Here’s Why Camden Will Exit California As It Bets Big On The Sun Belt

Camden Property Trust, one of the nation’s largest apartment real estate investment trusts, has long complained about California’s challenging regulatory environment.

Frustrations escalated to a breaking point in the early 2020s. An eviction moratorium during the COVID-19 pandemic, which effectively reduced a large share of rental revenue, left landlords largely on their own to manage operating and capital expenditure expenses during that period.​

Now the Houston-based REIT is selling its strong-performing California portfolio, banking on buyers willing to seize the opportunity by embracing that regulatory environment. Company executives told Wall Street analysts on its Friday earnings call that there’s strong interest in the portfolio — valued at about $1.5 billion. They expect to close a deal midyear.​

Camden executives downplayed the regulatory climate and operating challenges in their talk track about the properties. Under the surface, however, those challenges influenced the strategic shift and demonstrated how investors move capital into and out of states in response to regulation.​

They characterized the sale as part of an ongoing portfolio management strategy that reallocates capital into higher-return, pro-growth, pro-business Sun Belt markets while continuing share repurchases. Effectively, that means states with fewer, less robust tenant protections, which developers and landlords blame for higher operating costs.​

The cost of the regulatory climate and political activity​

Camden CEO Ric Campo provided an overview of the company’s thinking, focusing on a new Colorado law — Protection Against Deceptive Pricing Practices — that took effect at the start of the year.​

“The good news is that in most of our markets, the reason why they grow so fast is because they’re pro-business, pro-growth,” Campo said. “Obviously, putting legislation like that in place is not pro-business or pro-growth.”​

The law requires transparent price disclosures in areas such as utility billing and restricts landlords from charging certain prohibited rental fees. Nationally, tenant advocates ramped up criticism several years ago of so-called “junk fees” that apartment landlords charged, arguing they added financial pressure on renters on top of rapid rent increases. Ancillary fees have become a growing revenue source for landlords.​

Keith Oden, Camden’s executive vice chairman, noted in the call that the Colorado law is expected to lower revenue this year on the nearly 3,000 apartments it owns in the Denver area.​ “It is a significant item for us,” Campo added during the call. “The total value of this is about $1.8 million.”​ He said that works out to about 0.19% of same-store net operating income.​

It also costs money to battle undesirable legislation. Campo said California dominated political advocacy expense at 92% and worked out to 0.8% of net operating income at California properties. If its California properties have the same NOI as Sun Belt properties, the Sun Belt outperformed, he said.​

“Once we close that portfolio, the political advocacy in the Sun Belt is pretty much zero,” he said.​

Selling marks a shift in thinking​

Camden owns 11 properties in Southern California totaling some 3,600 units. They are 95% occupied and equally split between the San Diego/Inland Empire and Los Angeles/Orange County regions.​ Camden’s Los Angeles and Orange County properties recorded the highest revenue growth in the company, at 4.3%, and ranked third in NOI growth.​

Camden’s San Diego properties registered 2.9% revenue growth, third behind Washington, D.C.-area properties.​ Oden said the Southern California properties — none older than 2001 — exceeded original expectations because of declining bad debt on the books.​

“Supply has not really been an issue in most of our California markets, but we do expect less of a tailwind from reducing bad debt as we move through 2026,” he said.​ Bad debt had accumulated due to pandemic eviction moratoriums that Los Angeles repeatedly extended.​

Still, three years ago, California’s regulatory environment didn’t bother executives much beyond the eviction moratoriums.​

“California is actually a really good story in terms of being a landlord because just as difficult as it is to run properties, it’s three times as difficult to build properties” in the state, Oden said at the time when quizzed on whether it should leave.​

With little new supply and firm demand, existing units can steadily increase their prices. That contrasts with Florida and Austin, where a flood of new units lowered rent prices.​

Betting on supply-rich markets​

Camden wants to build and buy in places such as Nashville and Florida cities, where executives see more future gains.​

Alex Jessett, Camden’s president and chief financial officer, said the company anticipates about $1.1 billion of capital being redeployed this summer from the expected midyear sale. That means mostly buying.​

“We’re already evaluating a number of opportunities across all of our markets, and those are stabilized opportunities, both on and off market,” Campo added.​

Camden spent $423 million last year on properties as the apartment acquisition market showed favorable life after a sluggish couple of years. Apartment sales had stalled amid higher interest rates and sellers unwilling to lower prices. Record sales years turned into record lows.​

A significant portion of the Camden portfolio is in Texas, Florida, North Carolina and Georgia. It has three properties in the Nashville area and about 4,100 units in Arizona.​ Jessett said the company doesn’t expect to expand into new markets.​

The large supply of new units from the pandemic building boom has started to slow, and permits for new construction have dropped to record lows. Camden is angling for the upside when supply slows to a relative trickle and demand remains strong.​ That shift could happen this year or next.​

“You’re going to have a situation where simple supply and demand economics work, which means that we’ll have more demand than supply, and rents will go up,” Campo said.​

Chasing fewer regulations

California has passed a slew of laws to make it easier to build more housing in a quest for affordability. However, lawmakers there have also approved strong tenant protections at the state and local levels.​

The South has a more pleasant regulatory environment. Texas and Florida laws have focused only on improving housing affordability by easing regulations and preempting local governments on zoning to build more owner-occupied and rental housing. Laws against “junk fees” are not in the offing.​

Florida enacted a law in 2023 that allowed landlords to offer renters a monthly fee instead of a security deposit. Critics argued that the fee isn’t capped, doesn’t cover damages and is unrecoverable when the tenant moves out.​ Camden is also betting that owner-occupied housing affordability remains elusive despite legislative efforts.​

“We are certain that apartments are significantly more affordable than owning a home and will be for the foreseeable future,” Campo said.