Why Chasing Occupancy Can Cost You Revenue

In the world of multifamily property management, occupancy often gets top billing. However, chasing 100 percent occupancy without understanding the risk involved is a short-sighted strategy. If you’re an owner or operator, you know the game is not about heads in beds. Sustainable revenue, sound underwriting and risk mitigation support long-term asset value.

We have conditioned ourselves, through short-term earning goals and investor pressure, to view occupancy as the primary performance metric. However, the healthiest properties often operate below 100 percent. In fact, if you are fully leased, there is a strong chance your rents are undervalued. As highlighted in IREM’s Sensitivity Analysis Model, a natural vacancy rate of 4 to 6 percent is considered optimal—striking the right balance between maximizing revenue and maintaining risk tolerance.

From our experience, particularly in challenging economic cycles like 2008 and, more recently, post-pandemic, we have never exceeded 1 to 2 percent delinquency across our portfolio. This is the result of meticulous underwriting, screening, operations and, above all, restraint in saying “no” when occupancy pressures try to override long-term strategy.

You can’t manage what you don’t measure

First, you need a plan. Then, you need to execute the plan. Property managers and leasing teams must have clear Standard Operating Procedures for the application. Credit score thresholds, income requirements, employment verification and background checks must be clearly defined and uniformly applied. When we say: “Collections begin at the application,” we stand by it.

When you compromise those SOPs in pursuit of occupancy, you’ve introduced unnecessary risk to your revenue stream. Lowering standards to fill a vacancy may feel like a short-term win, but it often leads to longer-term losses, such as evictions, legal costs, bad debt write-offs and reputation damage.

Understand the credit behind the application

Residents are your customers. But, unlike a bank with a secured mortgage, landlords are unsecured creditors. If a resident doesn’t pay rent, we don’t get to repossess the unit—we take the loss. That’s why verifying income as well as credit behavior matters deeply. It’s not just “Can they pay?” but “Do they pay?” Look beyond the number. Read the full report. See the story behind the score.

Don’t just provide your teams with checklists. Take the time to explain this to your frontline leasing agents, so they understand why the standards are in place.

Don’t buy occupancy

Let’s be clear: reducing rents to drive occupancy is not a revenue strategy but a discount strategy. It may fill units in the short term but undermines asset value and lease comparables in the long term. Owners who operate with urgency but not with panic understand it’s better to wait for the right resident than to lease impulsively.

I’ve always said I’d rather lose a month of rent than spend six months chasing a nonpaying tenant. When you compromise your SOPs, you don’t just increase delinquency—you erode your team’s sense of discipline and the property’s financial foundation.

Protect revenue and create value

This isn’t an either/or equation. Financial security and occupancy are pendulums that must remain balanced. Smart operators do not trade one for the other. The highest occupancy does not consistently lead to the highest revenue. It is achieved through measured leasing, aligned SOPs, market-sensitive pricing and resident screening that protects the revenue stream.

Many in the industry say, “Do the right thing because the owner is looking.” But the resident is your customer, and creating value for them is creating value for ownership. And for us, risk management is not a function of fear—it is a function of care. Let’s train our teams not just on tactics but also on the reason behind the tactics. Great property managers don’t just react—they plan, educate and lead. So, the next time someone celebrates 100 percent occupancy, ask the deeper question: “At what cost?”