Operating expenses for federally subsidized multifamily housing dropped in 1999, except for garden-style projects, according to the 2000 edition of an annual research study.

The study reported that elevator buildings receiving HUD assistance declined $0.16 per square feet in total operating costs for the year, from $6.36 to $6.20. Low-rise projects also reported total expenses decreased from $5.17 to $4.75. However, garden-style complex expenses rose 8.2%, pushing the cost per square foot from $4.02 to $4.35 per square foot.

The annual Institute for Real Estate Management (IREM) research study analyzes data for nearly 1,200 high-rise, low-rise, and garden-style properties nationwide that receive any of six types of federal assistance: HUD Sec. 202, Sec. 221(d)(3), Sec. 236, Sec. 8 Elderly/Handicapped, Sec. 8 Family, and Rural Development, Sec. 515.

Median utility costs, usually a big expense for multifamily housing increased for both low-rise projects and garden apartments. Low-rise utility costs rose 15 cents per foot, to 89 cents, and garden-style apartments rose 11 cents, to 69 cents. However, utility costs for elevator buildings dipped slightly, from $1.28 in 1998 to $1.23 in 1999.

Maintenance expenses for HUD-subsidized properties (including security and grounds maintenance payroll, but excluding general maintenance payroll) held relatively steady. Median maintenance costs for all buildings receiving HUD assistance ranged from $0.67 to $1.29 per square foot of rentable area, depending on building and subsidy type. Elevator buildings were the most costly ($0.96 per square foot), followed by low-rise ($0.80 per square foot) and garden-style apartments ($0.75 per square foot).

Median net operating income (NOI) for HUD-assisted properties ranged widely based on building style and subsidy program, from a low of $1.84 per square foot to a high of $7.17 per square foot. For all HUD programs combined, high-rise buildings reported the highest NOI in 1999, at $6.63 per square foot. Low-rises and garden-style properties reported median NOI of $4.50 and $3.39 per square foot, respectively. For properties receiving Rural Development assistance, NOI was $2.49 for low-rise buildings and $1.84 for garden-style properties.

As for operating ratios (the percentage of total actual income used to cover total expenses), total expenses consumed no more than 60% of total actual collections for all subsidized building types, except for Sec. 221(d)(3) and Rural Development garden-style apartments. For Sec. 236 apartments, the ratio was about 66%.

Federally assisted apartments experienced much lower levels of tenant turnover than conventional apartments. During the course of the year, subsidized properties reported the number of new tenants moving into their buildings to be 16% of total apartments in elevator buildings, 31% in low-rise buildings, and 35% for garden style apartments. Conventionally financed apartments experience much higher turnover ratios ranging from 44% to 58%.

The report is titled Income/Expenses Analysis: Federally Assisted Apartments. It breaks down operating figures into several categories, such as building type, subsidy type, property size and property age. Regional and city reports are also included. More information is available through IREM's Web site, www.irem.org.

Members of the Institute of Real Estate Management, an affiliate of the National Association of Realtors, meet strict criteria in the areas of education, experience, and ethics, IREM says. Founded in 1933, IREM's mission is to educate real estate managers, certify their competence and professionalism, serve as an advocate on issues affecting the real estate management industry, and enhance its members' professional competence.