Expenses grew an average of 6.4% year over year (YoY) per affordable multifamily unit nationally through the first three quarters of 2024, according to data from Yardi Matrix’s new affordable housing database.
That’s a deceleration compared with the previous two years but still more than the typical annual expense growth of 3% to 4%.
The increase was mostly driven by insurance costs, which rose to 20.3% YoY through September. Property insurance costs have increased by at least 15% for the last five years, rising 135.7% since 2018, notes Yardi Matrix in its first report on expense and income growth in affordable housing.
Marketing costs increased 18.4%; administration, 7.3%; and repairs and maintenance, 6.7%, YoY through September.
The data comes from an analysis of 6,443 affordable multifamily properties in 114 metros across the United States in the Yardi Matrix database. The sample includes fully affordable properties, where at least 90% of the units are designated as affordable. This includes properties owned by public housing agencies and nongovernmental organizations and private-sector owners who use low-income housing tax credits, Section 8 subsidies, or other affordable programs.
While expenses rose, so did income, according to Yardi Matrix.
Income per unit increased by an average of 7.2% nationally YoY through the third quarter at affordable properties. That compares with 5.5% in calendar year 2023, 4.6% in 2022, and 3% in 2021. Five metros recorded double-digit increases in income: Nashville, Tennessee (12.9%); San Antonio (12.0%); San Diego (11.4%); Charlotte, North Carolina (10.1%); and Sacramento, California (10%).The data shows an 8.1% per unit increase YoY through September in net operating income for affordable assets. Several metros were ahead of the curve with double-digit figures, such as Nashville (25%); San Diego (20.2%); and Raleigh, North Carolina (19.8%).
As expenses comprise 56.3% of an average affordable asset’s balance sheet, compared with 44.9% in market-rate properties, the sector operates on a thin margin, according to the study.
“There is both good and bad news for affordable properties. The good news is that the formula that governs rent growth allows for higher increases when inflation and wage growth in the economy is high. The bad news is that expenses generally eat up a higher percentage of income in affordable properties than market-rate assets,” said Paul Fiorilla, director of research for Yardi Matrix.
