Now more than ever, housing affordability in the United States is at a critical juncture. Homeownership is slipping out of reach for millions of households as high interest rates, stubbornly high home prices and limited inventory continues to freeze would-be buyers out of the market. Renting continues to provide a more affordable, flexible and convenient option for many, stressing the importance of renting as part of the housing affordability solution. Across the board, however, housing costs still consume an outsized share of income for many households.
Policymakers, advocates, industry professionals and the public alike are debating the root cause of rising housing costs, and the role of housing providers more broadly. While these debates often focus on demand-side dynamics or high-level political solutions, they frequently overlook a critical piece of the affordability puzzle: The underlying cost of operating housing.
While these debates frequently zero in on profits, the reality is that the majority of each rent dollar covers essential costs such as mortgage debt, taxes, insurance, payroll, maintenance and reinvestment before housing providers see any return.
To make housing truly affordable, policymakers and stakeholders must address the real financial dynamics driving costs, not just the symptoms. Housing affordability depends on keeping rental housing financially sustainable while targeting the underlying factors that push rents higher. Without that balance, well-intentioned interventions risk discouraging new supply, accelerating disinvestment and ultimately worsening the very affordability challenges they aim to solve.
Examining where each dollar of rent is allocated allows for a shift from rhetoric to data-driven solutions that expands housing affordability options for residents at all income levels, preserve housing quality and ensure the long-term stability of America’s rental housing stock.
Where Does a Dollar of Rent Go?
To understand the economics of rental housing, it’s essential to examine the journey of the rent dollar. Using 2024 financial data from over 16,000 properties nationwide, the National Apartment Association (NAA) breaks down the average rent dollar into its key components. The findings highlight the significant financial obligations housing providers face. NAA’s Dollar of Rent Tool provides a detailed breakdown of a dollar of rent at the national level, across 44 states, the District of Columbia (D.C.), 286 congressional districts and nearly 100 metro areas nationwide. Depending on the location, the tool also offers insights by property type, rent type, property size and property age.
The Foundation: Mortgage Payments (44 cents)
The single largest portion of every rent dollar, 44 cents, goes toward mortgage payments, which is the core financing cost that allows rental communities to exist. In an economic environment defined by higher interest rates and tighter capital markets, debt service has become a massive pressure point. If these financial obligations aren’t met, the stability of the entire property and the homes of the people living there are put at risk.
Keeping the Lights On: Operating Costs (27 cents)
For every dollar paid in rent, 27 cents is used to cover daily community operating costs. These expenses include important items such as insurance, utilities and maintenance, making sure that heating and cooling systems are working, plumbing stays reliable and common spaces remain safe and clean.
In recent years, these costs have risen sharply, especially with insurance expenses. According to IREM/NAA/BOMA’s 2024 Income/Expense IQ national benchmark data , insurance costs increased 10.8% in 2024 alone, on top of a staggering 25% rise in 2023. Natural disasters have driven premiums to record highs, forcing operators to dedicate more revenue just to maintain coverage.
Supporting the Community: Property Taxes (10 cents)
Ten cents of every rent dollar goes directly to local governments as property taxes, funding essential services like schools, emergency response and infrastructure. This means rent payments support not only the apartment community but also the surrounding area. When property values are negatively affected by overregulation or policy changes, property tax revenues can decline, leading to less funding available for these vital community services.
In high-tax states such as Texas, New Jersey and Illinois, this share can rise to 13 cents or more. While property taxes are a crucial revenue source for municipalities, unpredictable assessments can cause sudden budget challenges for housing providers, who must pay these taxes even if rent collections are unstable.
The Human Element: Payroll (7 cents)
Rental housing communities rely on dedicated teams to operate smoothly. Seven cents of every dollar goes toward salaries and benefits for staff like maintenance technicians, leasing staff, groundskeepers and property managers.
Retaining skilled talent is critical to ensuring a high quality of life for residents. Since 2021, payroll expenses per unit have increased nearly 20%, reflecting the need for housing providers to offer competitive wages. These rising costs remain fixed, even as rent growth slows, creating additional financial pressures.
Investing in the Future: Capital Expenditures (1 cent)
While it represents a small slice of the pie, the 1 cent allocated to capital expenditures (capex) is vital for long-term sustainability of the housing stock. This portion represents the reserves set aside for major projects like roof replacements, parking lot repaving or significant system upgrades.
The Return: Profit (11 cents)
After all these expenses are paid, on average, only 11 cents of every rent dollar returns to the owner.
It is important to clarify the misconceptions surrounding the interpretation of profit margins. Profit margins are often interpreted as "extra" money that can be squeezed to lower rents. In reality, this margin is the safety net for the property. It is the buffer that allows housing providers to absorb unexpected shocks, such as a sudden spike in insurance premiums or an emergency boiler replacement, without destabilizing the business.
Additionally, these retained earnings can fund future supply. Investors and developers rely on these returns to mitigate the risk of building new housing or rehabilitating older properties. If this margin is compressed further by policy choices or economic pressures, the incentive to build vanishes. Less construction means less supply, which inevitably leads to higher housing costs for everyone in the long run.
Operational Financial Pressure
The rental housing industry has moved from a market driven by post-pandemic momentum to one defined by constraint. Nationally, rental income growth has significantly decelerated. Total annual income per unit grew by just 1.5% in 2024 year-over-year. Compare this to the cost pressures:
- Operating expenses rose 2.2% since 2023.
- Repairs and maintenance costs have risen nearly 28% since 2021, far outpacing the 10% growth in Net Operating Income (NOI).
- Turnover costs jumped 17.5% year-over-year in 2024.
This data reveals a widening gap where expenses are consuming a larger share of revenue. Housing providers are spending more just to stand still and to maintain the same level of service and asset quality. This "squeeze" is particularly heightened for smaller owners and operators who lack the scale to spread risk across large portfolios.
Advancing Sustainable Approaches to Housing Affordability
The narrative that rental housing is a high-margin business driven by self-interests simply does not align with the data. The industry is operating on thin margins, where 89 cents of every dollar is consumed by expenses.
Overregulation cannot solve a housing supply shortage, and the reality of operating costs should not be ignored. Sustainable housing affordability for all income levels rests on policies that expand supply and address the true cost drivers in rental housing. This is why NAA supports legislative solutions such as the Housing for the 21st Century Act and the ROAD to Housing Act . These comprehensive, bipartisan packages address regulatory barriers, invest in housing supply and update outdated systems to make quality housing more accessible for Americans. By embracing evidence-based reforms and advancing smart policy at every level, rental communities can remain stable, high-quality and accessible for the millions of Americans who depend on them.
Leah Cuffy is Director of Advocacy Research at NAA.