By Taylor Williams
The multi-family management industry has been plagued by labor shortages for years, which has led to the rise of numerous technology platforms designed to streamline, automate and simplify daily work. But the business of managing apartment communities has an inherent and irrevocable human element, and the cost of acquiring and maintaining this service is about to increase.
As an industry, multi-family management is not alone on this front. Companies in countless sectors across the country are locked in labor battles. While overall unemployment remains low at 3.7%, at 62.4%, the labor force participation rate remains about 100 basis points below its pre-pandemic level, Reserve data shows. federal.
Additionally, according to the Society for Human Resource Management, quits hit record highs in 2021, with some 4 million Americans quitting their jobs each month. With much of the labor supply on the move and potentially looking to change careers, the advantage is shifting to deep-pocketed, well-capitalized employers who can not only offer higher wages, but also greater flexibility in the workplace.
As such, multi-family management companies will likely be competing for talent with each other in 2023, as well as battling recruiters from wholly unrelated industries. This is also true for management groups that own their properties and those that work exclusively as third-party operators. And all of this is happening in the larger context of rising repair and maintenance costs fueled by inflation, as well as rising property taxes.
At the 11th annual InterFace Multifamily Texas conference, a quartet of seasoned multifamily managers dig deeper into the severity of soaring labor costs while analyzing broader cost structures and revenue forecasts for the coming quarters . The event took place at the Dallas Renaissance Hotel and was organized by InterFace Conference Group and Texas Real Estate Company, both of which are divisions of Atlanta-based publisher France Media.
April Royal, vice president of operations at Atlanta-based Capstone Real Estate Services, was the first panelist to speak about the industry’s pressing need for skilled labor. Royal said his company has been tinkering with staffing best practices over the past two years, including leaning more into AI platforms, to provide a better living experience for residents.
Royal also suggested that shelling out extra dollars for top performers is something the industry absolutely needs to embrace.
“We have several large communities where we have two strong managers in place, and people are wondering how we can afford to do this,” she said. “But if you have two different skill sets – one that’s administratively strong at managing capital expenditures – and one that’s good at managing people and can make an impact in the tech space – we have seen this system work very well.”
Royal conceded that Capstone’s developer clients were reluctant to take this approach, given its high salary demands. But due to the limited number of qualified staff available, apartment owners and managers can reasonably expect to see higher turnover rates by investing in top talent in the field. Still, the current value of this talent is not entirely clear, Royal added.
“Affordability is something we’ve been looking at all year, and the reality is that you have to make about $23 an hour to be able to afford a unit in one of our communities,” said she declared. “So we are adapting our wages at the moment. We want to be recognized as a company known for not having employees under $20 an hour, so we’re trying to figure out what skills are needed to match that pay level.
Part of this “adjustment” process involves analyzing the numbers among existing manager salaries on a market-by-market basis and finding a median number. Royal said creating this kind of limit on salary growth is an important step in managing the movement of this position, but it is only part of a larger process.
Moderator Ed Wolff, Chief Revenue Officer of LeaseLock, which provides digital tools and solutions for multi-family rental agencies, was next to weigh in on workforce challenges in the current environment. He reiterated the frustrations of competing with other management agencies as well as fully independent industries in the ongoing war for labour.
“Literally every one of our clients and prospects has identified staffing as the biggest challenge of 2022,” Wolff said. “They can’t attract the right people and they can’t retain the people they attract. In some cases, on the operations side, we compete for over 50 cents an hour, and now those people can go and work at Chick-fil-A and earn $20 an hour. Solving this problem at the global level is a huge challenge.
Another flaw in the labor situation that has emerged in recent years is the demand for labor flexibility. While much of the day-to-day work of multi-family managers has shifted to digital media, the on-the-ground element simply cannot be removed overnight. And any in-person employment requirement comes with limited or no flexibility in terms of when and where an employee works — another detriment to the industry, as Royal noted.
“Our industry has always been a 9-to-5 business, and people just aren’t willing to work 9-to-5 schedules anymore,” she said. “We tried to work with that through a four-day work week, and we always try to be creative and work within that. But at some properties, we had to close management offices on Saturdays, Sundays and Mondays, which in some cases boosted morale, but also forced us to change and redefine guest expectations.
Panelist Tana Blair, regional vice president of Dallas-based Highmark Residential, said her company is trying to get ahead of the labor shortage by investing in algorithms and platforms that allow the company to better manage the flow of prospects. And while a greater reliance on technology has helped Highmark reduce its resident turnover rate, the company still expects big payroll increases among existing employees in 2023.
“We have employees who have been with us for over 20 years, since we were known as Milestone Management,” she said. “They are very good at what they do, and we want to keep them. So when they got other offers, we responded with mid-year pay raises. While we normally budget 3-5% annual salary increases, we are now looking at around 7%.”