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Multifamily Minute Reader Reflections: Where Are Your Costs Rising?
It's no secret that multifamily operating expenses are up across the board. We asked our 40,000 subscribers to be more precise and tell us what expenses are hitting harder.
Our question in last week's survey built on the previous results. Where have your multifamily expenses risen the most in the past year?
We usually get a decent amount of survey responses for the Multifamily Minute, but last week it really took off. I'd be willing to hazard a guess that rising expenses are something so widespread that we've all got views on them.
Survey Results
And interestingly, the results show a tie in first place. Taxes and insurance each received just shy of 40% of the total vote. Let's dig into the top two a bit after the results table.
Category | Percent of Respondents |
|---|---|
Insurance | 39% |
Taxes | 39% |
Renovations | 11% |
Major repairs | 6% |
Utilities | 3% |
Other | 2% |
Insurance Heading Up, Up, Up
Insurance advisory firm HUB projects a 20% increase in premiums on average this year, with some high-risk zones seeing them double.
There are a lot of reasons insurance premiums are shooting through the roof. Yes, natural disasters are one, for sure. Just take a quick look at the damage caused by, say, Hurricane Ian late last year, and it's easy to understand why many insurers may be hesitant about issuing policies in coastal areas. California's wildfires. The Midwest's tornadoes. The list goes on.
In reality, though, it isn't just natural disasters. Inflation and rising building costs are also playing a massive role in elevating premiums.
If your apartment building gets damaged, insurance will cover the repairs. But those repairs' price points have been skyrocketing — thanks to a cocktail of labor shortages and construction material cost increases.
Taxes Climbing
Taxes aren't increasing everywhere. But for multifamily properties in many major markets, the pain is real.
Because every state and even county or city may tax apartment complexes differently, it's difficult to find any wide, national statistics highlighting these shifts. Still, a look at a few anecdotes shows that the problem is very real:
Take the case of a 10-unit building in Chicago, where property taxes jumped 440% in a single year.
As much as we may like to point fingers at city and state officials (and, hey, I'm not saying you shouldn't), the major increases typically come from climbing property values. That's why you may be seeing a higher tax bill even if your area has lowered tax rates — multifamily property values have simply soared.
At least we can be glad that multifamily investments have some pretty great tax benefits that most other investing doesn't.
Sign Up for the Multifamily Minute
Wonder who we asked, exactly, for this survey? You, hopefully, and a bunch of other people with a lot of insights to share.
If we didn't ask you, though, that's because you still need to subscribe to the Multifamily Minute. It's not just a survey, though — you'll get the latest multifamily content every Tuesday, straight to your inbox. Sign up below.
Our Previous Survey
Last week's survey results were something of a spiritual predecessor to this week. We'd asked you what were the biggest pain points of owning multifamily in 2023.
Naturally, a lot of folks answered that rising expenses were the main cause of sleep loss. But some other interesting dynamics popped up, too. Read last week's survey analysis.