Novogradac Special Report Finds that Income, Expenses Growth Outstripped Inflation in 2022
SAN FRANCISCO, Nov. 27, 2023 /PRNewswire-PRWeb/ -- Net operating income (NOI) at properties financed by low-income housing tax credit (LIHTC) equity and tracked by Novogradac increased by 7.4% in 2022, surpassing the inflation rate as the nation emerged from the worst of the COVID-19 pandemic and faced the highest inflation in 40 years.
Data in the 2023 Low-Income Housing Tax Credit Income and Operating Expenses Report, published by Novogradac, showed that operating expenses grew at a faster rate than rental income, but both surpassed the inflation rate–a 9.2% year-over-year increase in rental income and a 10.4% jump in operating expenses. Those compared to a 6.8% inflation rate from December 2021 to December 2022. The percentage and the nominal dollar increases in rental income, operating expenses and NOI were the highest in the 13 years for which Novogradac has tracked the data. The combination of the increased rental income and increased operating expenses led to an all-time high NOI per unit of $4,188.
"Over the history of tracking this data, we've seen how annual changes in rental income and operating expenses vary depending on a variety of economic and regulatory factors, but both track fairly closely, over-time, with inflation," said Michael J. Novogradac, CPA, managing partner of Novogradac. "That said, changes in the rate of inflation usually first affect operating expenses, as property operations more directly respond to market conditions. Changes in the rate of inflation affect rental income more slowly and less predictably, because rental income limits for LIHTC-financed housing properties are generally adjusted annually and are based on inflation adjusted data from previous years and evolving regulatory rules. This year's report gives a look at how the pandemic and the reactions to it affected both income and expenses. This also is a valuable tool to provide a long-term look for stakeholders to understand what has happened over preceding five- or 10-year periods to help assess the coming years."
Novogradac's data set includes information from more than 186,000 housing units in nearly 1,700 affordable housing properties across the nation.
The biggest increase in expenses–both nominally and by percentage–came in the category of repairs and maintenance, which saw a 21.7% increase over the 2021 figures to a record median of $1,664 in expenses per unit in the full data set. Repairs and maintenance saw consistent and large increases across properties, including properties in different geographic areas, types of buildings, sizes of properties and ages of the developments.
"The pandemic and associated social distancing requirements particularly limited repairs and maintenance spending in 2020 and 2021," said Kelly Gorman, Novogradac partner and lead author of the report. "Because of that, many of the expenses in 2022 were due to routine maintenance being delayed during the height of the pandemic. However, at least some of the increase was related to the increased inflation rate and things like supply-chain difficulties. This is an area that we will continue to monitor closely."
Novogradac has been issuing the LIHTC income and expenses reports since 2014 and has been tracking expenses and income since 2010. Novogradac also provided a series of blog posts on this year's report, with individual posts on the overall data, repairs and maintenance expenses, payroll expenses and property insurance. The report will also be the subject of the Dec. 12 episode of the Tax Credit Tuesday podcast.
Novogradac is also able to benchmark developer, syndicator and investor LIHTC portfolios and individual properties to its database of operating information. To learn how benchmarking can aid in assessing performance and identifying areas of potential improvement, contact Kelly Gorman at [email protected].
About Novogradac
Novogradac began operations in 1989 and has grown to more than 700 employees and partners with offices in more than 25 cities. Tax, audit and consulting specialty practice areas for Novogradac include affordable housing, community development, historic rehabilitation and renewable energy.
Media Contact
Alex Ruiz, Novogradac, 925-949-4300, [email protected], www.novoco.com
SOURCE Novogradac
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