Michael D. Lacy
Senior Vice President, Property Operations at UDR
Thanks, Tom. The topics I will cover today include our first quarter same-store results, early second quarter 2023 trends and how they factor into our reaffirmed full year 2023 same-store growth outlook, and an update on our continued innovation and operating efficiencies. To begin, strong year-over-year same-store revenue and NOI growth of 9.6% and 11.7% in the first quarter were driven by first: blended lease rate growth of 3.5%, which was in line with our expectations and driven by above-average renewal rate growth of 7.4%; second, occupancy that held strong at 96.6% supported by healthy traffic; and third, rent collections continued to improve, with March being our highest level of in-the-month collections since the beginning of COVID.
During the quarter, we remain focused on enhancing our rent roll and recapturing apartment homes that were previously occupied by long-term delinquent residents. The short-term effect of our approach had three direct results: one, approximately 400 basis points of higher annualized turnover versus the prior year, although 39% annualized turnover is in line with our long-term first quarter average; two, increased repair and maintenance expenses; and three, higher levels of availability during a seasonally slow leasing period and, therefore, a near-term drag on pricing. However, re-leasing these apartment homes to paying residents is beneficial to total revenue. Our efforts to date have reduced the number of long-term delinquent residents to approximately 300 or 50 basis points of total units, which is down from a peak of 750 and compares to our long-term average of 250. This, in combination with better in-month collections, help to further reduce our bad debt reserve.
Next, we continue to see favorable fundamental trends to start the second quarter. First, demand remains relatively healthy. Year-to-date job growth has been stronger than many had anticipated, and traffic is roughly in line with the elevated levels we saw a year ago and well above the long-term average. Second, the financial health of our residents appear to be in good shape as wage inflation has largely kept pace with rent growth, resulting in steady rent income levels in the low 20% range. In light of recent consumer spending habits and bank commentary, we continue to watch for signs of change, but affordability remains strong as only 10% of our first quarter move-outs were due to rent increases, which is down from roughly 18% at its peak during the middle of 2022. Furthermore, we have yet to see material evidence of residents choosing to double up.
Third, relative affordability remains in our favor. Renting an apartment is approximately 50% less expensive than owning a home versus 35% less expenses pre COVID. Only 5% of move-outs in the first quarter were due to home purchase, which is roughly 60% less than our historical average. And last, concessions remain minimal and average approximately half a week on new leases across our portfolio. The concessions we have been offering remain primarily concentrated in certain submarkets of San Francisco, Washington, D.C. and our Sunbelt markets, with the latter a function of new supply being delivered to those areas.
With this backdrop, second quarter blended lease rate growth is trending as expected and should average approximately 3%. New lease rate growth in April is approximately 50 basis points higher than March, though renewal rate has decelerated by 100 basis points. This convergence is in line with our expectations. Relating this to full year 2023 guidance, to achieve the 6.75 midpoint of our year-over-year same-store revenue growth guidance, full year blended rate growth needs to approximate 2.5%. With first quarter blended rate growth of 3.5%, we need to average only 2% blends for the duration of the year. We believe blends are anchored by renewal rate growth, which even during past downturns was at least 2% on trailing 4-quarter average. In short, we remain confident in our ability to achieve the guidance we set in February.
Turning to regional trends. On our last call, we anticipated that growth in our Sunbelt markets would continue to converge with the coast and that coast would have better growth results starting in mid-2023. That crossover occurred in the first quarter, slightly ahead of our expectation. While traffic remains healthy across all of our markets, the level of new supply being delivered to certain Sunbelt markets has resulted in higher market level concessions and has led to a pause in the ability to push new lease rate growth. Conversely, results and momentum in New York and Boston, which comprise roughly 18% of our same-store NOI have been stronger than expected. Minimal levels of new supply and robust traffic led to 97% occupancy and portfolio-leading blended lease rate growth of more than 6% on average for these two markets in the first quarter. These divergent situations reinforce the value of a diversified portfolio across markets and price points. We will continue to take a balanced approach between rate and occupancy to maximize revenue and NOI.
Finally, we are progressing with our various innovation initiatives which will add to our bottom line in 2023 and beyond. Our high-margin revenue-focused and tech-enabling building-wide WiFi project is expected to be rolled out across approximately 1/3 of our portfolio by year-end and our entire portfolio by 2025. We are making inroads on various resident-specific initiatives as part of our customer experience project that will enhance satisfaction, reduce resident turnover and drive greater pricing power. And we have advanced the integration of big data to enhance our pricing system. Over the past decade, our same-store growth results have benefited from approximately 50 basis point contribution from our unique initiatives. In this year, we expect the same. In closing, thanks to our teams for your passion in delivering best-in-class results to our residents and stakeholders. I'll now turn over the call to Joe.
