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NAA: Pandemic Magnified Multifamily Operators’ Longtime Challenges

The pandemic exacerbated challenges for multifamily operators in ways that had little to do with the nationwide eviction moratorium that was finally struck down by the U.S. Supreme Court. That’s among the broad conclusions to be drawn from a pair of surveys conducted under the auspices of the National Apartment Association (NAA) recently. 

This past summer, AppFolio sponsored an online survey of rental housing providers in the United States, conducted by the NAA and ndp | analytics. The survey, which received a total of 1,048 responses, focused on the top challenges currently facing the rental housing industry.  

The most common top challenge was HR, staffing and recruitment, with 74% of respondents selecting it as one of their top three challenges. Operational efficiencies and maximizing revenue were the second and third most common challenges, with nearly 63% and 48% selecting them as a top challenge, respectively. 

“Human resources issues, operating more efficiently and maximizing revenue have been the top concerns for rental housing providers for quite some time,” according to the NAA. “However, the impacts of COVID-19 have heightened these challenges for owners and operators.” 

After selecting their top three challenges, respondents rated a set of activities within each of those topics. Each activity was rated on a scale of one to five, with five being the most challenging. 

Within the topic of HR, staffing and recruitment challenges, attracting new team members, training new hires and reducing turnover were rated as the most difficult activities. The NAA says employers are struggling to keep their onsite offices fully staffed as a result of “high salary demands, low morale, concerns surrounding COVID-19 and labor shortages.” 

Inside the issue of operational efficiencies, finding high quality vendors, reducing labor-intensive processes and reducing costs were rated as the most difficult challenges. Changes brought on by the pandemic have led owners and operators to rethink their operational strategies in order to improve their bottom lines and employee productivity. 

Increasing NOI, mitigating bad debt loss and returning performance to pre-pandemic levels were rated as the leading challenges in the realm of maximizing revenue. NAA points out that rental housing providers are struggling with escalating expenses due to COVID-19 and rental income losses. 

Separately, the 2021 NAA Survey of Income and Expenses in Rental Apartment Communities found that despite a strong recovery taking hold in 2021 among professionally managed and maintained properties, 2020 financial results illustrate just how hard the industry was hit across most income and expense categories. 

Total revenue, measured as a percent of Gross Potential Rent, fell nearly 200 basis points from the prior year while operating expenses rose 60 bps. The double whammy resulted in a 3.3% loss year-over-year in average NOI per unit, the first such decrease since 2010 in the aftermath of the Great Recession. 

At the pandemic’s zenith, delinquencies rose because of financial hardships among residents who lost their jobs, particularly those in the lower-paying services sector. A pullback in demand during the shutdown period also contributed to revenue declines.  

“The desire by residents to stay put during the depths of the pandemic, coupled with the propensity of owners and operators to keep renewal rents flat, translated into far fewer opportunities to maximize revenue,” according to NAA. 

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

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