by Brianna Crandall — September 22, 2014—Building owners and facilities/property managers who oversee federally subsidized apartments will find valuable information in the latest benchmarking study analyzing income and expenses and key performance trends for these types of apartments just released by the Institute of Real Estate Management (IREM).
Operating expenses in 2013 vs. 2012 were down within a range of $0.13 to $0.87 per square foot of rentable area for two of the three types of Section 221(d)3 federally subsidized properties. In contrast, Section 8 Elderly/Handicapped housing experienced operating expense increases ranging from $0.15 to $0.69 per square foot. Depending upon building type, operating expenses for Section 202 properties as well as those in the Section 236 and Section 8 Family categories either were up (within a range of $0.39 to $1.30 per square foot) or down (within a range of $0.16 to $1.88 per square foot).
These are among the key findings reported in the 2014 edition of the Income/Expense Analysis: Federally Assisted Apartments study. Conducted since 1986, this annual study analyzes the previous year’s operating data for more than 1,076 high-rise (elevator buildings), low-rise and garden-style properties nationwide — containing 92,988 units — that receive one of six types of federal assistance: HUD Sections 202, 221(d)3, 236, Section 8 Elderly/Handicap and Section 8 Family and Rural Development Section 515.
The annual report is designed as a benchmarking and planning tool to help owners and managers of subsidized housing make detailed, accurate comparisons of the performance of properties in their portfolios. It also can be used as a resource for developing appraisals, acquisition or sales proposals, feasibility studies and loan requests.
Net income
In terms of net income by subsidy type, Section 202 building categories in 2013 ranged from $4.30 to $8.27 per square foot; Section 221(d)3 buildings ranged from $5.56 to $6.22 per square foot; Section 236 buildings ranged from $2.85 to $5.11 per square foot; Section 8 Elderly/Handicapped buildings ranged from $4.21 to $6.76 per square foot; and Section 8 Family buildings ranged from $3.96 to $6.76 per square foot.
Other study highlights
- Utility costs: Utility costs for federally subsidized multifamily buildings were both up and down in 2013 from the year earlier, with increases ranging anywhere from $0.08 to $0.24 per square foot, and decreases ranging from $0.02 to $0.65 per square foot. Section 8 Family garden buildings reported the lowest utility costs at $0.88 per square foot. Section 202 elevator buildings reported the highest such costs at $1.98 per square foot.
- Maintenance costs: Maintenance costs for all Section 8 Family buildings decreased from the prior year within a range of $0.02 and $0.09 per square foot. Costs for the other subsidized building and subsidiary types were both up and down, with increases ranging anywhere from $0.01 to $0.18, and decreases ranging from $0.02 to $0.19. Section 221(d)3 garden buildings reported the lowest maintenance costs at $0.23 per square foot, and Section 202 low-rise buildings reported the highest at $1.16 per square foot.
- Median net operating income: Elevator buildings reported median net operating income ranging from $5.11 to $8.27 per square foot. Income for low-rise buildings ranged from $2.85 to $4.30 per square foot, and that for garden buildings ranged from $3.87 to $6.22 per square foot.
- Turnover ratio: Federally assisted properties reported the number of new tenants moving into their building in 2013 to be 16 percent of total apartments in an elevator building, 25 percent in a low-rise building, and 23 percent in a garden-type property. Conventionally financed apartments experienced a turnover rate ranging from 44 to 50 percent.
- Operating ratios: In terms of operating ratios (the total of all expenses divided by total actual collections and expressed as a percentage) those for all Section 236 and Section 8 Elderly/Handicapped buildings increased. The highest operating ratio, 79 percent, was reported for garden Section 202 buildings; the lowest, 45 percent, was reported for garden Section 221(d) 3 buildings.
The IREM Income/Expense Analysis research study breaks down operating figures into several categories, such as building type, subsidy type, property size and property age. Regional and city reports are also included.
A state-of-the-art product called the Income/Expense Analysis Online Lab is available as a companion product for the research study. The Lab is an interactive Web site with 24/7 access that enables purchasers to download over 10 years of historical federally assisted apartment data — including over 100 customizable line-item variables — and compare it to the operating data in their individual portfolios.
The 226-page Income/Expense Analysis: Federally Assisted Apartments report is available from IREM’s Income/Expense Analysis Reports Web page in either soft cover or a downloadable format to IREM members and non-members for $219.95 and $439.95, respectively, plus shipping and tax. The companion Online Lab is priced at $317.95 for IREM members and $635.95 for non-members.
The reports Web page also features new 2014 editions of four other annual Income/Expense Analysis studies, each of which has a companion Lab: Office Buildings; Conventional Apartments; Shopping Centers; Condominiums, Cooperatives and Planned Unit Developments.
