Overcoming Multifamily’s Top Challenges

Research from the NAA's Apartmentalize reveals the biggest concerns for operators.

Panel at NAA’s Apartmentalize. Photo by Diana Mosher

The apartment industry is showing strong signs of recovery following the pandemic, but operators are still dealing with the havoc that COVID wreaked on the business. From higher costs to drops in revenue, there are certainly challenges ahead. Using research released by the National Apartment Association (NAA) and sponsored by AppFolio, a session at NAA’s Apartmentalize conference explored what’s keeping corporate and on-site teams up at night and how to navigate some of these challenges.

According to moderator Daniel Waas, vice president, product marketing, AppFolio, NAA conducted the survey in August 2021 and again in April 2022. Each time there were about 1,000 responses. Sixty three percent of the respondent companies have been in business 10 years or more, and there is a mix of multifamily and student housing operators.

“For the top three challenges, HR staffing and recruitment continues to be the biggest concern followed by operational efficiencies and then maximizing revenue and profits,” said Paula Munger, assistant vice president, industry research and analysis, NAA.

Increasing materials cost is also a concern keeping operators up at night. Under the category of maximizing revenue and profits, the number one worry in August was increasing NOI and mitigating bad debt—we still had some eviction moratoriums in place at that time in certain places. In April, navigating the rising inflation pressures and optimizing ROI are the biggest challenges as well as simply having enough time to focus on strategy.

“HR staffing and recruitment is by far the biggest challenge, and we hear it from our members all the time about how difficult it is to attract and retain talent,” said Munger. “Also people are demanding higher compensation. Of course that’s a result of inflation and higher prices. Reducing staff turnover is also still a challenge for many of the respondents.”

When looking at the data by region, Munger pointed out that HR is the biggest problem across the board but especially in the Midwest and Mid-Atlantic. The research also looked at the biggest challenges by role. For owners, HR was the top concern but risk, compliance and regulation also ranked high. For property managers, HR topped the list followed by revenue and operational efficiencies.

“By far the bigger your company is, the more HR problems you are having,” added Munger. “When you look at the smallest companies less than 50 units this is really telling—you see that they’re having challenges with investment and development decisions.”

Small owners and operators are having a hard time growing their portfolios which is really a testament to property values and how they’ve increased over the past couple of years, according to Munger. They’re still rising and so they’re having trouble maximizing their revenue and profits

Finding Solutions

“It wasn’t a surprise to me that HR and recruitment is up at the top of concerns today,” said Donna Smith, president, Enclave Property Management, in response to the informal poll taken of the audience during the session. “But I want to start today with maximizing revenue and profits. That is what we are tasked with as operators. We are investment managers,” said Smith, whose presentation focused on how an operator can work to overcome the challenges cited in the NAA research.

Panel at NAA’s Apartmentalize. Photo by Diana Mosher

Smith noted that staffing and HR issues include the budgetary aspect when people are demanding higher salaries; but there is also the human/emotional component as well when dealing with turnover. According to Smith, if your day-to-day operations become more efficient, you can get more done with fewer people which then possibly means fewer full time employees and then you have the budget to increase salaries.

“I believe the core of the problem and the way to solve it is to create culture,” added Smith. “I think if I went around the room and asked each one of you what is culture, I would get a different answer. It has to do with perception. Over my last 15 years of leadership I have come to see there are three ingredients in the culture pie, and they have to be balanced.”

The most obvious, according to Smith, is company events and perks like the annual holiday bash or summer hours which are necessary for recruitment. You need to be strategic about how often you do them, because once you have them in place, you can’t take them away. Be mindful of how you execute and communicate them.

Leadership is also an important piece of the pie, and you need to continually invest in growing leaders at all levels of the company. Also you need to have key performance indictors (KPI) in place so employees can self manage.

“This empowers employees to do a good job without having to rely solely on team leaders. They can pat themselves on the back.” Staffing and HR issues are not likely to disappear overnight, but Smith’s suggestions offer a proactive way to improve the situation.

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