On average, 93 cents of every rent dollar collected by property owners covers essential operational expenses, with only 7 cents returned as profit, according to updated research from the National Apartment Association (NAA).

“Just like every sector of the economy and countless American households, the rental housing industry has grappled with escalating costs in the face of record inflation,” says Bob Pinnegar, NAA president and CEO. “Rental housing is a narrow margin industry that is often mischaracterized, but the data shows the truth—93 cents of every rent dollar keep apartments running and support the local community. As we continue to contemplate housing affordability challenges, it is vital to keep these necessary expenses in mind.”

The NAA’s report attempts to inform the reality of the rental housing industry, which is predominantly made up of small mom-and-pop owners. The data’s illustration of narrow profit margins can help inform against “imposing harmful public policies without understanding the economic intricacies,” according to the NAA.

“Our research helps bridge the gap between data and informed policymaking,” says Leah Cuffy, NAA director of advocacy research. “A nuanced understanding of the dollar of rent can help avoid policies that inadvertently squeeze rental housing providers and, in turn, jeopardize their residents, employees, and communities.”

The property’s mortgage is the top expense for property owners, accounting for 46 cents of every rent dollar collected. A further 27 cents cover operating expenses like maintenance, insurance, and utilities. Eleven cents goes back into the local community through property taxes, funding schools, emergency services, and other critical local needs.

Seven cents account for payroll for community staff, from property managers to maintenance teams, while owners allocate an average of 2 cents to capital expenditure reserves.

Data for the Dollar of Rent analysis was derived from federally mortgaged properties, provided in part by Thirty Capital Performance Group. In addition to national data, NAA’s research provides insights on a state-level for 37 states and Washington, D.C.

On a state-by-state basis, mortgage payments represent the largest share of an average dollar collected in Colorado (56 cents) and the smallest share in Michigan (39 cents). The profit for every dollar of rent is the highest, at 9 cents, in Illinois, New York, and Wisconsin. Profit is the lowest, on average, at 5 cents, in Alabama, Maryland, Mississippi, New Mexico, Tennessee, Texas, Utah, and Washington, D.C.

Operating expenses represented the highest share of every dollar collected in Kentucky and Washington, D.C., at 34 cents; operating expenses represented the lowest share of every dollar collected in New Jersey (22 cents).

Employee payroll expenses are the highest for property owners in Mississippi and Oklahoma, at 13 cents and 12 cents for every dollar, respectively. Employee payroll expenses represented the lowest share of the dollar in Washington, D.C., at 2 cents.

Data in the report is based on 2022 operating statements from 9,263 rental properties with five or more units securing loans in Freddie Mac CMBS. Data is comprised of lender underwritten financials and appraised values and serialized operating statements extracted from agency multifamily CMBS offering circulars and trustee reports.