Trepp CRE Research has been running a series of reports on multifamily operating expenses. The reason is that even if, as expected by most, interest rates eventually start to drop, increased regular expenses are driving up the cost of operating multifamily properties and pushing down net operating income, as Moody's Analytics has pointed out.

Higher prices from inflation likely won't drop when cost increases from inflation come down to the target 2% annual rate. Insurance prices that have risen due to climate change-driven natural disasters may be up there for good. Taxes have continued to rise. Construction costs for new buildings, rehabs, and repair have been up more than 40% since 2019. All those expenses will be something lenders will look at closely when considering if debt service coverage ratios are in a safe range. Plus, it means less profit ultimately.

Trepp has looked at a number of the cost drivers in detail, like property insurance being up about 13.6% on average across the country from 2021 to 2022 — a single year's jump — and as much as 28% in some metros. Or tax increases that have run as much as 15.3% per unit between 2021 and 2022.