Inflation, Pandemic-Related Delays Play Role in Increase in LIHTC Repairs, Maintenance Expenses

Published by H. Blair Kincer on Wednesday, December 7, 2022 - 12:00am

Following a year during which interactions between staff and tenants at low-income housing tax credit (LIHTC) properties were limited due to the COVID-19 pandemic’s social distancing restrictions, maintenance and repair expenses jumped 13.2% in 2021 at the more than 125,000 properties tracked by Novogradac for an annual report.

According to the Novogradac Multifamily Rental Housing Operating Expense Report, 2022 Edition, the median annual expense amount per unit for repairs and maintenance in 2021 increased $124, the largest increase by both percentage (13.2%) and dollar amount since Novogradac began tracking such data in 2010.

The rate of increase for repairs and maintenance was more than three times the 4.3% overall increase for operating expenses. That overall figure was the second-highest year-over-year increase in the history of the data, fueled by the general inflationary environment that finished 2021 with a 4.7% average increase.

Blog Graphic: Repairs and Maintenance Total Goes Past $1000 Per Unit
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The increase in repairs and maintenance expenses was likely due to other factors, too–most significantly, a 5.7% decrease for the category in 2020, when COVID-19-related provisions such as social distancing left many LIHTC property managers delaying routine maintenance to 2021. Combining 2020 and 2021 creates a two-year compound annual growth rate (CAGR) for repairs and maintenance of 3.3%, which is below the overall 3.7% CAGR for those two years. However, inflation still played a role in the increase in repairs and maintenance expenses, as the price of parts and supply items increased through the year, picking up steam as the year continued.

Property managers should examine their expenditures in this category and evaluate how much of any increase was due to delayed maintenance from 2020 and what role inflation played. Inflation has likely played a role in 2022 and may continue, so property managers and owners should be ready for possible increases in this category.

Repairs and maintenance ranked behind only property insurance as an area of increase in 2021. Property insurance saw a 33.5% jump, accounting for $129 of the $240 overall increase in median expenses per unit. Most other expense categories saw small increase or even a decrease.

Blog Graphic: Repairs/Maintenance Outgoing Total Expenses
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Whether the 2021 increase foretells a longer-term trend for repairs and maintenance expenses is open to interpretation. While the 2021 increase followed a decrease during pandemic-stricken 2020, it was the third significant jump in four years, following increases of 7.5% in 2018 and 12.5% in 2019.

The CAGR since 2010 for repairs and maintenance is 4.8%, making it one of three categories that significantly outstrip the overall CAGR of 3.2%. The median expense per unit in 2010 for repairs and maintenance was $635, but in 2021 it was $1,067.

Since there are multiple factors at play in the 2021 figures, this is a category worth watching.