5 Trends NAA Wants You to Know About in Property Management

Inflation is the defining factor impacting the industry's landscape.

An ever-shifting economic environment – spurred by a prolonged inflationary period – and persistent staffing and recruitment challenges are impacting operations for apartment owners and operators across the rental housing industry. To help shed light on the current landscape, the National Apartment Association (NAA) and AppFolio surveyed more than 2,000 property management professionals nationwide to uncover their most pressing concerns and discover the short- and long-term solutions they’re employing to help ease these challenges.

Here are some of the report’s most prominent findings, and what they reveal about the industry’s trajectory over the months and years to come.

Inflation has emerged as the defining factor impacting the industry’s landscape, with 76% of property management professionals citing operational efficiency as one of their top three challenges. Within this category, respondents listed reducing costs, finding high quality vendors/suppliers, tracking projects and freeing up the team from labor-intensive processes as their most pressing concerns.

“Inflation has spoken loud and clear in this year’s survey, touching many of the industry’s most pressing challenges,” said NAA Vice President of Research Paula Munger. “This doesn’t mean that the industry’s labor woes have disappeared, but it is a testament to the impacts of a high interest rate and high inflationary environment.”

While inflation itself has eased over the past few months, owners and operators continue to face monumental increases in operating expenses – particularly property taxes and insurance costs. As of June 2023, average quarterly apartment insurance premiums rose a whopping 33% year-over-year according to Marcus & Millichap. Certain markets saw even more staggering yearly increases: nearly 80% in Orange County, Calif. and almost 62% in Jacksonville, Fla.

To reduce costs, industry experts noted they were largely turning to technology, in addition to fostering stronger relationships with vendors to negotiate better deals, and working to streamline internal processes where applicable. Advances in technology are leading property management companies to automate administrative tasks and centralize the prospect life cycle, all in the name of operational efficiency.

Following operational efficiencies, 61% of respondents placed maximizing revenue and profits as one of their biggest hurdles. Diving deeper, property management professionals noted that navigating rising inflation pressures, increasing occupancy rates and retaining current residents were the most challenging tasks pertaining to revenue.

Across the board, rents continue to decline across the country. As of August 2023, Apartment List reported that rent growth had fallen to -1.2%, “the lowest level since the start of the pandemic” and far from the 2.3% average. As rents experience sluggish growth and supply pressures persist, industry leaders are focusing on maintaining margins by optimizing supplier negotiations, adjusting bonus programs and trying incentives to boost resident retention.

On the expense side, many owners and operators said they are prioritizing stable occupancy over rent growth for the remainder of the year – especially when asked how they might prepare for an economic slowdown. Many respondents cited that cutting costs would be a part of their proactive response, yet industry experts made it clear that costs would not be trimmed at the expense of the resident experience. Residents are the foundation of rental housing; without them, there is no business to operate.

Unsurprisingly, HR/staffing/recruitment continues to be a challenge across the board for owners and operators. Forty-two percent of survey respondents cited this as a top three concern, with attracting new team members, training new hires quickly and implementing retention strategies to reduce staff turnover as the most pressing tasks in the category.

Property management professionals made clear the longstanding tight labor market has had impacts across rental housing. In the survey, industry experts specifically commented on challenges to attract and retain on-site staff – especially maintenance professionals – and noted a general lack of qualified applicants.

In response, industry experts are focusing on strategies that prioritize employee happiness and well-being. As part of an important movement that is becoming more and more popular across all industries, a positive workplace culture is the key to addressing recruitment and retention challenges. One executive stated that they are working on their internal reputation with the same level of commitment as their external reputation. Others have hired recruiters who emphasize company culture to candidates, while some have given their employees more opportunities to participate in company initiatives. Significant pay increases and loyalty bonuses were also cited as drivers for emphasizing a more positive company culture.

The results of this year’s survey notably mark a clear distinction from how property management companies ranked their most pressing concerns just 18 months ago. In 2021 – which featured soaring demand for apartment living, record occupancy and rent growth – property management professionals ranked HR/staff/recruiting (74%) as their top challenge. The ranking’s shift in the 2023 survey particularly underscores just how powerful the impacts of inflation have been on owners and operators across the industry.

Though the survey’s 250 corporate respondents ranked their top challenges the same as all other respondents, a much higher percentage of C-Suite professionals (55%) said HR/staffing/recruiting was their top concern, specifically noting the challenge of staying competitive with staff compensation. In other categories, corporate professionals also noted the impact of growing regulation, both in terms of cost and compliance.

There’s no doubt that the rental housing industry continues to navigate a constantly shifting landscape shaped by inflation, labor constraints, growing regulation and much more. Property management professionals are seeing the tangible impacts of these challenges, clearly noting operational efficiency as their most pressing concern. Once again, however, the industry is rising to the task and meeting these challenges head on. The innovative solutions developed today will only foster a stronger industry for future generations of housing providers and residents alike.

Bob Pinnegar is the president and CEO of the National Apartment Association.

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