanks. Good luck, guys.

David P. Singelyn -- Chief Executive Officer and Trustee

Thanks, Dennis.

Operator

Our next question comes from the line of Jade Rahmani with KBW. Please proceed with your question. Jade Rahmani, you may proceed with your question. There is no response from Jade. So we will move to the next question. Our next question comes from the line of Sam Choe with Credit Suisse. Please proceed with your question

Sam Choe -- Credit Suisse -- Analyst

Hi, guys.Most of my questions have been answered, but I did want to circle back to collections. I mean it was good that you guys provided that guidance for normalizing next year. But I'm just trying to understand the remaining, like tenants, that are trying to get current, how do they differ from your normal base? That's the 100,000 income-earning households the dual income. I'm just trying to compare what's different with the -- I guess the remaining tenants that need to kind of get back to normal?

David P. Singelyn -- Chief Executive Officer and Trustee

Sam I don't know if -- I think what you're getting at is whether there's a different profile between the cohort who's current, and the cohort who is under some distress.

Sam Choe -- Credit Suisse -- Analyst

Right.

David P. Singelyn -- Chief Executive Officer and Trustee

And I think you could look at it the COVID-related distress hit some of our markets hard. I don't know if there's a dramatic difference in incomes. But I do think that those are the ones that have been affected employment. If you take the hospitality industry in Las Vegas, as an example. But it's not a case of the people who are under distress had lower incomes than those who didn't. I think it's probably more isolated into whether their industry was affected by COVID and whether it's been able to recover.

Sam Choe -- Credit Suisse -- Analyst

Got it. Okay. So is it more market specific at this point with -- in terms of, what you need to get in terms of collections or...

David P. Singelyn -- Chief Executive Officer and Trustee

Yes. There are -- there is variability across the markets. The real goal for us is as you mentioned before, we alluded to in our prepared remarks, is to get everything back to normal. And part of that process is work out of some of the distressed tenants and working them through the system getting those houses turned and put back into normal in line bad debt delinquencies and so forth. The good news is we're seeing -- we're making really good progress on that. We've talked about that before. The full suite of collection tools have been returned to us now. So that's in process. We're happy that we've made really good movement on that. We think it's going to take into next year as I mentioned, in the prepared remarks. But our goal is, to work those tenants out, retenant these homes -- turn these homes retenant them taking advantage of the nice rate growth that we've gotten and get those back to kind of normal operations and that's going to be occurring through the first half of next year into 2022.

Sam Choe -- Credit Suisse -- Analyst

Got it. Appreciate the color. Thank you.

Operator

Thank you. Our next question comes from the line of John Pawlowski with Green Street. Please proceed with your question.

John Pawlowski -- Green Street -- Analyst

Thanks. My first question is on the trajectory of development deliveries. And so in past investor,presentations you've got some bars going from 2,000 homes delivered roughly this year up to 3,000 plus beginning in 2023. The question is, have you sourced enough supplies, given the supply chain bottlenecks to a step at trajectory? Or is there anything in the supply chain right now that's going to make you temper the increase from here?

Jack Corrigan -- Chief Investment Officer and Trustee

Yes. Thanks for that question, John. It's a good question. As far as 2023, I don't know if we'll have the same supply chain bottlenecks. I hope not. We've been pretty creative and have built an advantage in that we don't offer options to our renters in building our houses and we have standardized floor plans. So we have a built-in advantage over our national builders.

But I can't tell you about supply chain issues in 2023, but we're definitely ordering stuff well in advance. I can't even tell you for sure what the supply chain issues will be in 2022, but we're monitoring them. We've had them. There's really three areas nationally that we've had supply chain issues appliances windows and trusses.

As far as the others are more local in market and we've been able to -- because we're in so many markets if one market is suffering we've been able to move some supply over to the other market. So we've been creative. Hopefully, we'll be able to continue to be creative and achieve our goals for 2022, which I can't give you for sure what we're targeting until I get through all the unit delivery plans for each of the markets. And I haven't fully gotten through those yet.

John Pawlowski -- Green Street -- Analyst

Okay. Well, I may not be understanding the lag of when you got to collect your inventory on -- inventory of materials to deliver homes next year. But have you sourced enough supplies to make you confident you can deliver more homes next year than you did this year?

Jack Corrigan -- Chief Investment Officer and Trustee

I'm fairly certain that we'll deliver more. How much more? I'm not prepared to tell.

David P. Singelyn -- Chief Executive Officer and Trustee

Hey, John it's Dave. Supply chain issues have been an issue of all of 2021. And as you can see, we have delivered exactly what we expected. And I think what Jack is saying is, yes, there is a supply chain issue out there. But with the ability to order much earlier in the life cycle of building homes then our homebuilding friends have because of owner options and the ability to source in many markets, because we have very standardized plans, and we can move those materials around.

We have successfully delivered exactly what we thought we would deliver this year. And going into the early part of next year, we don't see that changing. We -- our deliveries in the early part of 2021 on land that we acquired two years ago, three years ago, we are on target for. And we have very, very good loyalty with our trades as well. And so we are not seeing issues with trade holding up deliveries at this time. And I don't expect it will hold it up next year either. So, yes, we are confident in our ability to deliver the homes that we have the land for that we have done the horizontal work on next year and work through the supply chain issues.

John Pawlowski -- Green Street -- Analyst

Okay. Great. Last question for me either for Bryan or Chris. Obviously, kind of R&M and turnover costs from a dollar amount have benefited from lower turnover rate this year. Wondering if you could give us a sense for how the cost per individual turn has increased and just so we can understand the magnitude of acceleration that's going to come once the turnover rate starts normalizing?

Christopher C. Lau -- Chief Financial Officer

Sure. John, it's Chris here. On average, I take turn costs bounce around a little bit. But on a trailing 12-month basis through the end of the third quarter, I think the average turn for a unit that actually turned was about $1,000 or so. And that typically runs in that area. It's probably up a touch.

But I would say on the turn side, as Bryan spoke to in his prepared remarks and then also in a question earlier in the queue, what we're seeing there is a little bit more volume-driven than cost per turn driven, just given two factors where our lease expirations fall in the year and the fact that we have a larger proportion of leases expiring in the third quarter. And then also as Bryan spoke to the fact that we're now making progress working through some of the COVID affected households in the portfolio. But I would think the -- I would think about it in context of average cost to turn a home the turns being about $1,000 or so.

John Pawlowski -- Green Street -- Analyst

Okay. Thank you.

Christopher C. Lau -- Chief Financial Officer

Thanks, John.

Operator

Our next question comes from the line of Chandni Luthra with Goldman Sachs. Please proceed with your question.

Chandni Luthra -- Goldman Sachs -- Analyst

Hi. This is Chandni Luthra from Goldman Sachs. Thank you for taking my questions. I'd like to talk about sort of increasing interest in the SFR space, as we think about institutional capital, as we think about home builders. Could you all talk about what sets you apart? And how are your communities different as we think about sort of more institutional investors looking to get a bite at the apple? And what doesn't worry you as you think about this increasing competition?

David P. Singelyn -- Chief Executive Officer and Trustee

Yes. So, it's Dave. It's a set of good questions there. The -- there is definitely more capital flowing into the space, especially into the build-to-rent area than in prior years. And that to me is a validation of what we are doing in build to rent is working and people are looking to capitalize on that opportunity. But the opportunity that American Homes has, I believe is very different than others. And that is because, we're the only ones that are building and managing the same asset.

And so, we are building them with the thought -- with the view that we will be the long-term owner. We are creating a better home for maintenance long term and that has a secondary benefit that it's a higher-quality home and has more value in the value proposition perspective residents. The ability to have that feedback loop from Bryan's operations group into Jack's development group and be able to make changes in a very, very quick manner, really provides us a unique opportunity to differentiate the product that we are delivering.

We were able to early in the COVID pandemic period changed some of our floor plans to provide work-from-home cubes in little areas that you could create for in-home offices and additional office space. And so, we are -- that's a modification that our architects were able to implement very, very quickly, providing now a product that's a little different. We also look at building communities a little different maybe than others. Maybe some are copying what we're doing. And we're looking at the best of single-family living and the multifamily living with respect to the amenities that are offered.

So, our -- we are building communities with high-quality amenity centers. Again, there is information and there's a video on our website that you can actually see what these amenity centers look like. And these communities are proving to be in very, very high demand. We are pre-leasing these communities at a rate greater than 50%. 50% of the homes are leased prior to them being completed. That's the demand that we're seeing for these homes.

Chandni Luthra -- Goldman Sachs -- Analyst

Got it. That's helpful color. And as we think about the expense outlook for the year and sort of if you don't look at the implied fourth quarter guide, it appears that your expense outlook has a wide range in there for the fourth quarter, about 400-plus bps or so. So, could you talk about what the contours are there as we sort of are left with just two months into the year? What are the drivers? Thank you.

Christopher C. Lau -- Chief Financial Officer

Good morning Chandni, its Chris here. I would remind you that the shape of expenses this year have largely been playing out consistent with what our expectations were at the start of the year, really being driven by the timing of the R&M and turn line, where we knew we were going to see some back half weightedness this year just again, as I was mentioning a couple of minutes ago based on the timing of move-outs where our lease expirations fall and the fact that collection tools have now -- practices have returned to normal and we're cycling through some of the COVID affected households in the portfolio.

And the timing of that is translating into what we're seeing and expecting in our R&M and turn cost line. But again, I would remind you very consistent with the shape and timing that we're expecting at the start of the year and the midpoint of our expense guidance has remained unchanged from the start of the year at 475.

Chandni Luthra -- Goldman Sachs -- Analyst

Got it. Thank you for all the detail.

Christopher C. Lau -- Chief Financial Officer

Sure. Thanks, Chandni.

Operator

Our next question comes from the line of Keegan Carl with Berenberg. Please proceed with your question.

Keegan Carl -- Berenberg -- Analyst

Hey guys. Thanks for taking the question. Just one for me given we're at time wise. Can you just give us some more color on your ancillary revenue streams and how you plan to grow them going forward?

Bryan Smith -- Chief Operating Officer

Hi Keegan, this is Bryan.

David P. Singelyn -- Chief Executive Officer and Trustee

Yes with -- go ahead Bryan, I'm sorry.

Bryan Smith -- Chief Operating Officer

Keegan, we're really pleased you've seen some really nice increases in contribution from other income this year. We've been -- we put a pet program in place as one example, and we're continuing to roll that out through the program. I think if you look at it from a long-term perspective, we're very excited about the opportunities we're going to have for ancillary revenue on the communities, the way that we're going to connect those communities smart home technology. It's really nice features that the residents are looking forward to getting. So we see great opportunity in that as we continue to roll that into the new community development.

Chris can speak to any other contribution that we're seeing today.

Christopher C. Lau -- Chief Financial Officer

Yeah Bryan, I think that's great. Keegan, the only thing that I would add is look ancillary income be the fee line is contributing nicely. I mentioned this earlier in the Q&A. But for this year alone, we're expecting at the midpoint about 50 basis points of Same-Home revenue contribution from that fee line. Now part of that is keep in mind the fact that we had late fees turned off for a couple of months last year, but a big contributor is that ancillary income that Bryan is referring to and we see a long runway for that ahead.

Keegan Carl -- Berenberg -- Analyst

Great. Thanks guys.

Operator

Thank you. Our final question comes from the line of Brad Heffern with RBC Capital Markets. Please proceed with your question.

Brad Heffern -- RBC Capital Markets -- Analyst

Hi, everyone. Just a question on land. So looking so far in 2021, the number of lots acquired has been about three times, the number of deliveries. And so I'm curious at what point we'll see those numbers look more equal? And is that really going to be just the deliveries going up, or is there a chance that at some point the land purchases will start moving lower?

Jack Corrigan -- Chief Investment Officer and Trustee

Hi, this is Jack. Thanks for that question Brad. When we stop growing the program, you'll see it equal out. So today we're buying land for -- maybe the end of 2023, 2024 and 2025 deliveries. So we still expect to be growing at that point. And if we feel like 3,000, 4,000, 5,000 deliveries is the right number to flatten out at then you'll see though that's how many we'll be buying a year.

Brad Heffern -- RBC Capital Markets -- Analyst

Okay. That's it for me. Thanks.

Operator

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I will now turn the call over to David Singelyn, CEO for closing remarks.

David P. Singelyn -- Chief Executive Officer and Trustee

Thank you Alex. Thank you for your time today. We are pleased with our operational and growth execution this year and we remain excited and well-positioned for what lies ahead in 2022 and future years. Talking again next quarter. Have a good day.

Operator

[Operator Closing Remarks]

Duration: 63 minutes

Call participants:

Nick Fromm -- Senior Manager, Investor Relations

David P. Singelyn -- Chief Executive Officer and Trustee

Bryan Smith -- Chief Operating Officer

Jack Corrigan -- Chief Investment Officer and Trustee

Christopher C. Lau -- Chief Financial Officer

Nick Joseph -- Citi -- Analyst

Steve Sakwa -- Evercore ISI -- Analyst

Buck Horne -- Raymond James -- Analyst

Richard Hill -- Morgan Stanley -- Analyst

Haendel St. Juste -- Mizuho -- Analyst

Dennis McGill -- Zelman & Associates -- Analyst

Sam Choe -- Credit Suisse -- Analyst

John Pawlowski -- Green Street -- Analyst

Chandni Luthra -- Goldman Sachs -- Analyst

Keegan Carl -- Berenberg -- Analyst

Brad Heffern -- RBC Capital Markets -- Analyst

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