SAVE | EMAIL | PRINT | MOST POPULAR | 
RSS | REPRINTS
IREM Report Shows Operating Expenses Rose in 2007 for Federally Assisted Multifamily Properties
Published: October 01, 2008
By Erika Schnitzer, Associate Editor
Chicago--Operating costs for most federally subsidized multifamily housing increased in 2007 from the previous year, according to a report by the Institute of Real Estate Management (IREM).
The findings, reported in the 2008 edition of the “Income/Expense Analysis: Federally Assisted Apartments,” show that increases in operating expenses ranged from $4.78 to $8.37 per sq. ft. of rentable area.
In general, utility costs increased in 2007, with increases ranging from $0.05 to $0.74 per sq. ft. Section 202 elevator buildings were reported as having the highest costs, at $2.66 per sq. ft., while Section 202 garden buildings had the lowest utility costs, at $0.43 per sq. ft. Maintenance-wise, the cost for all low-rise buildings increased in 2007.
For 2007 operating ratios—the total of all expenses divided by total actual collections, Section 202 building categories ranged from 53 to 75 percent; Section 221(d)3 buildings ranged from 62 to 69 percent in 2007; Section 236 buildings ranged from 63 to 72 percent; Section 8 Elderly/Handicapped buildings ranged from 56 to 62 percent; and Section 8 Family ranged from 48 to 57 percent. Of all categories, only the Section 8 Family buildings decreased their operating ratios from the previous year.
A survey on net income revealed that, of all the categories, only Section 221(d)3 buildings increased from $2.89 to $4.63 per sq. ft. in 2006 to $2.95 to $5.20 per sq. ft. in 2007.
The annual IREM study analyzes data for over 937 high-rise, low-rise and garden properties that receive one of six types of federal assistance—HUD Section 202, 221(d)3, 236, Section 8 and Rural Development Section 515.
So, how can managers decrease their operating costs? Here are some of IREM Staff Vice President of Research Chuck Achilles' ideas:
• Encourage vendors to help you create ways to reduce expenses by proposing new operating techniques, such as changing filters more frequently to reduce fuel costs.
• Keep prioritization in mind when seeking to control expenses--focus mainly on those items that have the greatest impact on the bottom line.
• Consider re-bidding a janitorial or landscaping contract, which could reduce operating expenses with no adverse effect on building operations
• Major building systems offer the greatest potential for increased efficiency and energy savings. When looking to reduce operating costs through capital improvements, you must ask what the payback is and over how long a period of time to determine efficacy.
• Cost- and time-saving innovations are becoming more frequent, including electronic rent payment and web-based systems that enable tenants to submit maintenance requests online.
• Proactive real estate managers are jumping on the green building movement to lower energy costs and to effect true environmental progress.
• The best green practices in property management revolve around alternatives in cleaning, landscaping, irrigation, energy reduction and conservation, and water conservation.
SAVE | EMAIL | PRINT | MOST POPULAR | RSS | REPRINTS
