Stable Homes. Stable Families. Stable Properties.

Growing up is hard enough.?? Not having housing stability only makes it harder.

Many of us might remember walking into the lunchroom during that first day at a new school. That fish out of water feeling.? Not having a place to sit.? ?Desperately scanning the crowd. Hoping to make a connection.??

It's a lot easier to get through the first day when you know you will have four years ahead of you to make friends and find your rhythm. But, if you don't know where you will be living next year or next month, it is ridiculously hard. Every day can feel like the first day of school.

And that is just one of many reasons why housing stability is a key principle of the Multifamily Impact Framework?

WHY DOES HOUSING STABILITY MATTER?

The social benefits of housing stability extend to kids, their parents and throughout our communities.

• Increased Academic Performance:? Frequent moves due to housing instability often result in absences and school changes, which can cause children to fall behind academically.? Kids in stable housing are more likely to do better in school. They benefit from continuity in their learning environment, access to educational resources, and the ability to form stable relationships with teachers and peers.
• Improved Social and Emotional Development:?? Housing stability also contributes to better social and emotional well-being. Kids who are always on the move may struggle to form lasting friendships and develop relationships with teachers and coaches, leading to feelings of isolation and stress.?
• Higher Graduation Rates:? Housing stability is also associated with higher graduation rates. When children are not subjected to the stress and disruptions of frequent moves, they are more likely to stay in school and graduate, setting the foundation for future success.
• Improved Mental Health: The stress associated with housing instability, such as frequent moves or the threat of eviction, can make existing mental health issues - like anxiety and depression - worse. ?When a person is not constantly worried about eviction or finding a new place to live, their stress goes down and their mental health improves.? ?
• Economic Stability: Having a stable place to call home also increases job security.? And it gives people a chance to invest in more education, better transportation, and job training, which can lead to better employment opportunities and increased economic mobility.
• Community Engagement: People in stable housing are also more likely to engage in their communities, take part in local events, and vote. Not only does this deepen a person’s connection with their community, but it also strengthens the entire community.??

The benefits of housing stability extend to local governments, taxpayers and the business community as well.

• Lower Administrative, Legal and Public Health Costs: ??The economic costs of housing instability to state and local governments are significant, spanning various direct and indirect expenses that include legal processing, emergency shelter, and public health services.?? When housing stability goes up, these costs to the taxpayer go down.
• Economic Productivity: The indirect costs of housing instability include reduced economic productivity and job loss. When a person has a stable place to live, they are more likely to have stable employment which not only helps them build their career but also lowers the cost of hiring and retraining employees for local businesses.

IS HOUSING STABILITY GOOD FOR INVESTORS?

To best understand how impact practices like housing stability make financial sense for investors, it is important to take a step back and understand how a property makes money.? And to do that, one must first understand Net Operating Income.

Net Operating Income (NOI) represents the sum of a property’s Effective Gross Income (EGI) minus Operating Expenses (OE).? It is the primary indicator of a multifamily property's financial health and the basis for how properties are valued and underwritten.??

If properties were people, then calculating a property’s NOI would be the equivalent of taking someone’s temperature. ??

Housing stability strengthens NOI because when more renters have housing stability, the effective gross income at a property becomes more stable and operating expenses go down.

Housing Stability and Lower Operating Expenses

• Lower Unit Turnover Costs: Each time a renter moves out, property managers incur costs associated with preparing the unit for the next occupant. These costs include cleaning, repairs, painting, and sometimes renovations. Stable housing reduces the frequency of these turnovers, leading to significant savings.
• Decreased Marketing and Leasing Expenses: High turnover rates also require more frequent marketing efforts to attract new renters, including advertising, leasing commissions, and administrative costs. Housing stability reduces the need for these expenditures, as fewer units need to be filled regularly.
• Reduced Legal and Compliance Costs: Stable housing also reduces the likelihood of legal issues related to lease terminations, evictions, and disputes over security deposits, further decreasing costs associated with vacancy and turnover.

Housing Stability and Net Rental Income

• Lower Bad Debt Costs:??When a renter falls behind on rent or is evicted for non payment, the economic costs are significant for everyone. Improving housing stability can significantly reduce bad debt costs in multifamily properties and allow property managers to avoid the negative financial impact of lost rent, legal fees, and turnover expenses.
• Stable Occupancy Rates and Fewer Vacant Units: When renters stay longer, there are fewer periods when units are vacant. Vacant units represent lost revenue. Reducing turnover and improving occupancy can directly translate to more consistent cash flow for property owners.

HOW DO YOU MEASURE HOUSING STABILITY AT A MULTIFAMILY PROPERTY?

According to the Multifamily Impact Framework? , housing stability in the multifamily sector is achieved when a household is not more than 30 days delinquent on rent or has not moved?in the past twelve months for financial reasons.? To assess the level of housing stability at a multifamily property, there are three key data points to consider.

?1) Resident Retention Rates:? The resident retention rate for a multifamily property measures the percentage of renters who choose to renew their leases and remain in the property over a given period, typically a year. ?High retention rates are a good proxy for housing stability because they indicate that renters are choosing to renew their leases and remain in the property.

2) Average Length of Stay: For multifamily properties, the average length of stay is the average duration that residents remain in a rental unit from move-in to move-out.? Generally speaking. the longer a renter stays, the more housing stable they become.

3) Bad Debt Ratio:? The bad debt ratio for a multifamily property typically reflects the percentage of rent that is not collected due to renters who are unable to pay and are more than 30 days delinquent. It is the most consistent method by which to tell if renters are falling behind on rent or not.

These three metrics enable property owners and investors to establish a solid assessment of housing stability that can be compared to benchmark averages of comparable properties in the same market.?? ?

WHAT IS THE MINIMUM THRESHOLD FOR IMPACT?

Establishing a consistent industry minimum standard for housing stability helps property owners set clear impact-driven goals across their portfolio and makes it easier for investors to assess affordable multifamily housing investment opportunities.

The Multifamily Impact Framework’s threshold for housing stability requires investors and property owners to incorporate housing stability into their impact plan(s) and investment strategies by committing to specific practices designed to increase housing stability, lower bad debt costs and improved resident retention rates and lengths of stay. ? These practices should include one or all of the following services:

1) Access to Emergency Rental Assistance in the form of grants or 0% loans: Emergency rental assistance programs can be a lifeline to renters who experience unexpected hardships such as job loss, medical bills, or other emergencies that impact their ability to pay rent. By covering rent arrears or future rent, these programs can help reduce evictions for non-payment, maintain housing stability and help break the cycle of housing instability.??

2) Flexible Payment Plans and Incentives that do not increase renter debt: Creating flexible payment options, such as splitting the rent into multiple payments within a month or offering discounts for early or automatic payments, can make it easier for renters to manage their bills and not fall behind on rent. ??

3) Eviction prevention programs:? While eviction prevention programs can be extremely beneficial to improving housing stability, they can be challenging to adopt across a broad portfolio because eviction policies and regulations are unique to each jurisdiction.? However, most successful eviction prevention programs include one or more of the following elements:

• Mediation and Dispute Resolution Services: These programs provide mediation between landlords and renters to resolve conflicts that may otherwise lead to eviction. They can also address issues such as lease violations or disputes over rent payments and facilitating agreements that keep renters housed.?
• Rent Payment Plans and Counseling: Programs often work with renters to create structured repayment plans tailored to their financial situation, allowing them to gradually pay off overdue rent without facing eviction. Financial counseling provided through these programs helps renters budget better and reduce the accumulation of bad debt.
• Renter Education and Support Services: Eviction prevention programs frequently offer renter education on rights, responsibilities, and financial management. Educated renters are more likely to maintain consistent rent payments, understand the importance of timely communication, and seek help before their debts become unmanageable.

It is important to remember that this represents the minimum threshold for impact. Many property owners exceed this threshold, and the Framework includes specific reporting guidance to help these organizations communicate their additional impact to investors.

If you are interested in learning more about housing stability and other multifamily impact investing standards, please feel free to download the Multifamily Impact Framework?.? ?

Since its introduction last year, the framework has been downloaded by more than 300 organizations across the United States and is updated on an annual basis to reflect the input of MIC members and the broader multifamily sector. ?To learn more about the Multifamily Impact Council, provide feedback, and learn more about the seven principles of multifamily impact investing, please visit the MIC website .

Bob Simpson is a nationally recognized expert in affordable, green and healthy housing with more than 25 years of experience working at the highest levels of housing finance and public policy. He is the CEO and Founder of the Multifamily Impact Council, a non-profit organization focused on creating industry standards for impact investing that help increase the flow of capital to support affordable and sustainable multifamily rental housing properties in the United States.

List of References:

• Voight, A., Shinn, M., & Nation, M. (2012). The Longitudinal Effects of Residential Mobility on the Academic Achievement of Urban Elementary and Middle School Students. Educational Researcher, 41(9), 385-392.
• Maqbool, N., Viveiros, J., & Ault, M. (2015). The Impacts of Affordable Housing on Health: A Research Summary. Center for Housing Policy.
• Robert Wood Johnson Foundation. (2011). Housing and Health: How Housing Affects Health.
• Lipman, B. J., Lubell, J., & Salomon, E. (2005). Something’s Gotta Give: Working Families and the Cost of Housing. Center for Housing Policy.
• Sandstrom, H., & Huerta, S. (2013). The Negative Effects of Instability on Child Development: A Research Synthesis. Urban Institute.
• National Apartment Association. (2019). Managing Turnover in Multifamily Housing.
• Urban Land Institute. (2020). The Economics of Multifamily Turnover.
• Moody’s Analytics. (2019). Understanding Multifamily Property Performance.
• Institute for Real Estate Management. (2018). Effective Property Management and Reduced Turnover Costs.
• Urban Institute. (2021). Eviction Prevention and Rent Relief Programs: Best Practices for Reducing Tenant Turnover. Urban Institute.
• Housing Matters. (2022). The Benefits of Eviction Prevention Programs for Tenants and Property Owners. Housing Matters.
• Enterprise Community Partners. (2021). Eviction Prevention as a Strategy to Reduce Costs and Maintain Stable Housing. Enterprise Community Partners.
• National Housing Law Project (NHLP). (2020). Eviction Prevention Tools for Landlords and Tenants. NHLP.
• Urban Institute. (2021). How Emergency Rental Assistance Programs Stabilize Families and Communities. Urban Institute.
• Brookings Institution. (2021). Rental Assistance as a Tool to Promote Housing Stability During the Pandemic. Brookings.
• Joint Center for Housing Studies of Harvard University. (2022). Understanding the Impact of Emergency Rental Assistance on Housing Stability. Harvard JCHS.

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