Operating expenses consume 93 cents of every rent dollar

Wisconsin leads in profit after operating expenses

Research from the National Apartment Association (NAA) reveals that nationally, on average 93 cents of every rent dollar cover essential operating expenses and support local communities. In addition to national data, NAA’s research provides insights for 37 states plus D.C.

The research uses new data derived from federally mortgaged properties, provided in part by Thirty Capital Performance Group, to expand and improve upon NAA’s previous Dollar of Rent analysis.

Nationally, the top operating expense is the property’s mortgage which accounts for 46 cents. Other operating expenses like maintenance, insurance and utilities consume 27 cents. Local property taxes account for 11 cents, payroll expenses account for 7 cents and capital reserves account for 2 cents. That leaves the property owners with 7 cents of profit from each dollar of rent.

The research seems intended to provide pushback in the face of increasing calls for rent control or other industry regulations. It emphasizes that the 11 cents of property tax payments go back into the local community, funding schools, emergency services and other critical local needs.

States are different

The research was able to collect sufficient data from 37 states and the District of Columbia to compute state-level averages. The states with the highest average profitability at 9 cents per dollar of rent were Illinois, New York and Wisconsin. Seven states and Washington D.C. had the lowest average profitability at 5 cents per dollar of rent. Those states were Alabama, Maryland, Mississippi, New Mexico, Tennessee, Texas and Utah.

The highest share of each rent dollar going to mortgage expenses was in Colorado at 56 cents. In Utah, the share was 55 cents, while the share was 54 cents in California, Oregon and Washington. The lowest share of each dollar of rent going to mortgage expenses was in Michigan at 39 cents.

Operating expenses took the highest share of each rent dollar in Kentucky and Washington D.C. at 34 cents. They took the lowest share of each rent dollar in New Jersey at 22 cents.

Property taxes were highest in New Jersey at 16 cents of every rent dollar, followed by Connecticut at 15 cents. Property taxes were lowest in Arizona and Nevada at 4 cents of every dollar of rent.

The share of each rent dollar going to payroll varied from highs of 13 cents in Mississippi and 12 cents in Oklahoma to lows of 2 cents in Washington D.C. and 3 cents in Illinois, New Jersey and New York.

“Just like every sector of the economy and countless American households, the rental housing industry has grappled with escalating costs in the face of record inflation,” said Bob Pinnegar, NAA President and CEO. “Rental housing is a narrow margin industry that is often mischaracterized, but the data shows the truth – 93 cents of every rent dollar keep apartments running and support the local community. As we continue to contemplate housing affordability challenges, it is vital to keep these necessary expenses in mind.”

“Our research helps bridge the gap between data and informed policymaking,” said Leah Cuffy, NAA Director of Advocacy Research. “A nuanced understanding of the dollar of rent can help avoid policies that inadvertently squeeze rental housing providers and, in turn, jeopardize their residents, employees and communities.”

The full dollar breakdown, including breakdowns for the 37 states covered by the survey, can be found here.