Affordable housing is a critical component of any society, ensuring that individuals and families have access to safe, decent, and reasonably priced accommodation.
In the United States, where housing affordability is a pressing issue, effective management of affordable housing properties is essential to meet the needs of diverse communities. However, managing affordable housing comes with its unique set of challenges and requires a nuanced understanding of key metrics to ensure success.
In this blog post, we’ll explore the essential metrics that every affordable housing manager in the US should be familiar with.
Occupancy Rate
In housing developments, the occupancy rate is a measure of how many units are occupied at a given time. Affordable housing managers need to keep occupancy rates high to stay financially viable and fulfill their mission. By monitoring occupancy rates, managers can identify trends, fill vacancies quickly, and target strategies to keep tenants. Let’s understand high and low occupancy rates:
- High occupancy rate: This means most units (let’s say 80 or more) have tenants living in them. This is good for the building’s finances and ensures they can keep offering affordable housing.
- Low occupancy rate: This means many units are empty (less than 50 in our example). This can hurt the building’s ability to pay its bills and continue providing housing.
Rent Collection Rate
The financial health of affordable housing properties depends on effective rent collection. The rent collection rate is determined by the percentage of rent payments that are received on time compared to the total amount due. To support residents facing challenges, managers should track rent collection rates closely and implement proactive measures such as payment reminders and financial assistance programs. Let’s understand high and low rent collection rates:
- High Rent Collection Rate (e.g., 90%): This means most tenants (90 out of 100) pay their rent on time. This is good news as the complex has enough money to cover its expenses and keep things running smoothly.
- Low Rent Collection Rate (e.g., 70%): This means a significant number of tenants (30 out of 100) are late or haven’t paid their rent. This can cause financial problems for the complex and limit their ability to maintain the property or help other residents.
If you want to improve your rent collection rate then relying on the traditional methods will not be a good idea. You should opt for the tech new solutions instead like ACH payments, which automates and eases the rent collection. You should also invest in using property management software if you have a big or mid-sized portfolio.
Turnover Rate
The turnover rate measures how often tenants move into and out of affordable housing. As a housing manager, you should know how much a tenant’s turnover costs. A high number of turnovers can increase operating costs related to vacancy turnover, maintenance, and marketing. Managers can address underlying issues such as dissatisfaction with living conditions, affordability concerns, or demographic changes by understanding the reasons behind turnover, whether voluntary or involuntary. Let’s understand how this affects the management:
- Low Turnover Rate (Few Moves): This means most tenants stay for a long time. This is generally good for the complex as it’s more stable financially.
- High Turnover Rate (Many Moves): This means a lot of tenants are moving out and new ones are moving in frequently. This can be expensive for the complex because:
- Empty Apartments Mean Lost Rent: While they find a new tenant, the complex isn’t collecting rent for that apartment.
- Costs Money to Refill Apartments: Advertising, cleaning, and repairs to get the apartment ready for a new tenant add up.
If you are an affordable housing manager and your apartments have a high turnover rate, you need to carefully look into this matter. You should ask for feedback, do regular maintenance check visits, address to all the issues promptly, and maintain good relations with the tenants.
Operating Expenses Ratio
Maintaining the affordability of affordable housing properties requires efficient operating expenses management. An operating expenses ratio is calculated by dividing total operating expenses by effective gross income to determine the percentage of income allocated to operational expenses. Managers can use this ratio to identify areas where expenses may be excessive and implement cost-saving measures without compromising housing quality. Here’s what the ratio tells us:
- Low Ratio (e.g., 60%): This is good! It means the complex is spending a relatively low proportion of its income on expenses. They have more leftover money for maintenance, improvements, or emergencies.
- High Ratio (e.g., 85%): This is not ideal. The complex is spending a large portion of its income on expenses. They might need to find ways to cut costs or raise income (through higher rent or subsidies) to stay financially healthy.
Maintenance and Repair Costs
For the safety and well-being of residents, it is imperative to maintain the physical integrity of affordable housing properties. Maintaining a record of maintenance and repair costs helps managers allocate resources efficiently, prioritize critical repairs, and plan long-term capital improvements. The proactive maintenance of building systems and amenities can also prevent costly emergency repairs. For example, you need to take care of the interior and exterior maintenance. It is also important to prepare for seasonal changes such as spring maintenance and winterizing your housing properties before winter.
Compliance with Regulatory Requirements
Managers must comply with all federal, state, and local regulations governing affordable housing programs. Complying with fair housing laws and meeting subsidy eligibility criteria plays a key role in protecting tenants’ rights and preserving the integrity of affordable housing initiatives. It is important for managers to conduct regular audits and inspections to identify non-compliance areas and take corrective action as soon as possible.
Resident Satisfaction and Engagement
Affordable housing managers should place a high priority on residents’ well-being and satisfaction in addition to their financial metrics. By monitoring resident satisfaction through surveys, feedback mechanisms, and community engagement initiatives, the quality of services, amenities, and overall living experience can be improved. Creating a sense of community and responding to residents’ concerns promptly can contribute to higher retention rates.
Conclusion
Navigating the landscape of affordable housing management in the United States requires a comprehensive understanding of key metrics that drive operational efficiency, financial sustainability, and resident satisfaction.
By prioritizing metrics such as occupancy rate, rent collection rate, turnover rate, operating expenses ratio, maintenance costs, compliance with regulations, and resident engagement, managers can make informed decisions to optimize performance and fulfill the mission of providing safe, affordable housing for all.
As the demand for affordable housing continues to grow, mastering these metrics will be essential for meeting the evolving needs of communities across the country. If you want to learn and become the best affordable housing manager then you can check out our other free resources, and can attend the live and recorded webinars from the industry experts.
