Apartment turnover (defined as the frequency with which individual apartment units are vacated and re-rented) is perhaps the single biggest recurring and controllable operating expense in any apartment community. Experienced property managers estimate that between lost rent monies, painting and replacement of carpet, fixtures and other equipment, one unit turned over represents an average cost of $1,200 or more in direct expenses.
Conventionally financed apartments typically experience turnover rates of anywhere from 50% to 75%. This means that in a 100 unit property with 75% turnover, 75 units are vacated and re-rented each year, resulting in an annual operating expense of $90,000.
When affordable housing communities enjoy a competitive advantage in rental rates over their market rate counterparts, they typically have a lower turnover rate. Some affordable communities, either because of the altruistic desire of the owners or because they are required to by tax credit authorities, provide social services dictated by the terms of their respective regulatory agreements. This agency is the Tax Credit Allocation Committee in the state of CA. These services are located on site of the affordable housing community and consist of education, health and social services provided both through direct service, onsite partnering agencies and by way of referral.
The purpose of this study is to determine if there is a correlation between the provision of social services and turnover rates. Annual turnover rates for the 2010 calendar year at 14 properties in Orange County were examined. All but three were managed by Village Property Management. For those properties without social services the lowest turnover rate was 25.8% at Imperial Park in Brea. The highest rate was 54.5% at Casa Nicolina in La Habra. However, the weighted average of properties without social services was 30.73%.
In contrast, the lowest turnover rate for those properties with social services was Tara Village in Cypress at 12.35%. The highest was North Hills in Fullerton with a turnover rate of 37.75%. The weighted average of all properties with social services was just 24.72%.
The data from this analysis suggests a strong positive correlation between the existence of onsite social services in affordable housing communities and and a reduction of turnover rates. At the same time, knowing that correlation does not imply causation, the data shoes that properties with social services had an average 6% less turnover on an annual basis. This translates to a direct financial benefit for affordable housing owners with an annual average value of $7,212 per property. We suggest that the activities of Project Access support a reduction in turnover rates because:
1. Social services provide informal childcare to a resident which is a direct financial benefit. Residents know their children have a safe and productive place to spend the 3-6:00 p.m. time frame, freeing up their parents time for other potential income generating opportunities.
2. Information and referral services connect residents with critical needs resources that help them avoid eviction during emergency circumstances through critical resources such as food and rental assistance.
3. Education services help residents increase their capacity to be self sufficient through human capital creation by way of employable skills including learning English, employment workshops and gaining computer skills.
4. Health education programs and disease health screenings focus on prevention and lead to better short (keeping people out of emergency rooms) and long term health (e.g. reducing the onset of diabetes) outcomes thereby reducing health care costs to the individual.
5. Community building efforts increase individual’s social capital through forming relationships with neighbors that can then be leveraged in the marketplace for economic gain. For example, a neighbor could share information on where to buy a discount good or service.