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WASHINGTON, DC-Multifamily executives can expect smaller merit increases this year. At the same time, apartment firms are dealing with high healthcare costs and turnover rates for on-site positions, according to the latest National Apartment Survey of Compensation and Benefits Practices from the National Multi-Housing Council.The 2008 study examined 68 positions from CEO down to leasing consultant, and the data is based on responses from a record 126 firms representing more than 49,000 industry professionals.

Overall, employees at the vice president level and above can expect to see a 3.7% merit increase. That’s down a bit from the 3.8% average increase firms budgeted last year. However, actual raises averaged 4% last year. Managers below the vice president level should see an average uptick in compensation of 3.5%, down 20 basis points from last year’s expected raise and 40 basis points from the actual figure. A 3.5% raise is also budgeted for non-exempt employees, including leasing consultants and maintenance technicians. That’s down a bit from last year’s anticipated and actual increase of 3.6%.

The overall decreases are slight and are certainly not indicative of a trend, says Elizabeth Feigin Befus, vice president of employment policy and special counsel at the NMHC. “In uncertain economic times, companies are cautious, even in an industry that remains strong,” she states.

One interesting finding, she notes, is that the raise for leasing consultants on a national level did not rise this year, while it did for every other position surveyed. “Considering that leasing consultants are responsible for initial and renewal leases and play a huge role in resident satisfaction, this stagnation is notable,” says Feigin Befus. And while actual increases for multifamily professionals surpassed budgeted ones in past years, that trend may not repeat itself this year due to current economic and employment conditions.

Among top executives, the median total compensation is down in 2008. In fact, the average total compensation by CEOs within publicly traded companies had declined by 7% since last August, while other positions such as property managers and acquisitions executives are bringing in more money.

Investments made by apartment firms to control turnover seem to be paying off, since the average rate of turnover was 36.9% this year, down from 42.8% last year. Increases were seen, however, among on-site property managers; and leasing consultants saw the highest rate of turnover, 59.9%, up from 54.5% in 2007. That position had reached a peak 70.8% turnover rate in 2004. Also seeing an increase were maintenance technicians and assistants, at 46.8% and 51.5% in 2008, respectively, up from 44.7% and 41.4% in 2007.

Because of the critical importance of leasing consultants to lease-ups and maintenance staff to resident retention, firms would do well to audit their recruiting and retention approaches to these positions. “High turnover among on-site property jobs is a long-standing problem in our industry,” says Feigin Befus. “One of the challenges is the decentralized business model, but I believe that as an industry we have growing room when it comes to smart hiring, training and retention practices. Building a strong company culture and developing competitive compensation programs are essential as well. Firms with notably low turnover have professionalized their property operations by investing in these best practices. That approach pays big dividends when it comes to the bottom line.”In addition to turnover, apartment firms are also dealing with the high cost of healthcare. The survey found that median benefit costs are anticipated to go up by 8% this year, after a 10% ride in 2006 and 2007. One way to deal with the costs was to increase employee contributions to health plans, like 44.1% of firms did in 2007 and intend to do so this year. Another option is putting together consumer-driven healthcare plans, with 9.1% of firms offering it in 2008 versus 5.7% the prior year.

Other cost-reduction techniques multifamily companies are utilizing are different approaches to certain operations functions, such as outsourcing payroll departments. Almost 60% of those surveyed have already outsourced their payroll departments or plan to do so. Another 30% have or plan to outsource their collections and accounts payable departments.

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