Novogradac Operating Expenses Report Finds that Expenses, Income Both Increased for LIHTC Properties in 2020

Published by H. Blair Kincer on Tuesday, November 16, 2021 - 12:00am

The first year of the COVID-19 pandemic resulted in increases in both income and expenses for affordable multifamily properties, according to the 2021 Novogradac Multifamily Rental Housing Operating Expenses Report.

Among the 1,200 properties included in data collected by Novogradac in both 2019 and 2020, operating expenses increased by 5.4%, while rental income increased by 5.0%. Despite expenses increasing at a slightly faster rate, net operating income still increased–due to the fact that the baseline amount for income is significantly higher than expenses.

Blog Graphic: Income, Expenses Both Increase for Same-Store Properties
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Information on expenses (and income) for affordable housing properties is presented in the 2021 operating expenses report, with information describing the expense amounts when affordable housing is broken down into categories: new construction or acquisition rehabilitation; senior or family housing; large metropolitan, small metropolitan, micropolitan or non-metropolitan areas; high-rise, mid-rise or low-rise properties; buildings of different ages; and more.

Novogradac surveys expenses for multifamily rental housing properties financed by low-income housing tax credit equity to track and analyze the factors that cause variations and presents the findings. The 2021 edition of the Multifamily Rental Housing Operating Expense Report focuses on “same-store properties,” those with data included in both the 2019 and 2020 data sets. The purpose was to examine how those properties were affected by issues related to the COVID-19 pandemic, such as stay-at-home mandates, school closures and other issues. The report includes data on more than 1,400 properties (with nearly 145,000 units)–including the 1,200 properties in the same-store category.

While same-store rental income increased by the aforementioned 5.0% over 2019 levels, its impact on the overall total revenue was tempered by vacancy loss, which saw a 12.6% increase in 2020. Vacancy loss measures the amount of revenue lost due to units being vacant or rent being delinquent and the increase in 2020 is presumably attributable to tenants being unable to pay rent, but remaining in their apartments due to the pandemic. The figure also likely reflects the difficulty of turning and showing vacant apartments due to COVID restrictions.

Among same-store properties, there were significant jumps in property insurance, general operating expenses and property management fees. Administration expenses dropped slightly.

As mentioned previously, despite expenses increasing at a slightly faster rate than income, the net operating income for same-store properties increased by 4.3% in 2020, to $4,063 per unit. That increase is attributable to the fact that rental income increased $462 per unit, while expenses increased $292 per unit.

Affordable housing property owners and managers in 2021 are adjusting to the new normal of decreasing restrictions, but also to the continued need for extra safety precautions and for the eviction moratoriums that lasted much of the year.

For more specific details, purchase the Novogradac Multifamily Rental Housing Operating Expense Report