Created by on 5/14/2015 11:35:42 AM

By Paul Votto, National Director of Housing Programs

In our Certified Manager of Housing program we ask attendees what they think is the average turnover rate for all apartment communities nationwide. Inevitably, the vast majority make a guess that is below the average – usually well below. When we tell participants that, according to the National Apartment Association's 2014 survey of more than 3,000 properties (that are individually metered for utilities), the average is 54%, most are shocked. Some don't even believe it. But it’s a fact. And frankly, it's not all that surprising when you think of it this way: if half your residents move out every year that means the average length of tenancy is two years. Now some individual residents will stay longer of course, but conversely, some will stay shorter periods of time. Put in that context, when you think of how mobile we are as a society, a 50% turnover rate is not all that surprising.

Now, of course, the type of property has a significant bearing on turnover. Subsidized properties, for example, have a lower turnover rate as you might expect. But again, not as low as most people predict. The NAA survey found that the average turnover among the subsidized properties responding was 39%.

Another interesting fact is the difference in turnover rates between individually metered and master-metered properties. For all properties combined (market-rate and subsidized) the rates are 54% and 45% respectively. For subsidized properties the rate is 39% for individually metered properties and 21% for master-metered properties. There are likely a number of factors that account for this difference including the likelihood that master-metered properties are older and house an older, less mobile population.

While this data is interesting, what I find most surprising when we discuss the topic in our training is how few managers know what the turnover rate is at their properties and how many are convinced the rate is lower than what logic tells you is possible. For example, one manager insisted that the turnover at her property was 2%. When I explained that meant her average tenancy was 50 years, she reconsidered.

Managers of senior housing argue that rates in their buildings are lower than the average. While the NAA data doesn’t break out the rates for senior housing, my experience tells me that those managers are correct -- the rate is lower. But I'd also argue it may not be as low as they think. Sure, most of us have heard of (or experienced) the resident that has been in tenancy for years, but we also are aware of the ones that last only a few months due to health or other unforeseen reasons.

Why does it matter? Because turnover is one of the leading contributors to operating expense. And it's not just about unit preparation cost. It also contributes to vacancy loss, higher utilities in some cases, higher marketing costs, and a variety of other expenses and drains on a property's resources. No, not all turnover can be avoided, but reducing the number of voluntary move-outs for controllable reasons (most notably, quality of service) should be high on most managers' lists of to-dos.

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