Greetings, and welcome to the American Homes 4 Rent Second Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I'd like to turn the call over to Anne McGuinness, Manager of Investor Relations. Please go ahead.

Good morning. Thank you for joining us for our second quarter 2020 earnings conference call. I'm here today with David Singelyn, Chief Executive Officer; Bryan Smith, Chief Operating Officer; Jack Corrigan, Chief Investment Officer; and Chris Lau, Chief Financial Officer of American Homes 4 Rent. At the outset, I need to advise you 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. The current and expected future economic impacts of the COVID-19 pandemic including extraordinary increases in national unemployment, may pose headwinds to our future results. All forward-looking statements speak only as of today, August 7, 2020. We assume no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Reconciliation to GAAP with the non-GAAP financial measures we are providing on this call is included in our earnings press release. As a note, our operating and financial results. Including GAAP and non-GAAP financial 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. And with that, I will turn the call over to our CEO, David Singelyn.

Thank you, Anne and good morning, everyone. I hope that everyone joining us today is staying well. Let me begin by saying that it is hard to believe that 10 years have passed since Wayne Hughes suggested we buy homes in Las Vegas and rent them out. In just under a decade, American Homes 4 Rent has transformed the rental home industry by providing housing options tailored to the modern lifestyle. Today American Homes 4 Rent is the leader in the single family rental industry for three reasons. One, our strong second quarter operating performance during these COVID pandemic times, demonstrates the strength and resiliency of our platform. Two, the pandemic has also highlighted the strong demand for our single family housing, and particularly our well-located rental homes that provide residents with an environment, where they can live and work safely. And third and finally, our strong balance sheet and consistent investments is in our one-of-a-kind development platform give us the ability and capacity to grow during these difficult economic times. Our second quarter highlights the strength and resiliency of our platform, while many economic concerns do exist; our leasing and occupancy reached all-time highs. During June, we executed a record number of new leases, and combined with our excellent retention; it resulted in June's occupancy reaching all-time levels, only to be surpassed by July's results. And the accomplishments do not stop on the leasing side; our collection levels for the second quarter were strong at approximately 98% of normal operating levels, and July's results tracked the second quarter. Our maintenance program also delivered; proudly continuing to serve our residents during this time, and ending the quarter with no backlog in maintenance work orders. Bryan will provide more details on our second quarter operations. But let me say that I…

Thank you, Dave and good morning, everyone. Over the past few months, the strength and resiliency of our platform has been tested. And I'm pleased to report that we are continuing to deliver strong results in spite of COVID-19 related challenges. Our continued investment in industry leading systems and our team's dedication and effectiveness have allowed us to capitalize on emerging trends that have driven record leasing and occupancy levels. I would like to thank all of our team members for their hard work, dedication and perseverance. Today, I would like to start by talking about the recent demand trends that are driving record leasing across the portfolio; then I will discuss our second quarter results including the COVID-19 implications to our business. And finally, I will conclude with a recap of our disposition activity. As Dave mentioned, demand for our homes has never been stronger with record leasing activity and retention, driving occupancy in June and July to all-time highs. These results were powered by our technology-driven platform that allows our current and prospective residents to manage their entire leasing, and rental experience online. In the second quarter, our website traffic and user activity grew to record levels with the number of distinct users up over 25% from the prior year. We are able to capitalize on this activity through our proprietary, Let Yourself-In mobile-leasing Technology, which allows prospective residents to tour homes without an agent and submit applications, and execute leases digitally. With more people utilizing our self-service leasing option than ever before, we saw a significant increase in showings per rent-ready home, which drove a record volume of applications, including a 30% increase June-over-June. The recent increase in demand is due in part to changes in consumer preferences. Our second quarter applicant data highlights a clear trend…

Thank you, Bryan and good morning, everyone. Just four years ago we pioneered a unique development program to meet the increased demand for single-family rentals. This initiative features new home communities located within our existing footprint. Since then we have become the nation's leading builder of purpose-built single-family rental home communities. We are building homes and communities that are tailored to the way residents want to live, and are designed to be efficient from a maintenance and management perspective. Most importantly, these homes fit nicely into our leading property management platform, which drives many of the decisions around design and location. Our proprietary AMH Development Program plays a critical role in our three pronged approach to growth that also includes our existing National Builder Program and our Traditional MLS Channel. With control over our development pipeline, we have the ability to build better rental homes and drive consistent growth in various economic cycles. As an example, we have continued to deliver homes without interruption throughout the COVID-19 crisis. In the second quarter, we added 504 total homes to our platform including 64 new construction homes delivered to our joint ventures. 440 of the 504 homes were added on balance sheet, representing a total investment of approximately $112 million. Our AMH Development Program delivered 327 homes, many ahead of schedule as we were able to successfully accelerate some of our deliveries into our peak leasing season. Complete our portfolio, 98 additions homes were delivered through our National Builder Program and 15 homes were acquired via traditional channel. Year-to-date, we have added 1,213 total homes to our platform including 723 homes delivered through our AMH Development Program of which 117 were delivered to our joint ventures. For our consolidated portfolio, we have invested approximately $385 million into our growth programs for the…

Thanks Jack. In my comments today, I'll cover three areas; one, a brief review of our operating results, including a summary of how the pandemic impacted our second quarter earnings; two, update you on our balance sheet and liquidity position; and three, conclude with some wrap-up thoughts around our business and operations in the ongoing COVID-19 environment. Starting off with our operating results; for the second quarter of 2020, we generated net income attributable to common shareholders of $15.4 million or $0.05 per diluted share. On an FFO shared unit basis during, the second quarter of 2020, we generated $0.27 of core FFO and $0.23 of adjusted FFO, which compares to $0.28 and $0.25 during the second quarter of last year respectively. As disclosed in yesterday's earnings release, and supplemental information package; please keep in mind that this quarter's financial results do not reflect any add-backs or exclusions for the negative impact of the COVID-19 pandemic. In particular, the quantifiable negative impact of the COVID-19 pandemic included in our core FFO for the quarter was $9.4 million or $0.03 per FFO share and unit, comprised of $7 million of increased bad debt on rental revenues; $1.9 million of bad debt on tenant utility reimbursements, and approximately $500,000 of increased costs associated with enhanced cleaning and safety protocols. Additionally, keep in mind that this quarter's financial results also reflect the impact of our various socially responsible policy decisions such as the waving of late fees and month-to-month lease premiums and offering of flat increases on newly signed renewal leases that were expiring throughout the second quarter. Lastly with respect to our operating results, as we discussed last quarter; I'd like to remind you that we've taken a conservative approach to recognizing revenue amidst the uncertainty of the pandemic. For the second…

[Operator Instructions] Our first question comes from the line of Nicholas Joseph with Citigroup. Please proceed with your question.

Thanks, appreciate the color on the demand drivers that you're seeing. And I know you mentioned in your new residence survey seeing an increase of people moving from apartments to single family rentals. Curious if you're seeing any trends across different markets? Or are those apartment renters or previous department renters moving within the same market or are you seeing kind of more mobility and people moving between markets? I just want to get some more color on your new renter survey.

Hi, Nick. It's Bryan. We look at the applicant pool; we look at from a couple of different perspectives. First of all where are they coming from in terms of type of housing which is the multi-family piece that we talked about before, and that was a clear trend that there was a big migration from multi-family into our single family homes? The second piece was the out of state and out of area component, and probably the most dramatic data that we've seen there is the coastal movement; so if you look at movement outside of California for example, we saw over a 50% uptick in movement from California to Boise; 15% uptick and movement from California to Nevada; that's year-over-year. So we're seeing some nice migration from the West Coast and then if you flip it to the East Coast, we saw some dramatic increases in movement out of New York into Florida and into North Carolina. So we're seeing some pretty good movement that ties in with the narrative and kind of the intuition on some of the other pieces that we talked about. If you start to talk about movement within market; we have seen some movement outside of the city core, but it's a little bit more difficult to measure. But our data is real solid on the state to state migration.

Thanks. That's very helpful. And then maybe, Chris, just on the bad debt; appreciate the conservative policy, when you take into account security deposits, how does that change the equation? What sort of protection do you have already from a security deposit standpoint relative to the bad debt that you wrote off this quarter?

Yes. Thanks Nick. Good question. On the balance sheet; so general policy is that we typically have one month, sometimes a little bit more than that in security deposit on each one of our tenants. And as of the end of the second quarter we just about $90 million of security deposit cash on the balance sheet, which as a reminder none of which has been applied for accounting purposes, and calculating of our bad debt. And then, Nick, while we're on the topic, I just want to reiterate a couple of points for people from an overall bad debt perspective. Just keep in mind collections are tracking really well as a reminder I just mentioned this in my prepared remarks, but through July we've and collected 96.5% of our second quarter billings; July and August are tracking very nicely, very similar to the second quarter. And keep in mind, the bad debt policy and approach we've taken this quarter is very consistent with what we outlined on our call last quarter; and really the function of just uncertainty and lack of history in the pandemic so far. And so we've taken a conservative approach, but very importantly our teams are out there actively working with every single one of our delinquent residents on a case-by-case basis; pursuing each of the that are still outstanding from the second quarter and they're already being successful on collecting some of those into the third quarter. And so when those dollars are received they'll be recorded as incremental revenue in that period. We've just been prudent and cautious on the timing of when it's recognized, and I think the key word to keep in mind here is timing.

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

Hey, Chris. I want to follow up on your comments about bad debt; make sure I was fully understanding how your policy and how you accounted for it. So my understanding is that you account it for all the rents that you did not collect as cash and then as a result any future collections will be recorded in future quarters is that correct?

Let me clarify one thing; so our approach to calculating bad debt always has been and continues to be to evaluate each tenant on a case-by-case basis, and recognize revenue and bad debt if necessary based on the likelihood of collection. It's just that for purposes of the second quarter we've taken a conservative approach to those estimates, and the accrual that we originally booked in the quarter has now been fully collected in cash by the end of July. So I just want to clarify that beginning part and then the second part is absolutely correct. Think of it this way; any dollar that is collected from August 1 onward that relates to the second quarter will be treated as incremental revenues in the period that it's received.

Understood. So just one caveat to this or one clarification to this, is it effectively saying that anything that's more than 30 days delinquent you automatically write off as bad debt?

No. We don't have a hard and fast 30-day or 60-day policy. Again, it goes down to individual payment patterns at the tenant level. So I would not think of it as binary like that.

Our next question comes from lion of Haendel Juste with Mizuho. Please proceed with your question.

Hey, there guys. Good morning out there. So sounds like the operating strategy from here is to take advantage of your all-time high occupancy, and favorable demand as you've outlined to push rent more aggressively and deeper into the year -- into the fourth quarter as you mentioned, which I found intriguing actively the goal as you approach the following winter is occupancy retention; so understand the overall goal is to optimize revenue, I guess, I'm curious how much occupancy could you be willing to forego as you push rate or perhaps if you think you can continue to push rate and maintain your current levels of occupancy? Thanks.

Hi, Haendel. It's Bryan. It's good question. This is a unique position that we're in going into the third quarter with phenomenal momentum; we start to see slow down generally in August and September with families going back to school, kids going back to school, but we're not seeing that this year. So we're in excellent position occupancy wise. The demand is phenomenal. If you look at the delta and demand that I talked about in the prepared remarks regarding June; it continued to accelerate into July. Our applications per rent-ready property in July were up 50% year-over-year and 30% sequentially. So we're seeing just phenomenal demand and we're going to capitalize on that by maintaining high occupancy, and pushing rate where generally we might back off going into the end of the third quarter. I'm hopeful that we can maintain these occupancy levels and have it translate into better releasing rate growth.

Got it. Thanks Bryan. One for you, Jack, maybe a conversation or some comments around the challenges and opportunities in the development pipeline; is hearing that construction costs are coming down. I am curious what you're seeing out there, what you're hearing and how it's impacting your yields and your desired volumes. Could you be stepping up homes? Your development activity more into 2021 as a result of the strong demand but then also curious on what you're seeing on the cost side and how that might be impacting yields? Thanks.

Thanks for the question, Haendel. Yes our -- when you say cost coming down; the cost came down a bit in March and April and then when the builders saw the demand actually increasing versus going down; they picked up their building and they picked up their land purchasing, so I wouldn't expect costs to come down in fact we're probably seeing record lumber prices, which probably adds $3,000 or $4,000 per house, it won't affect the yield significantly but it does add to the cost. We have seen some cost savings in other areas. We kept building through the pandemic. So I think we got some pretty good traction with a lot of the suppliers, and subcontractors that we're going to keep going no matter what. And then when you talk about -- we had planned to continue to grow our pipeline and our production through 2021 and beyond, but what we're purchasing now and land unless we're buying vacant developed already developed lots is really for 2022 production maybe the end of 2021. So I wouldn't expect anything we ramp up now in terms of land purchasing that to hit us until 2022.

Our next question comes from the line of Jade Rahmani with KBW. Please proceed with your question.

Hi, everyone. This is Ryan on Jade. Thanks for taking the questions. I wanted to get your updated thoughts on the company's technology and specifically the property management platform. At this point would you characterize it as a proprietary and type of technology or is it mostly a hybrid of services providers by third party vendors like a Yardi?

Hi, Ryan. This is Bryan; it's a good question. It's a little bit of a combination as many of you know; we do use Yardi as our back-end accounting system, but the system as a whole is proprietary. We've had we have custom applications that we've built. We've integrated other third-party software solutions; it's a bit of a combination but the real value to the system is how well it's integrated. If you take the example of our leasing platform or Let Yourself In Technology, we've been using that since 2013 and the value of that program is how well it's integrated into our leasing teams one, a prospect tours a home one of our leasing team members is immediately assigned that particular prospect, and can provide excellent service digitally or via phone depending on what the prospect's preference is. So I think the value in the system, there are some third-party applications that have been integrated; there are some custom applications but the real value is and how well it and seamlessly it's integrated. It's something that we're continuing to work on and utilizing kind of the back end foundation of Yardi.

Ryan, it's Dave. Let me just add one thing to it that proprietary side. As Bryan indicated in prepared remarks, we were able to pivot very quickly on our maintenance programs during the last three months. As we indicated that at the -- on our last call the prior quarter as we entered into the pandemic, I guess it was at a conference as we entered into pandemic we did slowdown maintenance, but we were able to retool the development or the technology platform quickly; get the PP&E and serve all of our residents in a timely manner. We ended the quarter with no backlog in our maintenance as a result, so the technology is very flexible and nimble, it's proprietary; and that's how we can react as fast as we can.

Great, appreciate all that color. And then with the increase in demand for single family housing that we're seeing, are you interested in pursuing additional JV opportunities to expand into maybe adjacent home types or markets in order to further scale the business overall.

Yes. Ryan, it's Dave. And I'll take this one, yes, you're 100% right the demand is extremely strong for single family rentals, and the opportunity to provide in additional inventory whether it's through our development program which is our primary desire because of the superior economics that we get out of it, or to supplement it through national builder inventory or even the MLS inventory is something that we're looking to do. Jack talked about ramping up the development program, we are looking to acquire more and more land; we've ramped up our land acquisition program, it will have more benefit in the latter part of next year and more in 2022, but we've also -- we're in discussions with a number of national home builders to supplement as well. Whether we take them on our books directly or through joint ventures; we'll determine that when the opportunities is there.

Our next question comes from line of Jeff Spector with Bank of America. Please proceed with your question.

Great. Good morning. Thank you. I guess one follow-up to that topic on markets based on the strong demand and surveys applications, are there certain markets that are surprising you where you're seeing move-in trends markets that you are considering to enter? Any changes from your prior strategy on markets.

Hi, Jeff. It's Bryan. When you look at the individual markets, I think, the takeaways -- there's some mark - some changes that you'd expect in the current environment; there's been a little bit of softness in Las Vegas because of tourism, but across the board we've just been really impressed with the high level of demand within the existing footprint. And what I really like about it too is we have great portfolio diversification. So we're not so relying on one particular market or relying on a particular industry, and its effect on that market. From a from the side of what's been maybe a little bit surprising, we've seen really good payment from the Orlando market, really good collections despite a little bit of softness in occupancy. The Las Vegas market has been -- has recovered completely from a slight dip at the beginning of the crisis to post really strong occupancy numbers towards June and July, which I think is evidenced by the interstate migration. So I think things are moving along as we'd expect on the market by market side but with strength almost across the board.

Jeff, this is Jack. I would also add to that that we chose -- we're basically growing in 15 markets that we have done a lot of work on the demographics including population growth and job growth. So we really like those markets the best, but we keep monitoring the demographics in our other 20 markets to see if maybe we should add growth to those also.

Thank you and my second question, I'd like to focus on the work from home; given it's such a key topic and clearly through the through the demands and applications you mentioned one of the positives of your product is let's say that extra room to work from home. I guess can you provide any details on your current renter base. How many are actually working from home on the applications or website traffic? Like can you talk a little bit more about that and just trying to get a feel for how permanent this shift is?

Yes, Jeff, it's difficult to quantify exactly. I mean we had stay-at-home orders in most of our markets, and so the vast majority of people then would be working from home; one of the things that was interesting is even prior to the pandemic, we built a community for example outside of Seattle that had relatively long commute to the core, but the demand was incredible when we put the new units up; it was -- it immediately filled up. We were very excited about the demand levels and we took a very close look at where our prospects and ultimately residents were working, and these were characterized by technology employees who were either working remotely entirely or spending one day commuting into the Amazon or Microsoft offices. So we saw the trend before COVID even started, and then once COVID hit it really, really accelerated, in some cases by law but I think there are some trends that will end up being permanent. If you look at the news around Google, Google's working home through middle of next year. Zillow made the announcement up in Seattle kind of a tech real estate company. So we're seeing a pretty big trend, and I think you're going to see a lot a big portion of this work from home component staying. So it plays really well into our, place nicely into our strategy as Jack mentioned it's affecting how we're designing the homes and some of our model layouts and plans, but we are benefiting from having that extra space; the extra bedroom and the feedback from the prospects over the past few months has been a very high preference for that extra space.

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

Yes, hey, thanks. Good morning. I was wondering if you could go through maybe the economics of operating an entire community that you purpose built for yourselves, and how do the economics and operation of that differ from if you're maybe doing a smaller pod of more infill homes in a market, and/ or what economic differential is if you're buying some units from a national builder maybe in one of their master plan communities. How does how the numbers differ between those types of development?

Yes. Hi, Buck. Good question. In terms of the maintenance when we buy from national builders versus when we build them ourselves in a lot of cases when we buy -- we buy from national builders really two ways. One, where we have a sizable enough order where we can dictate the specs, and in that case the maintenance isn't tremendously different or we buy when they're doing quarter closeouts or where they want to sell existing product at some discount to us, and in those cases it'll be kind of a hybrid between our typical purchases and in our new homes development. As far as communities, a large community of say 80 to 100 versus 20 lots in an infill location, I wouldn't say there's a tremendous amount of difference. There's clearly some ability to especially during lease up to have somebody at 150 unit development and that will facilitate that getting leased up. It's just what we're able to do on the larger really 20 and above we're able to do the landscape maintenance, which keeps everything looking fresh and new and so that's a big benefit to us.

Yes and Buck if I could just add a couple of things too. The larger communities especially when we're phasing in the deliveries give us some really nice pre-leasing opportunities. We have visibility into exact dates when homes will be delivered. We're still working through that program, but I think that there's going to be a lot of upside on that going forward. And then finally another thing that we've been working on that I think is facilitated by the larger communities is the opportunity for ancillary revenues surrounding connectivity, and some smart home features that are more difficult to apply to the regular portfolio of disparate assets. So we're working on some technology there that I think will be very valuable to the residents.

Yes, hey, Buck. It's Dave. You'll get all three of us on this one. So the one let me just contrast to your question the national builder to our in-house development because the benefits that Jack and Bryan outlined are absolutely true on the operation side much better for the maintenance side as a result we are -- because we are building them with maintenance in mind, but the benefits are also on the investment side. For us to build, we can build a better home at a lower investment cost to us. We're not paying the developer his development profit; there are no sales and marketing costs that need to be incurred and paid to the developer. And so we are getting a better home with better economics because of better maintenance, but also because of a lower investment when we develop a home ourselves.

Perfect, really appreciate all that, that's great color. Second question on renewals and I wonder if you could provided a little bit of -- you're thinking about pricing renewals, what kind of offers you have out going into maybe September and October at this point. How are you thinking about ramping up the renewal increases from here?

Hey, Buck. It's Bryan. So we went out flat as in July and then and started instituting increases for August, but we didn't do it in every market; there were a couple of markets where we had some softness that we really wanted to kind of test the environment, and get more information as to whether people were going to be, economies were going to be opening up or whether there was good news coming. We got some additional confidence in operations to continue to push those rates into September, October and November and although we're not back to kind of pre-COVID levels; we're moving in that direction. So September for example had increases in all markets on average, and as you move into the October, November time frame, I think you can think of it in terms of offers in the high 3% range.

Our next question comes from the line of Dennis Harder with Credit Suisse. Please proceed with your question.

Thanks. Chris for something that's kind of the one time impact this quarter, can you talk about kind of how those are going to progress over the next quarter or two kind of based on where we are in reopenings and various state rules and regulations?

Sure. Let me kind of carve them back out for you again; the three largest components, the first two really coming down to collections impacting both rents and then obviously our chargebacks and expenses as well. I think it's a function of how collections trend from this point forward as I shared or as we all shared in our prepared remarks, July is tracking very nicely similar to second quarter and the beginning of August is as well, but from this point forward I think it's going to be a function of how collections continue to trend. Also recognizing that we should be seeing some benefits, and are expecting; and already beginning to see some benefits from recovery of our second quarter outstanding receivables that we took a conservative position on from a revenue recognition standpoint in the second quarter. So I think it's going to be relevant that we continue to watch collections to rent and then also chargebacks, but it's going to be a function of the ongoing collections environment as I mentioned is tracking well so far, but there's still uncertainty ahead of us as well.

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

Hey. Thanks for the time. The build-to-rent pipeline, the economics of it are going well in terms of total portfolio. I just like to better understand case studies and project level economics of when things go wrong because I think it's important as a pipeline ramps to understand the risk behind it. So could you give some color Jack or Bryan when communities go sideways on you guys by what margin are your yields missing original underwriting and how slow of lease of pace is for the projects that are kind of laggards within the pipeline? What does that look like?

Hi, John. This is Jack. Thanks for the question. We haven't had very many go sideways. We've had when and when you say sideways, we've had some go where we had over underwritten our rents by 10% and so we haven't really had any significant blow ups and expenses, but I'd say we've had two or three projects that I think once they got leased up where the rents were 10% lower than we expected once -- and we've had some where they're 10% higher, so they kind of balance out, but once they get leased up then you start bringing the rents back to normal. And like one of the things that we did in the beginning that was my mistake is in some cases we were building from back to front instead of front to back, well that that requires the potential resident and the resident to drive through a lot of construction traffic. So in those cases where we made that error that they leased up slowly and we kind of had pioneer pricing for people who are willing to put up with that. But once they got leased up, rent started going back right up to pro forma. We're pretty good at underwriting stuff.

Okay. Great. And then the roughly ,5000 lots that'll deliver beyond this year, if you dropped a pin in all those homes those lots how would the kind of sub market kind of demographics, density, location compare versus recent vintages?

They compare almost exactly the same, and we're -- we work with Bryan and property management when we're choosing our sites and make sure he's happy with the overlap of with existing product, and when we expect to deliver these, and so we're not going far if at all past our footprint.

And the other nice thing, John, is we're able to control the delivery cadence to match the demand expectations. So it's really nice; it affects when and how much we're getting in a particular marketplace. So we're real thoughtful on that as well.

Hey, John, it's Dave. Again, we'll get three comments on this one. One f the things keep in mind is when you have 15 markets that you are doing construction in, and you think about, 5000; it may sound like a big number but on a per market basis we're talking 300 homes, and as we continue to ramp up 5,000 next year that 5,000 is over next year in the following year, so it won't be 300 next year but 300 in the market is easily absorbable. And as we continue to ramp up this program, and get over 5,000 deliveries; the demand is there and having enough markets to spread it over ensures that you're not going to negatively impact yourself.

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

Hello. Thanks for taking my question. First one, I think would be for Chris. Can you on the 92% of July collected in July; can you tell us what the year ago July was? I just want to clarify.

Good question. I don't have exactly a year ago off the top of my head, but keep in mind you can use second quarter as a proxy of what we've collected there at this point in July through the end of July. We're tracking it over 99% of second quarter levels.

In second quarter would be about 300 basis playing below second quarter 2019?

No. Keep in mind that bad debt typically runs 90 to 1000 basis points, but also the other thing too is keep in mind here that payment times and cycles have elongated a bit; so I don't think it's a perfectly fair comparison to look at July -- in July compared to a year ago. And I think it's more relevant to look at how we're tracking against the second quarter, and recognize that as I said payment cycles have elongated a bit. And so we'll provide another update as we get further into the quarter, but so far yes I think we've been real pleased with payment patterns and in our experience so far.

Okay. I'll follow up on that, Chris. And second question just as you're thinking about that renewal cadence that you talked to a few minutes ago stretching out to October and November, and just maybe also thinking about what you're seeing as far as credit quality -- applicant credit quality on the application spikes that you also noted. How are you thinking about the potential of having a weaker environment with stimulus rolling off and the uncertainty that brings second quarter had a lot of funds out there for people to bridge with, and if that were to diminish whether on the resident base or the applicant base, how would you manage that with potentially renewals rising into a weaker backdrop?

Dennis, this is Bryan. We're paying very close attention to what's happening in the markets, and we're pricing renewals -- I gave kind of broad ranges but we're pricing renewals down at the neighborhood level. We're not -- we don't have 100% clarity into how much government assistance is flowing through our residence now, but there are a couple of points that I want to make. Our resident base and the collection trends that we've seen through COVID, it's very stable. The incomes are high over $100,000. There are majority of the households have dual earners; our income to rent ratio is very high, and we've got very good portfolio diversification too. So we're watching it very closely, but with the level of demand that is in the marketplace for the new product, which would imply very limited supply; we're confident that our residents will hold up well. But we're cautiously confident, and we're paying very close attention to it. So in the event that there were other shocks to the system, we would we would work with the residents for a good resolution to keep them in the homes.

Our next question comes from line of Tyler Batory with Danny Capital Markets. Please proceed with your question.

Good morning. Thank you. One question for me on turnover and retention trends in those metrics have been quite good, but any sense how much the pandemic is driving that more recently and additionally your comments on demand are obviously encouraging, but any thoughts about whether there could be some pent-up desire to move out once we get past the pandemic especially given low mortgage rates and the increases that are going to be coming on the renewal side of things as well,

Tyler, this is Bryan. I -- we look at the changes the COVID induced changes it's kind of an acceleration of people really understanding the value proposition of the well-located single-family home. So we've talked at length today about the uptick in demand, people coming from multi-family; people migrating from maybe the higher cost of living coastal states. There's also the aspect of supply in our markets too. So we've carefully selected our markets to be characterized with high employment, job growth, population growth and I think our residents who are in our homes are really appreciating that as well. So I think it's kind of two-pronged; the value proposition of our homes is being really appreciated by our existing residents, and that's translating into better retention. Second, there aren't a lot of alternatives if you do want to work from home or have the remote learning for your children, having the extra space has never been more important. So we think that's factoring into the retention piece as well.

Our final question this morning comes from the line of Ryan Gilbert with BTIG. Please proceed with your question.

Hi. Thanks, guys. I appreciate all the detail that you provided and the time. First question for me is just a point of clarification on the bad debt expense. So if you've got let's just say that rent collection trends in 3Q at a similar pace 2Q then we would see bad debt expense in the third quarter at around that 3.5% range, but that the net effect of core revenue would be much less than 2Q because you'd be getting some of the second quarter collections coming back and benefiting third quarter revenue. Is that the right way to think about it?

Yes, Ryan. It's Chris. If you simplistically held all else equal and constant that is the right way to think about it, but keep in mind one of the factors that has influenced our conservatism here is just having only three to four months of history within the pandemic so far. By the time we get to the end of the third quarter, we're going to have far more monthly data points that will help inform our accrual for that quarter as well. So I think there are a number of different factors, but all else equal you're correct as we continue to collect additional receivable balances from the second quarter beyond August 1st; those will contribute to third quarter revenues. That's correct.

Okay. Great. Thank you and then second question on the development program; we are hearing a fair amount of interest from other parties to increase or I should say that to join the build-to-rent investment idea. And I'm wondering if you're seeing, I mean, it doesn't seem like your lease up has been impacted by increased competition, but I'm wondering if you're noticing other players entering the market to a single family rental development. And if that's impacting either your land sourcing or any sort of impact you're seeing in any market. Thanks.

Yes. Good question. One of the things I think we mentioned in our prepared remarks is we started this four years ago; it's not something where somebody's going to ramp up overnight even if they bought lots today they're delivering in 2022. And they're going to go through a lot of learning curve just like we did. The other part to remember is very few of the ones I hear talking about it can match it with a property management platform that's as advanced as ours. So I think that that the level of competition we haven't seen it, we've heard a lot of talk about it but I don't foresee it hitting us for at least two or three years, if there is any.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Singelyn for any final comments.

Thank you, operator. To close, let me just say that and remind you single-family rental fundamentals remain solid. And we have the portfolio; we have the operational platform, the growth strategy, balance sheet to continue to execute today; and emerge stronger in the future. Thank you for joining us this morning. And I look forward to talking to you next quarter. Have a good day.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.