New Report Analyzes Multifamily Rental Properties' Operating Expenses

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Novogradac finds operating expenses for low-income housing tax credit properties increasing at 2.92 percent annual rate.

Source: Novogradac & Company LLP 2014

Operating expenses between 2010 and 2012 for low-income housing tax credit (LIHTC) properties increased at an annual rate of 2.92 percent between 2010 and 2012, according to a report released by Novogradac & Company LLP. The report, “Novogradac Multifamily Rental Housing Operating Expense Report—Survey and Analysis for LIHTC Properties,” reveals this trend and discusses the economic forces driving the increase.

To provide insight into national and regional operating expense trends, Novogradac & Company LLP collected data from property audits, categorized that data based on accepted operating expense line items and analyzed the information. The survey spans from 2010 to 2012 and covers more than 2,100 market rate and LIHTC properties that include 585,000 individual units. The report, which will be updated annually, examines how rental housing properties’ operating expenses differ over time as well as by property size, type and location.

“Operating expenses affect many aspects of the affordable rental housing market. Insight into trends in the size, composition and rate of change of these expenses, can help developers anticipate potential costs that will affect future cash flow,” said H. Blair Kincer, MAI, CRE, a partner in the metro Washington, D.C. office of Novogradac & Company LLP in the firm’s government consulting and valuation advisory services (GoVal) group. “As the nation continues to recover from the Great Recession, understanding and monitoring operating expenses will remain important for multifamily rental housing communities.”

The findings of Novogradac & Company LLP’s operating expense report are mostly congruent with conventional industry wisdom and economic trends. For example, the three largest categories of operating expenses for both LIHTC and market rate rental housing developments between 2010 and 2012 were the same: payroll, repair and maintenance, and utilities.

“The data and analysis contained in this report are designed to provide insight and context to guide multifamily rental housing developers, investors, owners, managers and others as they plan for the years ahead,” said Michael J. Novogradac, CPA, managing partner in the firm’s San Francisco office. “The trends and conclusions presented in this report are based on findings from thousands of property audits, market analyses and appraisals that included interviews with property managers and owners.”

Novogradac’s survey also revealed some notable exceptions to conventional wisdom and larger economic trends. For more details and a copy of the report, please go to To participate in the survey and data collection for the next annual installment of the report, please send an email to CPAs(at)novoco(dot)com.

Novogradac & Company LLP was founded in 1989, and has since grown to more than 400 employees and partners in offices in San Francisco and Long Beach, Calif.; the Washington, D.C., Atlanta, Ga., Detroit, Mich., Kansas City, Mo. and Seattle, Wash. metro areas; St. Louis, Mo.; Boston, Mass.; Austin, Texas; Dover, Columbus and Cleveland, Ohio; New York, N.Y. and Portland, Ore. Specialty practice areas include tax, audit and consulting services for tax-credit-assisted multifamily and affordable housing, community revitalization and rehabilitation of historic properties. Other areas of expertise include military base redevelopment, preparation and analysis of market studies and appraisals of multifamily housing investments and renewable energy tax credits.

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H. Blair Kincer
Novogradac & Company LLP
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