The Multifamily Expense Squeeze: Where NOI Is Going

Slower rent growth is only half of the profitability challenge facing multifamily operators. The other half is happening below the revenue line.

Labor, insurance, maintenance, utilities, taxes and other property-level expenses have increased substantially over the past several years. When those expenses grow faster than revenue, even highly occupied communities can experience pressure on net operating income.

That makes expense management one of the most important levers available to today's multifamily operator.

Labor costs add up across a portfolio

Apartment communities are people-intensive businesses. Leasing teams answer inquiries, conduct tours and process applications. Maintenance teams respond to work orders and turn units. Property teams handle payments, resident communication and countless administrative tasks.

Each individual workflow represents a relatively small amount of time. Across hundreds or thousands of units, however, those hours become significant, and labor is getting more expensive.

That creates an important distinction for operators: controlling labor costs doesn't necessarily mean reducing headcount. It can mean reducing the amount of repetitive, manual work employees need to perform. Every task that can be automated, centralized or completed more efficiently creates capacity that teams can redirect toward work requiring human judgment and resident interaction.

Insurance is becoming a structural challenge

Some expenses are even harder for operators to control. Property insurance is one of the clearest examples. Research from the Federal Reserve found that inflation-adjusted monthly insurance costs for multifamily properties increased by more than 75% between 2019 and 2024, from approximately $39 to $68 per unit.

For an individual property, that increase is significant. Across a large portfolio, it can represent millions of dollars in additional annual expenses. Unlike certain operating costs, operators can't simply eliminate insurance. That means increases in relatively fixed expenses place even more pressure on the areas of the business where operators can make changes.

Maintenance creates another opportunity

Maintenance represents a similar challenge.The costs of materials, supplies and labor have increased, while resident expectations for fast, convenient service haven't gone away.The answer isn't simply completing fewer work orders. It's making the process more efficient.

Better scheduling, mobile workflows, centralized visibility and preventative maintenance can help teams reduce unnecessary trips, prioritize work more effectively and identify recurring issues before they become expensive emergencies.

Focus on the controllable expenses

Not every expense can be reduced. Owners can't automate away property taxes. They can't eliminate insurance coverage, and they can't control every increase in utilities, materials or wages.

But they can determine how efficiently their organizations respond to those pressures. That distinction is becoming increasingly important. When revenue growth is limited and uncontrollable costs are rising, improving the controllable side of the expense equation can become one of the most direct paths to protecting NOI. The next question is where to look first.

In the final blog post in this series, we'll explore the operational levers multifamily organizations can use to protect and potentially grow NOI without relying solely on higher rents.