Apartment Operating Expenses During the Pandemic

Rising expenses have been a key storyline across the multifamily industry in the past few years. In fact, despite record rent growth and tight occupancy (rates that at peak 2021 levels had never been experienced in many markets) the rising tide of external inflationary pressure has resulted in less substantial growth in net operating expenses (NOI) than the baseline performance figures might suggest. Pre-pandemic, expeneses generally rose between 2% to 4% per year with a little flucuation around the mean (about 3.8%) during the 2012 to 2019 period. In total, that seven year period saw expenses rise by roughly 30%. In 2021 and 2022 however, expenese have risen by almost 19%. By category, the largest increase in expenses stems from rising costs of insurance and taxes. In the year-ending 2nd quarter 2022, that subset of expenses rose by roughly 13% for the nation overall. Increase in payroll (about 8%) and operational/maintenance expenses (about 6%) rank as the second and third fastest growth expense categories.