Expenses and income for the average U.S. affordable housing unit were up 6.4% and 7.2% year-over-year in September, respectively, according to the latest Yardi Matrix affordable housing market report.
Report highlights:
- For the average U.S. affordable housing unit, expenses were up 6.4% year-over-year in September.
- Insurance and marketing disproportionately affected affordable costs.
- Income per unit rose 7.2% year-over-year through September at affordable assets.
- Affordable properties’ net operating income spiked 8.1% per unit year-over-year as of September.
Costs and income on the rise for affordable housing properties
As of September, expenses increased on average by 6.4% year-over-year per affordable U.S. multifamily unit. Although expenses were up, the index seems to be softening. For the full calendar year of 2023, the affordable properties’ cost growth was 8.2%, while for the year prior, the figure stood at 7.7%. As of September, the highest average expenses at affordable assets were registered in New York ($14,485), Boston ($13,240) and San Francisco ($10,662). Conversely, the lowest expenditures were in Orlando ($5,773), Las Vegas ($6,000) and San Antonio ($6,095).
For affordable properties, insurance costs skyrocketed 20.3% year-over-year through September, while marketing expenditures climbed 18.4% during the same interval. Against the backdrop of major weather-related events, several metros witnessed a considerable increase pertaining to insurance expenses, such as Houston (41.5%) and Charlotte (39.4%). As a share of total costs, insurance made up 9.8% in September, up from 5.6% in 2018. Additionally, insurance expenses have risen a staggering 135.7% since 2018 across all asset classes.
However, the income per unit of affordable assets grew by 7.2% year-over-year through September, providing a counterbalance. A few metros stood out with double-digit growth, such as Nashville (12.9%), San Antonio (12.0%) and Charlotte (10.1%). This increase is deeply entwined with the federal department of Housing and Urban Development’s maximum allowable rent formula, which allowed for higher-than-normal growth in 2024. By contrast, the income per unit at affordable properties for the calendar year of 2023 grew by 5.5%, while the year before witnessed a 4.6% increase.
Although HUD’s formula somewhat shelters affordable properties from negative market forces, the assets operate on a thinner margin compared to their market-rate counterparts. At the average affordable property, expenses comprise 56.3% of revenue, while the index lands at 44.9% for market-rate assets. “Owners of affordable properties would be wise to examine operating efficiencies and develop strategies to cut costs.”, said Paul Fiorilla, director of research at Yardi Matrix.
Net operating income quadruples for affordable assets
On the heels of HUD loosening its grip on the maximum allowable rent, the NOI at affordable assets rose by 8.1% per unit nationally in September compared to the year before. For the calendar year 2023, the figure sat at 2.0%—a spike that more than quadruples the NOI for affordable properties. The index was even higher in markets such as Nashville (25.0%), San Diego (20.2%) and Raleigh (19.8%). In markets with a negative NOI, such as Charlotte (-1.2%), Houston (-3.1%) and Pittsburgh (-3.2%), the income growth was insufficient to counteract the surge in expenses.
Read the full Yardi Matrix Affordable Housing Market Report: November 2024.
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