Multifamily's New Expense Squeeze: Insurance, Taxes, and Utilities All Rising at Once.

The multifamily sector has experienced significant value compression since the 2022 peak. Most analysis has focused on the revenue side — cap rate expansion driven by rising interest rates. But expense growth has been an equally significant factor, and it receives far less attention.

Insurance costs for multifamily properties have increased 25-40% in most markets since 2020. Property taxes have risen sharply as reassessments catch up with prior appreciation. And utility costs — driven by rate increases, rising consumption, and the pass-through of capacity charges by utilities — have climbed steadily.

Of these three expense drivers, utility costs are the most actionable. Insurance pricing is a market condition. Property taxes require an appeal process with uncertain outcomes. Utility billing errors are recoverable through an audit, typically uncoverable within 90 to 180 days.

In multifamily portfolios, utility costs include both owner-paid common area costs and, in properties with master-metered utilities, the cost of resident utilities as well. Both are subject to billing errors. Both are auditable. Both represent NOI recovery opportunity. The insurance data has only gotten starker since. Federal Reserve research on multifamily properties found per-unit insurance costs rose from roughly $502 in 2021 to $777 in 2024 — a 55% increase in three years — with property insurance climbing from about 6% of operating expenses in 2020 to a forecasted 14% in 2024. Utility recovery will not offset an insurance line that is rising on its own trajectory, but it remains one of the few expense levers still fully within an owner's control.