July 2023
CRE Research
Breaking Down Multifamily Property Operating Expenses Across
the U.S. | Part 2 – Real Estate Taxes
In a recent report, the Trepp team discussed the trends in year-over-year (YoY) net operating income growth (NOI) for
multifamily properties across various geographies. In this series, Trepp examines YoY trends for specific operating expense
line items that contribute to the overall NOI of multifamily properties.
Property tax is one of the largest contributors to the
operating expenses of a commercial real estate property,
and with multifamily property values soaring in particular
metro areas in the years following the pandemic, property
tax has expectedly followed suit.
With interest rates at historic lows in 2020, investors that
sought higher yields turned to real estate, particularly
multifamily properties. The favorable financing conditions
stimulated increased transaction activity and contributed
to the upward pressure on property values. Multifamily
properties, with their potential for steady rental income
and relatively lower risk compared to other commercial
property types, became particularly attractive to investors
during economic uncertainty.
However, with the supply of available multifamily properties
remaining limited as the market got hotter with investor
demand for these properties skyrocketing, the supplydemand imbalance contributed to increased competition
among investors, bidding up prices and driving property
values higher.
COMPARING YOY CHANGES IN REAL ESTATE TAXES
ACROSS MULTIFAMILY MARKETS
In this part of the series, the Trepp team ranks the
multifamily markets based on the largest average YoY
increase in property taxes from 2021 to 2022, utilizing
the multifamily property data set laid out in the Data Set
Description section in Part 1 of the series.
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FIGURE 1: TOP 15 MULTIFAMILY MARKETS FOR LARGEST YOY
INCREASE IN REAL ESTATE TAXES (2021-2022)
MSA
AVG YOY REAL
ESTATE TAXES
PER UNIT
CHANGE
1
Richmond, VA
15.3%
2
Orlando-Kissimmee-Sanford, FL
12.2%
3
Salt Lake City, UT
11.9%
4
Virginia Beach-Norfolk-Newport News, VA-NC
10.9%
5
Chicago-Naperville-Elgin, IL-IN-WI
9.9%
6
Denver-Aurora-Lakewood, CO
9.3%
7
Tampa-St. Petersburg-Clearwater, FL
8.7%
8
Jacksonville, FL
8.6%
9
Miami-Fort Lauderdale-West Palm Beach, FL
8.4%
10
Hartford-West Hartford-East Hartford, CT
7.8%
11
Atlanta-Sandy Springs-Roswell, GA
7.3%
RANK
12
Birmingham-Hoover, AL
7.2%
13
Las Vegas-Henderson-Paradise, NV
6.7%
14
Dallas-Fort Worth-Arlington, TX
6.3%
15
New York-Newark-Jersey City, NY-NJ-PA
6.1%
Sources: Trepp Inc.
A DEEPER DIVE INTO SPECIFIC MARKETS
Richmond, Virginia
The Richmond metro saw population growth take off
since the pandemic in 2020, adding almost 28,000 people
between 2020 and July 2022. The Richmond MSA includes
the suburban counties of Henrico and Chesterfield, as well
as the more rural counties of New Kent, Powhatan, and
Goochland, all of which have seen significant population
growth – even more than Richmond city proper itself.
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New Kent County was the fastest growing county in
Virginia, seeing a 7.5% population growth since 2020, and
Chesterfield was the county that added the largest number
of residents – over 17,000 – since 2020. Altogether, these
counties make the Richmond metro the fastest growing
region in Virginia from 2020 to 2022.
A large portion of these new Richmond residents have
flocked from the Northern Virginia region, many of them
being couples with young children looking to settle down in
the suburbs of Richmond. Residents have been relocating
due to the increased cost of living in Northern Virginia as
well as the need to commute by train between Richmond
and the D.C area. These contributors led to the 36% jump
in residents moving from Northern Virginia to the Richmond
area in 2020 and 2021, compared to 2012-2019.
The recent surge in population growth seen across the
Richmond area was also met with limited housing supply. As
a result, the assessed property values and thus the property
tax assessments in the city of Richmond grew remarkably,
with overall real estate property tax assessments rising by an
average of 13% in 2022. In Trepp’s analysis on the multifamily
property dataset in the Richmond, VA-MSA, real estate taxes
per unit grew 15.3% on average from 2021 to 2022.
For the time being, it seems that the Richmond market
outlook continues to be positive going into 2023, as
broader market uncertainties due to higher interest rates
and inflation have yet to show up in the metro. Many
development projects will stimulate further economic
growth in the Richmond area. Some examples are the $1
billion construction of the new LEGO carbon-neutral factory,
which is set to open in 2025 in Chesterfield County, the
$2.3 billion GreenCity “eco-district” development that broke
ground in early 2023 in Henrico County. Another example is
Meta, which is expanding its data center campus in Henrico
County. The future trend of property taxes in Richmond will
be heavily dependent on the housing supply-and-demand
dynamics in the metro, as we see how hot and for how long
the Richmond multifamily market will continue to grow.
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Salt Lake City, Utah
Home prices in Utah have surged in 2022, with the Salt
Lake City region seeing a 28.7% jump from 2021 to
2022 in median residential property value. Coming out of
the pandemic, as home values grew rapidly, commercial
property values grew at a more modest pace – 11.8%
from 2021 to 2022 in Salt Lake City. As these two types
of properties grew at separate paces, the taxation burden
naturally has fallen more on the property category that is
witnessing the higher property valuations.
However, multifamily properties seem to be the standout
among the commercial property types. Salt Lake City has
a large population of young renters and has also recently
seen an inflow of residents relocating from more expensive
West Coast cities. And in this case, the rental market has
been even hotter than the residential housing market,
as homebuyers are getting priced out of the expensive
single-family market, driving up apartment demand. In
the state of Utah, 76% of homebuyers were priced out of
homeownership in 2022 and were left to turn to the rental
market. Therefore, opposite from the rest of the commercial
real estate property types, due to increased property
valuations, the multifamily property sector has shared the
increased tax burden alongside residential properties.
In addition, the Salt Lake City Council approved a 4.9%
property tax increase, which was included in the city’s
budget for the fiscal year starting July 2022. This was the
first property tax increase in Salt Lake City since 2014 and
was intended to cater towards the increase in demand for
the city’s services. With the city experiencing a growing
population and recovery from the pandemic at the same
time as inflation, increased labor costs for increased usage
of city services prompted this new property tax. For
multifamily properties, the increased property taxes will
undoubtedly flow into increased rent payment for renters.
Salt Lake City is seeing dense volumes of new multifamily
construction and deliveries to keep up with burgeoning
rental demand, with most of the new development located
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CRE Research
in the downtown submarket. The delivery of a large amount
of new multifamily supply could help soften the rental
market, which would alleviate the tax burden on multifamily
properties. However, how property taxes ultimately fare
will up to the local governing authorities as they set the
budget in the coming fiscal years.
WHAT’S AHEAD FOR PROPERTY TAXES
greater profits and thus higher valuations. And lastly, as
population fluctuations affect a city’s need of public services,
local governments correspondingly seek out more financial
resources through methods such as property taxes. It will
be interesting to see how each of these elements will flow
through to each multifamily market and how the indicator
of property taxes will reflect the extent of the impact on
each metro.
The factors of supply and demand dynamics, relative
growth in property value across property types, and local
government budgets, are all key determiners for multifamily
property taxes in each geography. Rental demand adjusts
as consumer behavior reflects macroeconomic fluctuations
in interest rate and inflation, and whether this demand is
met with a dearth of inventory or overflowing volumes of
new construction deliveries will affect apartment property
tax valuations.
Additionally, as some categories of properties grow at a
more accelerated pace compared to others in the same
geography, the tax burden will shift onto the sector with
For more information about Trepp’s commercial real estate data, contact info@trepp.com.
For inquiries about the data analysis conducted in this research, contact press@trepp.com or 212-754-1010.
About Trepp
Trepp, founded in 1979, is the leading provider of data, insights, and technology solutions to the structured finance, commercial real estate, and banking
markets. Trepp provides primary and secondary market participants with the solutions and analytics they need to increase operational efficiencies,
information transparency, and investment performance. From its offices in New York, Dallas, and London, Trepp serves its clients with products and
services to support trading, research, risk management, surveillance, and portfolio management. Trepp subsidiary, Commercial Real Estate Direct, is a
daily news source covering the commercial real estate capital markets. Trepp is wholly owned by Daily Mail and General Trust (DMGT).
The information provided is based on information generally available to the public from sources believed to be reliable.
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