Owners of affordable housing properties are facing rising operational costs, but higher income is helping offset some of those pressures. According to a new report from Yardi Matrix, expenses for affordable multifamily units grew by an average of 6.4% year-over-year through September 2024, a sharp rise from the typical 3-4% annual increase in prior years. While this marks a slight deceleration from the previous two years, it reflects an ongoing trend of rising operational costs, with insurance and marketing expenses driving the increases.

Insurance costs have been a significant burden, surging by 20.3% year-over-year in 2024. This increase is largely due to the rise in weather-related claims—hurricanes, floods, and wildfires—that have become more frequent and severe. Insurance now accounts for nearly 10% of total expenses for affordable housing properties, up from 5.6% in 2018. Regions like the Southeast, Southwest, and West have seen some of the highest premium increases, with cities like Houston, Tampa, and Los Angeles experiencing jumps of more than 25%.

Despite these rising expenses, affordable housing owners are benefiting from higher income growth. The rent increase formula for affordable housing, set annually by the U.S. Department of Housing and Urban Development (HUD), has allowed for larger rent hikes in recent years. That's in line with inflation and wage growth.