Multifamily Expenses Continue to Skyrocket in 2024
Moody’s latest analysis reveals that multifamily property owners’ financial challenges have persisted into 2024. Despite efforts to manage operational expenses like insurance, utilities, and property taxes, these costs continue to outpace revenue growth, straining net operating incomes (NOI). With annual effective revenue growth expected to remain below 2% this year, the pressure on NOI is significant, impacting property valuations and the ability to refinance. Some landlords are facing difficulties in maintaining required insurance coverage, affecting their loan agreements and creating ripple effects for lenders. To offset rising expenses, landlords have raised rents, keeping the average operating expense ratio stable at around 45% over recent years, including pre-pandemic levels. This has shifted the burden onto renters, contributing to inflationary pressures, particularly in housing costs. The heightened delivery of new multifamily properties further complicates the outlook, challenging assumptions of sustained rent growth amid increased supply and potentially decreased demand.
