Why 2026 Will Be the Year Operational Performance Defines Multifamily Success

When New York City elected a socialist mayor on a “Freeze the Rent” platform, it signaled that housing affordability has reached crisis status in American politics. These policies, however well-intentioned, eliminate operators’ ability to cover surging expenses: Property insurance has risen by more than 75% in real terms since 2019, property taxes have surged by over 23% nationally from 2019 to 2023, and maintenance costs continue to grow relentlessly due to material and labor inflation.

The disconnect is real. Renters perceive landlords as profit-maximizers. Operators experience barely viable economics while maintaining safe housing. The path forward isn't constraining operators or defending the status quo. It’s fundamentally transforming how efficiently we operate housing—reducing costs, improving service, and creating conditions that attract capital to solve the supply shortage.

2026 is the year this transformation accelerates from necessity, not choice.

Two Forces Converging to Make Operations Critical

1. The Labor Model That No Longer Works

Property management staff turnover now exceeds 30% annually—among the highest in commercial real estate. Those who remain spend roughly 60% of their time on repetitive administrative work: answering the same leasing questions, chasing late payments, coordinating maintenance schedules.

This labor dependency model is breaking. The talent shortage isn't improving, and labor costs continue rising while availability decreases. Real estate has lagged significantly in operational technology adoption compared with sectors like retail, hospitality, and financial services that have extensively automated repetitive tasks.

The operators who solve this structural problem don't just gain competitive advantage—they create operational margin that makes housing economically viable to operate. Operators implementing operational artificial intelligence (AI) have seen administrative overhead reductions of up to 20%, margin that can stabilize housing costs rather than forcing rent increases to cover inefficiency.

Mid-market operators face the most acute pressure: too large to operate manually, too small to justify enterprise-level implementations requiring dedicated IT teams. As operating costs climb and revenue growth opportunities narrow—whether through market competition or regulatory constraints—efficiency becomes survival.

2. The Retention and Service Quality Imperative

The math is clear. Turnover costs between $3,500 and $5,000 per unit when accounting for vacancy loss, marketing, make-ready work, and leasing commissions. Yet residents rarely leave over rent pricing. They leave because operations break down: unanswered maintenance requests, slow communication, impersonal service.

With homeownership increasingly out of reach—the median first-time buyer is now 40 years old, the oldest on record—rental tenures are extending. When residents stay 18 to 24 months instead of 12, every operational failure compounds. When better service reduces turnover from 30% to 27% annually, a 100-unit property saves $12,000 per year in margin that doesn’t need to be recovered through rent increases.

Building the operational capacity to deliver retention-driving service consistently at scale remains the challenge.

AppFolio's 2025 Renter Preferences Report shows that 19% of renters cite “seeking a better property manager” as a moving factor. This percentage continues rising, particularly among younger renters who expect immediate, transparent, consistent communication.

Residents increasingly evaluate properties by operational performance, not amenities. How quickly do maintenance requests get acknowledged? How transparent is communication? Properties that deliver responsive service can differentiate themselves through operational excellence, not capital-intensive upgrades. This is achievable at any price point.

How Operational Efficiency Creates Housing Affordability

The connection between operational performance and housing affordability is direct:

Reduced Administrative Overhead: For mid-market operators, leasing and administrative staff salaries represent 21% to 25% of total operating expenses—one of the largest controllable cost categories. AI automation handling routine inquiries, applications, and maintenance requests creates meaningful margin.

Higher Occupancy: Properties responding within minutes convert more leads and fill vacancies faster. Industry research shows that 28% of leasing calls go unanswered, representing revenue leakage that drives costs up across portfolios.

Lower Turnover: Automated maintenance acknowledgment and consistent communication improve retention. When better service reduces annual turnover by 3 percentage points, operators save thousands per unit in costs that don't need to be recovered through rent increases.

Minimized Delinquencies: Automated rent reminders and payment follow-ups reduce late payments and bad debt, meaning more resources for maintenance rather than covering losses.

Fair Housing: AI ensures consistent, unbiased communication for all applicants. Multi-language support—over 50 languages—makes housing accessible to non-English speakers who often face additional barriers.

When operators reduce costs while improving service, they create margin that makes housing financially sustainable. This attracts capital into development—essential for addressing the supply shortage.

The Infrastructure Investment That Changes the Equation

Property management has been relatively slow to adopt AI, although this is changing. AppFolio's 2025 benchmark data shows adoption of AI tools jumped from 17% in 2024 to 28% in 2025—a 65% year-over-year increase. This acceleration reflects necessity, not hype.

The adoption of AI is an infrastructure investment comparable to implementing a property management system. You don't do it to be cutting-edge; you do it because operations fail without it.

This is where centralization becomes critical. The most successful operators are consolidating routine communication handling (leasing inquiries, maintenance acknowledgment, payment questions) into centralized AI-powered systems that work across their entire portfolio. This allows on-site teams to focus entirely on relationship-building and complex problem-solving while ensuring 24/7 responsiveness that individual properties could never staff for. The result: better service at lower cost, with consistency that scales.

AI infrastructure also serves a mission beyond operational efficiency: It democratizes access to quality service. Someone in affordable housing receives the same responsive, professional service as someone in luxury housing. This consistency makes housing operations fairer and more economically sustainable across all market segments.

Three Operational Priorities

1. Make Response Speed Measurable and Visible

Properties that can’t track first-contact response times across all communication channels can’t manage this critical performance driver. Operators should immediately begin correlating response time metrics with renewal rates. The data will show what operators instinctively know: Faster response directly impacts retention.

2. Build Repeatable Systems That Scale

When residents evaluate renewal decisions over 18 to 24 months, they're assessing organizational competence, not individual staff heroics. This requires documented, repeatable workflows for every resident touch point—from maintenance acknowledgment to lease renewal communication to payment processing.

Properties that retain residents demonstrate systematic reliability. They prove through consistent performance that the service experience won't degrade when staff members leave—critical when turnover exceeds 30% annually.

3. Analyze and Reallocate Staff Time

Adding staff doesn't solve the structural problem—it just adds cost. The priority is analyzing where existing capacity goes and systematically reallocating human time toward high-value interactions.

What percentage of staff hours flows to repetitive administrative tasks versus relationship-building activities that influence renewals? Properties lacking this baseline understanding can't make informed decisions about where to apply operational leverage.

Why This Matters Beyond Competition

For years, operators could mask operational deficiencies through pricing adjustments, amenity upgrades, or concessions. Current market conditions remove these options. Revenue growth opportunities narrow through market competition and regulatory constraints. Rising costs squeeze margins. Labor scarcity limits traditional solutions.

Operational performance becomes the primary competitive differentiator not because operators chose this focus, but because market forces eliminated the alternatives.

The operators investing in operational infrastructure now create durable advantages. But this transcends competitive positioning. When 44 million households depend on rental housing and homeownership rates have hit historic lows at 66%, efficient housing operations become essential to national prosperity.

Every property operating leaner can compete on service quality rather than price alone. Every resident staying longer saves turnover costs that would otherwise drive rent increases. Every operator demonstrating sustainable economics attracts capital that could fund new housing supply.

The housing crisis demands both more supply and better management of existing supply. We must build more, but we also need property management that can scale efficiently to operate it.

Operational excellence is about proving that efficient private operations can help solve public challenges—that housing can be both affordable for residents and economically sustainable for operators.

By Arthur Attal

Ready to keep residents longer and operate more efficiently?