New research from the Multifamily Impact Council, Mercy Housing, and the NYU Stern Center for Sustainable Business puts a dollar figure on the financial value of housing stability and gives the multifamily industry a tool to do the same.
All successful investments in commercial residential real estate are based on a fundamental premise that a property will generate enough income from people who can afford to pay rent to cover the cost of operating the property. Stable returns on investment don’t come from financial engineering or timing the market, they begin and end with a rent payment. This is especially true in the affordable housing sector that serves people whose monthly budgets have no margin for error. But when unexpected costs arise and a resident falls behind on rent, the default response for affordable market rate properties is often the same: send a legal notice, begin eviction proceedings, and eventually turn the unit over.
The Multifamily Impact Council recently sponsored a case study with New York University’s Stern Center for Sustainable Business that explored how Mercy Housing, one of the nation’s largest affordable multifamily housing owners, improved the financial performance of their project-based Section 8 properties by using Housing Support Plans to work with delinquent renters and give them a chance to get back on track and avoid as many evictions as possible. The NYU team not only quantified the extent to which these housing stability plans improved a property’s net operating income, they also applied their Return on Social Investment (ROSI) methodology to build a tool that will help other across the industry do the same.
What is a Housing Support Plan
A Housing Support Plan is a structured agreement between a property and a resident who has fallen behind on rent. When a resident at a Mercy Housing Section 8 property receives a legal lease violation notice, they also receive an offer to enter into a Housing Support Plan. If they accept, the Mercy Housing team designs a customized arrangement that includes an installment schedule for the past-due amount, a start date for resuming full monthly rent, and, in some cases, a temporary reduction on the resident portion of the rent.
The financial mechanism behind each these plans are simple: When the residents who complete their housing support plan stay housed, their Section 8 rental subsidy keeps flowing. When a resident is evicted, the subsidy stops flowing. The unit sits vacant. Legal fees are incurred, turnover costs pile up, and any outstanding bad debt must be recorded and written off. When the resident stays, the rental subsidy keeps flowing, and legal fees and turnover costs are avoided while the property owner works with the renter to help them get back on their feet.
What The Data Says
The NYU Stern Center for Sustainable Business research team analyzed six Mercy Housing properties in California across 2023 and 2024. The average size of each property was around 110 units and approximately 10% of their residents were on a Housing Support Plan in a given year. Using operating data supplied by Mercy Housing, the research team built a mini revenue and cost statement for two scenarios: one where delinquent renters received a plan and one where they did not. And then they compared the two.
Across four of the properties, they found that properties with a housing support plan produced an average annual net benefit of about $33,000 dollars in 2023 and $45,000 dollars in 2024. Even under a stress test where 25% of renters with housing stability plans could not stay housed, the average annual net benefit remained positive, at roughly $18,000 and $23,000 dollars.
Specifically, the research team identified three key areas where Housing Stability Plans were able to deliver the most value:
- They allowed Mercy Housing to capture a full year of of Section 8 rental subsidies on units by keeping renters housed, as opposed to the ten months of rental subsidy that they would have received by immediately pursing eviction.
- Housing Support Plans enabled Mercy to avoid more eviction-related legal fees, which the analysis conservatively pegged at roughly two months of rent per case.
- By keeping renters in place, Housing Support Plans also reduced the costs associated with turnover, re-marketing, and economic vacancy.
It is important to note that the study did find that because they were not able to write down the bad debt of the renters who were not evicted, properties with Housing Support Plans did carry a higher level of bad debt. But, on balance, the benefit of increased revenue was greater than the cost of fewer write downs.
This is important because, for as long as I have been working, the industry has treated housing stability as an aspirational feature. A “nice to have” that looks good in the annual report and is quite clearly good for humanity. The Mercy analysis adds an additional and essential layer that is all too often undervalued and overlooked: Housing stability makes money. Because when people get evicted, investors don’t get paid. They get paid when people are able to live and pay rent in a place they feel comfortable enough to call home.
Establishing Standards. Defining Impact. Quantifying Value.
The Multifamily Impact Council was founded on a simple premise: If we can create a common language for impact in multifamily housing, and if we can show that investing in that impact will make properties perform better, more capital will flow into the sector and make rental housing more affordable and sustainable for the people who need it.
We created the The Multifamily Impact Framework to establish that common language and now we are building the research case to back it up. And that is what makes the Mercy Housing case study so important. It creates a property-level, dollar-denominated calculation that ties a specific principle of the Impact Framework to a specific line on the operating statement. And it has enabled our partners at the NYU Stern Center for Sustainable Business to create a monetization tool to help property owners and investors assess the value of implementing Housing Stability Plans across their Project-Based Section 8 properties as well.
Read. Review. Then Take Action.
The Multifamily Impact Framework and our research partnerships were not just designed to be read. They were designed to be to put to work. Here are three good places to start:
- First, if your property serves Section 8-eligible residents and you do not already have a structured way to work with those who fall behind, build one. The appendix in the case study has some great information on Mercy Housing's HSP model and it is a great place to start. And if you are interested in learning more, just let us know.
- Second, track the numbers. Start with the Framework's reporting guidelines (annual retention rate, average length of stay, and whether specific stability services are offered) and complement them with the operational metrics that are recommended in the case study.
- Third, run the calculator on your own portfolio. Then share what you find and let us know your feedback so that we can check our initial assumptions and establish credible industry benchmarks. That is how a case study becomes a category, and how a category becomes an asset class.
Investments in housing stability enable property owners to treat residents who have fallen on hard times with the dignity and respect that all human beings deserve. They also stabilize cash flow, lower operating expenses, improve NOI, and generate long-term financial returns that make it easier for more investors to put more capital into affordable housing.
About Our Partnership with the NYU Stern Center for Sustainable Business
The Multifamily Impact Council is partnering with the NYU Stern Center for Sustainable Business (CSB) to support research projects that apply their Return on Social Investment (ROSI) methodology to quantify the financial value of impact practices aligned with industry standards established by the Multifamily Impact Framework™.
NYU CSB’s Return on Social Investment (ROSI) Monetization Tool © has been utilized to measure the financial value of impact practices across the agricultural, health care, apparel, and energy sectors and we are excited to be partnering with them to apply the same rigor and methodology to the multifamily industry in the United States. You can read more about the work that they do here.
