Apartment Operating Expenses Have Changed Dramatically Since 2019

For apartment owners, investors, and lenders, the story of the multifamily market since 2019 has not simply been rising rents—it has been the unprecedented growth in operating expenses. While rents increased significantly during the post-pandemic period, many owners have discovered that expense growth has absorbed much of that revenue gain, placing increasing pressure on net operating income (NOI).

Recent research published by Marquette University highlights just how dramatic the shift has been. Since 2019, apartment operating expenses have increased across nearly every category, with property insurance leading the way. According to the study, insurance costs have risen approximately 156% since 2019, while administrative expenses increased 32%, maintenance expenses increased 15%, and property taxes increased 12%.

Insurance Has Become the Largest Concern:
The most significant change has been the explosion in property insurance premiums. Insurance carriers have faced increasing losses from severe weather events, rising construction costs, larger claim settlements, and reinsurance pricing pressures. As a result, apartment owners across the country have experienced annual premium increases that would have been unimaginable just a few years ago.

National multifamily studies confirm that insurance has become one of the fastest-growing operating expense categories in the industry. Recent industry data shows insurance expense growth substantially outpacing most other operating costs and becoming a major factor in property underwriting and valuation. ([Novoco][1])

For many apartment properties, particularly older assets, insurance is no longer a minor line item. Instead, it has become a major determinant of cash flow and investment performance.

Administrative Costs Continue to Rise:
Administrative expenses have increased approximately 32% since 2019. These costs include property management software, accounting services, legal fees, compliance requirements, office expenses, and management overhead.

Owners are facing a more complex operating environment than they did before the pandemic. Increased regulatory requirements, higher labor costs, and growing technology demands have all contributed to rising administrative expenses. Even self-managed properties are seeing increased costs associated with accounting, tenant communications, software subscriptions, and recordkeeping.

Maintenance Costs Reflect Labor and Material Inflation:
Maintenance expenses have increased approximately 15% since 2019. While this increase may appear modest compared to insurance costs, it remains significant because maintenance is a recurring expense that directly affects tenant retention and property condition.

Contractor labor shortages, higher wages for maintenance personnel, and increased material costs have all contributed to higher repair and maintenance expenses. National multifamily operating reports continue to show repairs and maintenance among the fastest-growing expense categories. ([Novoco][1])

Deferred maintenance has also become more expensive. Roof repairs, HVAC replacements, plumbing work, and appliance replacements all cost substantially more today than they did five years ago.

Property Taxes Remain a Challenge:
Property taxes have increased approximately 12% since 2019. Although this increase trails other expense categories, taxes remain one of the largest individual operating expenses for apartment properties.

Many local governments have reassessed properties based on higher market values, causing taxable assessments to rise. In certain markets, tax increases continue to outpace inflation and create additional pressure on property owners' operating budgets.

Impact on Net Operating Income and Valuation:
The combined effect of these expense increases is significant. Every additional dollar spent on operating expenses reduces NOI dollar-for-dollar.

Because commercial real estate values are largely determined by capitalizing NOI, expense growth has a direct impact on property valuation. For example, a property that experiences an additional $50,000 in annual operating expenses could see its value reduced by more than $700,000 at a 7.0% capitalization rate.

As a result, investors, lenders, and property managers are paying closer attention than ever to expense controls, insurance renewals, maintenance planning, and tax appeals.

Looking Ahead:
The multifamily industry continues to face a new operating reality. While rent growth has moderated in many markets, operating expenses remain elevated. Insurance costs, in particular, are expected to remain a key challenge for apartment owners nationwide.

Successful apartment operators will increasingly be those who focus not only on growing revenue but also on controlling expenses, managing risk, and preserving NOI. In today's market, expense management has become just as important as leasing and occupancy.

For investors evaluating apartment acquisitions, understanding operating expense trends since 2019 is no longer optional—it is essential to accurately underwriting risk and projecting future returns.