Harder Than It Looks: Effective Property Management Requires Right People, Mix of Skills

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10 min read

Although the improving economy has helped boost occupancy rates to high levels at many low-income housing tax credit (LIHTC) properties, it still takes a combination of the right people, product, tools, and processes to achieve effective property management of these assets.

Site managers have a challenging job as they try to keep their community full, attract and retain good tenants, keep the rent checks coming in, control expenses, maintain the property, and assure continuous compliance with all of the rules of the LIHTC program and other government funding programs.

“The issues for managing tax credit properties are virtually the same as they are for conventional property, except they’re on steroids because of all the compliance requirements that we have on top of them,” says LIHTC compliance expert A. J. Johnson of A. J. Johnson Consulting Services, Inc., and a former owner of tax credit properties. “You’ve got the same challenges for managing a tax credit property that you have for a conventional property. But at the same time you’ve got to keep in mind these various tax credit program restrictions about how you can use the property, advertise the property, etc.”

The particular strategy and actions for effective management of a LIHTC project will depend on:

 

  • The location and particulars of the property (age, size, amenities, services, etc.);
  • The type of resident population (families, seniors, special needs);
  • Competing apartment properties (LIHTC, conventional) in the sub-market; and,
  • Budget limitations and staff capacity (company and property).

 

Qualified and Right People

“Our keys to success fall under three general categories,” says Kathy McDonnell, Vice President of Asset Management at National Church Residences, a nonprofit owner and developer of affordable housing based in Columbus, Ohio. “It’s people, process, and tools. Having the right people organized in the right way and supported by good strong processes and systems.”

NCR manages 301 affordable multifamily rental properties (83 LIHTC, 218 HUD-related) in 28 states containing 20,858 units. Properties range from 30 to 270 units; the average size is about 75; and the current average occupancy rate 97.4%.

“Our mission is to develop and manage homes integrated with supportive services for vulnerable populations,” says McDonnell. “Most of our communities are senior housing although we do have a number of small family housing properties, and we’ve recently developed permanent supportive housing serving the formerly homeless.”

Greg Brandwene, NCR Senior Regional Vice President, says the organization has its own internal education department (National Church Residences University) that trains site managers in leasing, marketing, tax credit compliance, Fair Housing requirements, budgeting, telephone techniques, and other skills.

Site staff for any company need to have compliance knowledge about the rules and restrictions of the LIHTC program and any other government funding programs utilized at their property (e.g., HOME, Section 8).

“Compliance is a huge challenge,” says Michael Johnson of Memphis, Tenn.-based Alco Management, Inc., which manages over 6,000 rental units, located in seven states in the Southeast. About 80% of the units are affordable; a majority of these are LIHTC. The portfolio’s properties range from 28 to more than 400 units; the average size about 100; and the current average occupancy rate about 97%.

According to Johnson, Alco expects site managers to have compliance certification or designation for the programs used on their property, such as in LIHTC compliance. “We do a lot of education ourselves with continuous training,” he adds.

Knowledge alone isn’t enough, though.

“Having the right manager at the site, someone who genuinely cares about what they’re doing” is one of the keys to successful property management, says Kerri Toth, President of Panama City, Fla.-based Royal American Management, Inc. “It’s especially critical in affordable housing, where you’re playing many roles as a site manager…[including] helping the residents find resources so they can be successful as a resident.”

Royal American Management manages 177 properties containing about 16,000 units, located mostly in the Southeast. The properties range from 16 to around 500 units; the average size 100-120 units; and the current average occupancy rate 96.1%. Most properties are affordable, including LIHTC, HUD, and USDA Rural Development.

While LIHTC owners and property management companies ideally will want to hire site managers already experienced and certified in tax credit compliance, A. J. Johnson believes first of all in finding individuals with good “people skills” who can relate well to prospective and current residents. They can always be trained in compliance, he says. “When I had my own management company some of my best on site staff came from outside the industry,” he says. “I’d find them in other service industries: retail, food service, bartenders.”

 

Keep the Residents Happy

Key to successful property management is keeping the current residents happy.

Part of this is having a good product: a well-kept property with attractive units, appealing unit/common amenities (e.g., available Wi-Fi, in-unit washers and dryers or at least hook-ups), and services and activities for residents.

For example, Melanie Poole, Vice President of Management Services at Atlanta, Ga.-based NorSouth, says all of its “HearthSide” brand senior communities have a business center that residents can use.

NorSouth manages 14 properties, all LIHTC new construction for seniors with a total 1,263 units, located with one exception in Georgia. The company has two brands of senior rental communities: “HearthSide,” for active seniors 62 or older, featuring a mix of market-rate and LIHTC units, and generally in suburban locations; and “MainStreet,” for seniors 55 and older, 100% tax credit, located in rural communities.

“Our tagline at our HearthSide communities is called Join the Journey,” says Poole. Everything we do is about putting them on a journey so that they can be more active. We have fitness classes every week, everything from senior Zumba to yoga classes to other activities. We have tons of stuff for the seniors, and a morning bistro three days a week at most properties. The bistro is…more about getting residents together in groups and getting them more active with their other residents. It’s a small bistro; it may be bagels and oatmeal. It’s more about the activity than it is about the food.”

National Church Residences has more than 170 service coordinators to oversee and coordinate services for residents.

It’s crucial for site staff to respect and listen to residents, to plan activities and services that are appealing to them, and to follow through expeditiously on work order requests.

Alco, for instance, requires site managers to follow up some of the completed work orders, checking with the residents to see if they were satisfied. Alco’s Michael Johnson says site managers also need to communicate with their residents year-round – not just when their lease renewal date is approaching.

According to A. J. Johnson, some creative things that owners and managers can do to distinguish their property or give current residents extra value are:

 

  • Allowing pets, including dogs of any size but with a prohibition against aggressive breeds. Johnson advises charging a large upfront pet deposit fee, of which almost all is refundable when the tenant moves out and there is no damage. The large fee will tend to weed out irresponsible pet owners.
  • Letting residents, when they renew their lease, pick the paint color for repainting of their unit; and,
  • Paying the security deposit of new residents and giving it to them after one year or when they move out if their unit is in good condition.

 

Marketing, Marketing

The starting point for developing a marketing plan for a LIHTC property, Johnson said, is for the manager to identify the strengths and weaknesses of their tax credit property and those of competing apartment properties (conventional and LIHTC). These could be the property’s age and condition, location, unit sizes and features, amenities, rent advantages or disadvantages, size of security deposits and fees, and services and activities for residents.

To get this information, Johnson suggests that managers try to forge cooperative arrangements with on-site managers at competing properties, to regularly exchange information on current rents, fees, occupancy rate, available units, etc. One approach is for the LIHTC manager to ask the other manager for permission to refer rejected applicants to their property, such as if the manager’s LIHTC project is full or an applicant makes too much to qualify for a tax credit unit, in exchange for a reciprocal arrangement with the other manager. Other LIHTC properties might refer applicants if they are full, and conventional properties might refer applicants whose income is too low to qualify for a market-rate apartment but might conform to the tax credit limits.

Johnson advises managers to create a matrix showing the strengths and weaknesses of their LIHTC property and of the competing properties, and then develop – and carry out – a marketing plan that stresses their property’s strengths. “Those areas where you have an advantage are the ones that you want to stress when prospects come in,” Johnson says, “as well as in your marketing and advertising.”

The particular marketing vehicles and messages will vary by property, shaped by such factors as the target resident population (e.g., seniors, families), the area, the competition, and budgetary constraints.

Johnson says the primary target for marketing should be the current residents – to remind them that they live in a desirable place to both motivate them to renew their lease and to encourage other people they know (relatives, friends, co-workers) to apply to live at the same development.

“National apartment turnover ranges from 25% to 40% a year,” says Johnson. “Reducing this to 10% or 8% by keeping residents happy and constantly marketing the property to them can sharply reduce the amount of outside marketing that the owner or management company needs to do to keep your property full and the cash flow moving along. Because the typical cost of turning over a unit is about $3,000.”

Sources said the best and most effective marketing is resident referrals. If state law permits, management can provide financial compensation to residents for referrals such as a fee or a gift certificate.

Common marketing methods are print and online apartment guides, apartment Web sites (apartments.com, rent.com), a Web site for the apartment community, Facebook pages, and newspaper ads. Others are posting flyers or conducting outreach to groups, organizations, or institutions that serve lower income households and might make referrals.

“Having good exposure on the Internet is huge,” says Royal American’s Kerri Toth. “Now more people go to the Internet to do apartment searches.”

 

Integration with Development

Companies that both develop and manage LIHTC properties can also design and build better new housing developments by taking advantage of the lessons and experiences from the property management side.

“Our in-house development company always seeks our advice when they’re developing or redeveloping a property, as far as amenities, unit size, changes between units,” says Toth. “And most of our third-party [management] clients so the same…We welcome that opportunity to take a look at the floor plans that they’re proposing, give our thoughts, and give our ideas on features within the apartment homes.”

Poole, for instance, said one suggestion by NorSouth’s property management staff that was incorporated by the development staff into the design of new senior rental communities is to install sliding doors at the entrance and front vestibule of properties rather than conventional doors that open outwards. The impetus was the observation that seniors using scooters or walkers often have difficulty opening a conventional door but a much easier experience with an automatic door that slides from side to side.