Significant Accounting Policies

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Significant Accounting Policies

Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and with the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021.

These condensed consolidated financial statements include the accounts of INVH and its consolidated subsidiaries. All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements. In the opinion of management, all adjustments that are of a normal recurring nature considered necessary for a fair presentation of our interim financial statements have been included in these condensed consolidated financial statements. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022.

We consolidate wholly owned subsidiaries and entities we are otherwise able to control in accordance with GAAP. We evaluate each investment entity that is not wholly owned to determine whether to follow the variable interest entity (“VIE”) or the voting interest entity (“VOE”) model. Once the appropriate consolidation model is identified, we then evaluate whether the entity should be consolidated. Under the VIE model, we consolidate an investment if we have control to direct the activities of the entity and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the VOE model, we consolidate an investment if (1) we control the investment through ownership of a majority voting interest if the investment is not a limited partnership or (2) we control the investment through our ability to remove the other partners in the investment, at our discretion, when the investment is a limited partnership.

Based on these evaluations, we account for each of the investments in joint ventures described in Note 5 using the equity method. Our initial investments in the joint ventures are recorded at cost, except for any such interest initially recorded at fair value in connection with a business combination. The investments in these joint ventures are subsequently adjusted for our proportionate share of net earnings or losses and other comprehensive income or loss, cash contributions made and distributions received, and other adjustments, as appropriate. Distributions of operating profit from the joint ventures are reported as part of operating activities while distributions related to a capital transaction, such as a refinancing transaction or sale, are reported as investing activities on our condensed consolidated statements of cash flows.

Non-controlling interests represent the OP Units not owned by INVH, including any vested OP Units granted in connection with certain share-based compensation awards. Non-controlling interests are presented as a separate component of equity on the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, and the condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021 include an allocation of the net income attributable to the non-controlling interest holders. OP Units and vested OP Units granted in connection with share-based compensation awards are redeemable for shares of our common stock on a one-for-one basis or, in our sole discretion, cash, and redemptions of OP Units are accounted for as a reduction in non-controlling interests with an offset to stockholders’ equity based on the pro rata number of OP Units redeemed.

Significant Risks and Uncertainties

One of the most significant risks and uncertainties to our financial condition and results of operations continues to be the adverse effect of the ongoing pandemic resulting from the coronavirus, or COVID-19, and its variants on our residents, associates, and suppliers. As such, we continue to closely monitor the impact of the pandemic on all aspects of our business and actively manage our response thereto in collaboration with our residents and business partners.

The ongoing COVID-19 outbreak in the United States has led entities directed by, or notionally affiliated with, the federal government as well as certain states, counties, and cities, including those in which we own properties and where our principal places of business are located, to impose ongoing measures in response to the COVID-19 pandemic, including temporary eviction moratoriums if certain criteria are met by residents, deferral of missed rent payments without incurring late fees, and restrictions on rent increases. Most of these restrictions have generally been lifted or expired; however, we cannot predict if states, municipalities, local, and/or national authorities will renew, extend, or expand such restrictions, or impose additional similar restrictions. We endeavor to comply in all material respects with applicable federal, state, and local laws, regulations, ordinances, and restrictions regarding evictions, collections, rent increases, and late fees as appropriate. While none of the current and previous restrictions have materially impacted our ability to provide services to our residents or homes, additional or modified measures may negatively impact our ability to access our homes, complete service requests, or make our homes ready for new residents. Such measures may have material adverse effects on our financial condition, results of operations, and cash flows.

Since the outbreak commenced, a number of our residents have requested rent deferral and/or late fee relief, and components of our rental revenues and other property income have been impacted by the pandemic. We continue to work with residents experiencing financial hardship to find solutions that keep them in their homes. This includes continuing to provide residents with information about rental assistance programs for which they may be eligible, application instructions, necessary documentation, and owner requirements. We cannot predict if the federal government, states, or local authorities will continue to offer assistance programs or if such programs will be available to our residents (and if they are available, if our residents will take advantage of them).

Our financial condition, results of operations, and cash flows depend on our ability to collect rent. To the extent our current or prospective residents continue to experience unemployment, deteriorating financial conditions, and declines in household income, they may be unwilling or unable to fully meet their obligations to us or enter into new leases for our homes, resulting in increases in uncollectible revenues and thus reductions in rental revenues and other property income. Our associates continue to face COVID-19 health risks. If a significant number of our associates, or key personnel, are unable to work as a result of COVID-19, this would adversely impact our business and operating results. In addition, workforce turnover, and remote work arrangements could adversely impact our business and operating results.

Additionally, COVID-19 and related containment measures may also continue to interfere with the ability of our suppliers and other business partners to carry out their assigned tasks or supply materials or services at ordinary levels of performance relative to the conduct of our business.

The extent to which the ongoing COVID-19 pandemic ultimately impacts our operations depends on ongoing developments, which remain highly uncertain and cannot be predicted with confidence, including the scope, duration, and severity of COVID-19 including resurgences, new variants or, strains, the extent and duration of actions taken to contain the pandemic or mitigate its impact, the availability, distribution, acceptance, and efficacy of vaccines and therapeutic drugs (including against any future variants or strains), and the direct and indirect economic effects of the pandemic, and government, regulatory, and/or legislative changes precipitated by the ongoing COVID-19 pandemic, among others. While we have taken steps to mitigate the impact of the pandemic on our results of operations, there can be no assurance that these efforts will be successful.

Overall weaker economic conditions, ongoing geopolitical tensions, uncertainty in financial markets, including the impact of inflation and rising interest rates, and a general decline in business activity could adversely affect (i) our ability to acquire or dispose of single-family homes and (ii) the value of our homes and our business that could cause us to recognize impairments in value of our tangible assets or goodwill.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These estimates are inherently subjective in nature and actual results could differ from those estimates.

Accounting Policies

We periodically evaluate the appropriateness of our accounting policies in accordance with authoritative guidance. Based on a review of the useful lives of the components of our buildings and improvements, we extended the weighted average useful lives range for depreciation thereof from 7 to 28.5 years to 7 to 32 years. This change was implemented for additions to our single-family residential properties placed in service after January 1, 2022.

There have been no additional changes to our significant accounting policies that have had a material impact on our condensed consolidated financial statements and related notes, compared to those policies disclosed in our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Recently Adopted Accounting Standards

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which simplifies an issuer’s accounting for convertible instruments and contracts in its own equity. The guidance reduces the number of accounting models for convertible instruments, requires entities to use the “if-converted” method in diluted earnings (loss) per share (“EPS”), and requires that the effect of potential share settlement be included in the diluted EPS calculation when an instrument may be settled in cash or shares. We adopted ASU 2020-06 as of January 1, 2022, and it did not have a material impact on our condensed consolidated financial statements.

Recent Accounting Pronouncements

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848) (“ASU 2021-01”), which provides the option for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on contract modifications and hedge accounting. An example of such reform is the expected market transition from the London Interbank Offer Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. Entities that make this optional expedient election would not have to remeasure the contracts at the modification date or reassess the accounting treatment if certain criteria are met and would continue applying hedge accounting for relationships affected by reference rate reform. ASU 2021-01 became effective upon issuance, and optional expedient elections can be made through December 31, 2022. We are currently evaluating existing contracts and hedging relationships and the impact of adopting ASU 2021-01 on our consolidated financial statements.