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LIHTC Operating Cost Trends

Explore the latest trends in LIHTC operating expenses and their impact on revenue. Gain valuable insights and data to make informed decisions. Presented by Michael Novogradac at the 2014 Fall Industry Meeting.

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LIHTC Operating Cost Trends

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  1. LIHTC Operating Cost Trends Michael Novogradac, CPA Managing Partner 2014 Fall Industry Meeting Novogradac & Company LLP Hilton Portland and Executive Tower October 7-8, 2014 Slides prepared by

  2. Outline Why Do We Care? Data Details Findings Expenses, In-Depth Other Observations

  3. Why Do We Care? www.novoco.com

  4. Sensitivity to Changes in Annual Expenses www.novoco.com

  5. Leverage Ratio: Market Rate vs. LIHTC $11,418 OPEX is 55% of revenue at year 16 OPEX is 82% of revenue at year 16 $8,000 $8,074 $7,793 OPEX is 75% of revenue at year 1 $6,837 $5,460 OPEX is 50% of revenue at year 1 $5,920 $6,388 $6,232 $4,100 $4,000 $4,400 Year Sources: IREM/REIS, AMI Growth Estimates, Novogradac Valuation Database

  6. Data Source Information AUDITED FINANCIALS 7% 93% Over 2,100 Properties Over 585,000 Units LIHTC Market Rate www.novoco.com/products

  7. Data Source Information 2013 data submissions… are due Oct. 31,2014 Look for an update in February of 2015! Current dataset 2010 2011 2012 2013 2014 2015 www.novoco.com/products

  8. What Have We Found? www.novoco.com/journal

  9. What Have We Found? www.novoco.com/journal

  10. LIHTC Operating Expenses Growth is Outpacing Other Growth Indicators www.novoco.com/products

  11. Median LIHTC Property Operating Expenses by Category 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  12. Median LIHTC Property Operating Expenses by Category Property Insurance $225 $231 $262 5.4% 5.3% 5.9% 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  13. Median LIHTC Property Operating Expenses by Category Property Insurance Real Estate Taxes $259 $253 $281 6.0% 5.7% 6.8% 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  14. Median LIHTC Property Operating Expenses by Category Property Insurance Management Fees Real Estate Taxes Tied to change in rental income $419 $434 $394 9.8% 9.7% 9.5% 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  15. Median LIHTC Property Operating Expenses by Category Property Insurance Management Fees Real Estate Taxes Administration $565 $560 $548 13.2% 12.6% 13.1% 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  16. Median LIHTC Property Operating Expenses by Category Property Insurance Management Fees Utilities Real Estate Taxes Administration $728 $768 $780 17.5% 17.6% 17.8% 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  17. Median LIHTC Property Operating Expenses by Category Property Insurance Management Fees Utilities Real Estate Taxes Administration Repair & Maintenance Repair & Maintenance vs. Replacement Reserves? $706 $736 $645 16.6% 16.3% 15.5% 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  18. Median LIHTC Property Operating Expenses by Category Property Insurance Management Fees Utilities Real Estate Taxes Administration Repair & Maintenance Payroll $1,131 $1,100 $1,163 26.2% 26.2% 26.4% 2010 Total: $4,162.68 2011 Total: $4,324.64 2012 Total: $4,440.27 2010 2011 2012 www.novoco.com/products “Same Store Analysis” Used

  19. Operating Expense Change Over the 3 Years “Same Store Analysis” Used

  20. Operating Expense Change Over the 3 Years “Same Store Analysis” Used

  21. Comparing Acq/Rehab Properties with New Properties www.novoco.com

  22. Administrative Costs Per Unit LIHTC Properties vs. Market Rate Properties www.novoco.com/products

  23. LIHTC Property Operating Expenses Slightly Decline as the Size of the Property Grows 50 units: $4,937.22 200 units: $4,768.68 300 units: $4,659.54 100 units: $4,880.39 Number of Units www.novoco.com/products

  24. LIHTC Property Administrative Expenses Also Slightly Decline as the Size of the Property Grows 50 units: $709.46 200 units: $585.93 300 units: $515.78 100 units: $665.63 Number of Units www.novoco.com/products

  25. www.novoco.com/products

  26. www.novoco.com

  27. BIG DATA BIG DATA Robust Data VS. www.novoco.com/products

  28. Keep Up to Date on Future Editions! www.twitter.com/novogradac

  29. Questions? ? www.novoco.com

  30. LIHTC Operating Cost Trends Michael Novogradac, CPA Managing Partner 2014 Fall Industry Meeting Novogradac & Company LLP Hilton Portland and Executive Tower October 7-8, 2014 Slides prepared by

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