NLHA: Expenses Rise, Rent Revenues Fall, for Affordable Housing Providers
COVID-19 has increased costs and reduced revenue for housing providers, making it harder for them to operate and invest in future housing projects, according to a survey by the National Leased Housing Association (NLHA) and ndp analytics. Conducted in August, the survey asked low- and moderate-income housing providers about additional expenses related to COVID-19, changes in rent revenue, and how the pandemic has affected their plans.
Since the COVID-19 outbreak, housing providers have had to adapt to protect the health and safety of workers and residents, according to the report. In addition to normal operating expenses (payroll, maintenance, utilities), housing providers are spending money on air filtration, extra cleaning costs, personal protective equipment (PPE), and other health-related expenses to keep properties and personnel safe.
Like all other housing providers, these additional activities have increased costs for low- and moderate-income housing providers. Nearly three-quarters of housing providers have increased their operating expenses due to COVID-19. For these housing providers, operating expenses have increased by an average of 14.8 percent. The increase was greatest for housing providers with 1,000 units or fewer, whose operating expenses increased nearly 16.7 percent compared to 14.3 percent for those with 1,000 to 5,000 units and 11.7 percent for housing providers with 5,000 units or more.
Additionally, housing providers in the Northeast reported the highest increase in expenses (18.9 percent) followed by the West (15.8 percent), South (15.1 percent), and Midwest (10.3 percent). Housing providers with units in more than one region reported an average increase in operating expenses of 13.9 percent.
The additional operating costs were largely attributed to extra cleaning and personal protective equipment (PPE): 86.1 percent of low- and moderate-income housing providers identified extra cleaning as a primary driver of increased expenses, and 79.6 percent identified PPE as such. Significantly fewer housing providers identified costs related to telework, payroll, utilities, and air filtration as primary drivers of increased operating expenses.
Due to the nature of the COVID-19 economic crisis, many Americans who routinely paid rent on time were unable to make monthly payments because of furloughs, jobs loss, and other economic hardships, according to the report. The vast majority (88.9 percent) of low- and moderate-income housing providers saw declines in revenue because of the pandemic. The average decline in revenue is nearly 12 percent. And nearly 73 percent of housing providers said nonpayment was a main cause of the decline, and 49 percent identified incomplete or partial payments as a reason. In order to accommodate households struggling during the downturn, 77 percent of respondents reported implementing flexible payment plans.