Net Operating Income Per Unit Grew Slightly from 2010-2014

Published by H. Blair Kincer on Wednesday, August 10, 2016 - 12:00am

After declining for four consecutive years, from 2010 through 2013, the ratio of a low-income housing tax credit (LIHTC) property’s total expenses to its total median rental income, known as net operating income, or NOI, finally had a winning year in 2014, based on five years of Novogradac & Company’s operating expense data.

Specifically, NOI as a percentage of rental income for LIHTC properties fell from 47.5 percent in 2010 to 45.9 percent in 2011 and eventually got as low as 44.9 percent in 2013. A small uptick in 2014, to 45.1 percent, is good news for developers and other stakeholders in the LIHTC marketplace.

It’s important to note that it’s too soon to tell if this growth is, in fact, the start of a recovery or if 2014 was a blip and more concern should be paid to LIHTC properties’ NOI. The 2017 edition of the operating expense report will likely provide greater context on this vital issue.


Blog Chart Net Operating Income as a Percentage of Rental Income Fell for LIHTC Properties
Click to Enlarge


Over the five years of data that Novogradac & Company analyzed for the 2016 edition, total expenses grew by 11 percent while income grew at about half that rate.  Novogradac estimates have predicted that NOI would decrease if operating expenses continue to grow at an approximately 2.4 percent pace, as they have. Unfortunately, in this case, that prediction was correct.