IREM Operating Expenses Study: Mixed Bag of Results for Federally Subsidized Properties
In the post-Great Recession climate, federally subsidized housing is perhaps more important than ever. But aside from high demand, the year-over-year benchmarks for the various forms of this housing class are anything but consistent.
By Barbra Murray, Contributing Editor
In the post-Great Recession climate, federally subsidized housing is perhaps more important than ever. But aside from high demand, the year-over-year benchmarks for the various forms of this housing class are anything but consistent, as noted in the Institute of Real Estate Management’s 2014 edition of the Income/Expense Analysis: Federally Assisted Apartments study.
Federally subsidized housing consists of much more than Section 8 Family properties; it also encompasses Section 202, Section 221(d)3, Section 236 and Section 8 Elderly/Handicap multi-family communities. The IREM study surveyed 1,076 of these properties–including high-rise, low-rise and garden-style buildings– totaling 92,988 residential units.
There appears to be no pattern to the numbers. From 2012 to 2013, operating expenses dropped for two of the three building types of Section 221(d)3 apartment communities, while the figure went on the upswing at all building types of Section 8 Elderly/Handicap properties. And for Section 202, Section 236 and Section 8 Family, operating expenses went up for some building types and down for others.
The hodgepodge of results continues with utility costs, where numbers fluctuated among the categories and building types, with year-over-year increases ranging from $0.08 to $0.24 per square-foot to decreases ranging from $0.02 to $0.65 per square-foot. Owners of Section 8 garden buildings saw the lowest utility costs, $0.88 per square-foot, while Section 202 elevator buildings experienced the highest utility costs at $1.98 per square-foot.
And the mixed bag continues. When looking at maintenance costs, Section 8 Family properties saw a year-over-year decrease. For other subsidized properties, maintenance costs either decreased or increased among the three building types.
In terms of operating ratios–the total of all expenses divided by total actual collections–the figure rose for all Section 236 and Section 8 Elderly/Handicapped properties As for the highest operating ratio, garden Section 202 buildings recorded a ratio of 79 percent, and garden Section 221(d) 3 buildings reported the lowest at 45 percent.
IREM’s study did find at least one consistency among the different federally assisted property segments and their different building types: each boasted a far lower turnover ratio in 2013 than that seen at conventionally financed properties. The turnover ratio at assisted properties was just 16 percent for high-rises, 25 percent for low-rises and 23 percent for garden-style communities. At traditional apartment properties, the average turnover rate ranged from 44 to 50 percent.
