*We understand that this may be a sensitive topic. However, we feel it is important to educate our tenants and the general public on how parts of the apartment business work.
Many people believe that their rent should be forgiven due to the economic impact of the pandemic. They feel like apartment owners profit huge amounts of money and could easily forgive rent. This is simply not the case. With a little help from the National Apartment Association (NAA), we’ve created a breakdown of where your rent money goes.
Breaking Down $1.00 of Rent
There exists a misconception that rental housing owners enjoy large margins and can continue operating in the absence of rent payments. With so much discussion around rent payments during COVID-19, the rental housing industry would like to explain the breakdown of $1 of rent.
For instance, let us start here. On average, only 9 cents of every dollar is returned to owners. This includes the many apartment owners who are themselves small businesses and rely on this revenue to make ends meet. It also includes investors, which include public pensions and 401K’s, on which many Americans rely—whether or not they reside in rental housing.
Approximately 39 cents of every $1 pays for the mortgage on the property. Roughly two-thirds of the apartment industry has private lenders and are ineligible for federal mortgage forbearance via the CARES Act. This is a critical expense, as mortgage foreclosures put all residents at risk of losing their housing.
10 cents of every $1 is spent on capital expenditures. This includes roof and HVAC replacement and other important repairs that help ensure safe, quality housing. Did you know that there are over 40 million rental housing residents in the United States?
27 cents of every $1 covers payroll expenses. This includes paying employees who operate and maintain the property, ongoing maintenance, utilities, insurance, and more.
14 cents of every $1 goes to property taxes. This money in turn supports the community through financing for schools, teachers, emergency services and other important local needs.
What is Our Goal with this?
Our goal with all of this is not to create some emotional story about apartment owners and managers. Our goal is truly to educate the greater population on how our business works. Above all, we hope to provide transparency.
Essentially, mortgage payments and investor returns, which help support many Americans’ retirement plans, and dollars put back into the apartment community to ensure quality living for residents. In other words, a rent payment is much more important than one might otherwise realize.