Staying Ahead in Multifamily: Key Takeaways from the 2023 Income/Expense IQ Report
Staying Ahead in Multifamily:
Key Takeaways from the
2023 Income/Expense IQ Report
As multifamily owners and operators face rising expenses and tighter margins, understanding the latest industry trends is essential for making informed decisions. The recently released 2023 Income/Expense IQ Report, a collaboration between the National Apartment Association (NAA), the Institute of Real Estate Management (IREM), and the Building Owners and Managers Association (BOMA), offers valuable insights into the financial challenges and opportunities in the rental housing market.
At Utility Ranger, we make it a priority to stay on top of these trends so our clients can remain competitive and efficient. Here’s a breakdown of the most significant findings from the report and what they mean for multifamily professionals.
Top Trends in Multifamily Operations
Expenses Are Outpacing Revenue Growth
While rent growth slowed to 3.6% in 2023—a sharp decline from prior years—operating expenses surged across nearly every category. Key highlights include:
Insurance Costs: Up 26.2%, driven by natural disasters and increasing risk aversion in the insurance market. Coastal markets, in particular, have been hit hard.
Repairs and Maintenance: Increased by 11.8%, with labor-intensive services like janitorial work and painting driving much of the rise.
Property Taxes: Jumped 9.7%, accounting for over a quarter of operating expenses, with markets like Los Angeles and Orlando experiencing the largest spikes.
Utility Costs Stabilized
After an 18% spike in 2022, utility costs grew by only 1.4% in 2023. While this is a welcome reprieve, utilities remain a substantial portion of operating budgets, particularly in markets with high water rates or aging infrastructure. Managing these costs effectively is essential for maintaining profitability.
Bad Debt and Concessions on the Rise
As operators worked to maintain occupancy in a challenging market, bad debt increased by 39%, and concessions more than doubled. This highlights the importance of clear communication with residents, especially around shared costs like utilities, to prevent misunderstandings and disputes.
What This Means for Multifamily Operators
With operating expenses rising faster than revenues, owners and operators need to look for opportunities to recover costs and improve efficiency. Utility billing is one area where operators can take immediate action to make an impact.
1. Utility Billing as a Cost-Recovery Tool
Utility billing programs like Ratio Utility Billing Systems (RUBS) allow properties to allocate utility expenses fairly to residents based on occupancy, unit size, or other factors. This ensures that utility costs are shared equitably, helping properties recover a significant portion of their operating expenses.
2. Improving Transparency and Resident Satisfaction
Clear and accurate billing systems build trust with residents, particularly as utility costs become a larger share of their housing expenses. Providing detailed billing information helps residents understand their usage and reinforces the value of shared resources like water and sewer systems.
3. Keeping Operations Efficient
Digitizing utility billing processes with platforms like Utility Ranger can help multifamily operators reduce administrative burdens, minimize errors, and streamline workflows. This allows teams to focus on more strategic priorities while keeping operating costs under control.
How Utility Ranger Stays Ahead of the Trends
At Utility Ranger, we’re committed to helping multifamily professionals navigate challenges like rising costs and shifting market conditions. By staying informed on industry benchmarks and adopting forward-thinking strategies, we empower our clients to make data-driven decisions that improve both NOI and resident satisfaction.
The 2023 Income/Expense IQ Report underscores the importance of proactive cost management, and utility billing is a critical piece of that puzzle. With Utility Ranger, you can simplify the process, recover costs effectively, and provide residents with a seamless experience—all while staying on top of the latest trends in multifamily operations.
Looking Ahead
As we head into 2025, the multifamily industry faces both challenges and opportunities. While some expenses are beginning to stabilize, others—like insurance and property taxes—show no signs of slowing down. By leveraging tools like utility billing to recover costs and improve efficiency, multifamily operators can position themselves for success in an increasingly competitive market.
Stay tuned for more updates and insights from Utility Ranger as we continue to track industry trends and deliver solutions tailored to multifamily professionals.
