March 28, 2023 |
Updated March 28, 2023
Centralizing the maintenance staffing model requires radical innovation and new ways of thinking.
In prior articles for units, the discussion centered on the multifamily housing industry’s progress toward centralizing property management functions. Centralization was already a hot topic, as operators tried to identify ways to take cumbersome tasks out of the individual communities and put them into more specialized locations.
Since then, however, the prevailing economics have changed. Now that deals have substantially slowed down, operators have both the incentives and bandwidth to focus on changing their operations to increase efficiency. Through this year’s interviews with apartment industry executives for the 20 for 20 white paper, it’s increasingly noticeable that the path toward centralization seems to heavily focus on leasing and administrative tasks rather than on maintenance.
There are some obvious reasons why that is the case. For example, maintenance is harder to organize across multiple buildings than leasing: The skills of a leasing agent are transferable from a garden-style community to a high-rise. The same is not true of maintenance, where different buildings can require specialized equipment and skills, which have their own peaks and troughs of demand.
These problems can be solved, and there are highly compelling reasons to solve them. Any property manager knows it is harder to staff maintenance than any other property role. Companies routinely finalize budgets knowing that between 10% and 20% of maintenance expenses will go unspent because it is too hard to be fully staffed.
Constant onsite team turnover creates overhead for operators and, of course, has service implications. But much of the inefficiency lies in the model itself. There are always peaks and troughs of activity depending on the high numbers of turns, changes in the season, days of the month and other habitual factors. A staffing model where the number of maintenance techs is always the same is suboptimal.
While most operators are still running maintenance the same way it has always been, some companies are changing how they deliver this critical service. It is normal to view maintenance through the lens of the coverage model (also known as the 1:100 ratio, or one maintenance tech for every 100 units), but that perspective can constrain thinking about new models.
Centralizing the maintenance staffing model will require more radical innovation than those of leasing or accounting; it requires different ways of doing business. Not for the first time, some of the answers for multifamily may lay in single-family rentals (SFR).
Learning From Single-Family Rentals. Again.
The discussion on maintenance centralization looks reminiscent of conversations back in 2018 during the research for the first edition of 20 for 20. Part of the discussion was about self-guided tours (SGT) and how multifamily companies were resisting the concept. SFRs had been successfully using self-show for some time, and it seemed multifamily was slow in adopting what looked like a proven winner. SGTs are now, of course, culturally normal in multifamily. New maintenance models may be following a similar path.
In SFR (scatter-buy, rather than build-to-rent [BTR]), there is no concept of “on-premise” maintenance staff, so operators centrally manage maintenance. There are differences between the models: SFR operators typically handle fewer “small” work orders than multifamily. For example, minor activities like changing lightbulbs are not usually part of the SFR service. Multifamily residents, on the other hand, are familiar with more of a concierge-style service.
The service layer of multifamily maintenance is a critical part of the resident experience and hence the property management company’s value proposition. But the key to the SFR maintenance model is that it blends internal and external resources to deliver maintenance efficiently. This model is already successful in mixed SFR and multifamily portfolios.
Ray Hespen, the Chief Executive of Property Meld, a maintenance software company, says, “There seems to be a bifurcation in maintenance operations today around the 50-unit mark. There is a legacy multifamily model predicated on larger properties, but operators that manage properties with fewer than 50 seem to operate much more similarly to SFR.”
Danny Harlow, VP of Acquisitions at HomeRiver Group says, “Historically, we have specialized in SFR, and we mostly came to multifamily opportunistically, so it never made sense for us to have [onsite] staff. Like many owner-operators, our portfolio has grown through acquisitions, where different parts have specific delivery models, including some that use very few internal resources.”
The ability to deploy a mix of resources is also a core skill for managing a workload, only part of which is predictable. Says Harlow, “The biggest challenge is always the peaks and troughs of demand for maintenance services. In an ideal world, you want a kind of hybrid, where you staff the portion of the business that you can staff efficiently. Some resources, for example, those with specific licenses, don’t belong on your payroll.”
To optimize the blend of resources, multifamily operators must think differently. “The ratio of techs to doors in multifamily has not changed in years: When we organize maintenance, we shouldn't start with the legacy model,” says Hespen.
A key difference is that multifamily’s onsite model provides a certain amount of capacity available to perform tasks, in many cases on a first-come, first-served basis. The distributed SFR model forces operators to make decisions about each activity, which requires a high degree of transparency. “In order to maximize NOI and resident satisfaction, operators should have enough information to answer these three questions that optimize for both: Who should do the job, how much time do I have to do it, and how much will it cost?” says Hespen. “The legacy multifamily model largely avoids those questions, and that represents a big opportunity for operators.”
Divide and Conquer
In thinking about how to organize a more flexible delivery model, it’s helpful to consider the types of activity maintenance entails. For the sake of simplicity, activities can be bucketed into three categories: Business as usual, proactive maintenance and turns. The nature and the cadence of these three sets of activities are quite different.
Business as usual entails relatively large volumes of work orders best handled by those close to the property. Proactive maintenance can be scheduled in advance, particularly during lower-demand periods. Turns tend to create large spikes in activity during leasing season and at the times of the month when move-ins and move-outs are at their peak.
The cadence and planning of turns differ from the other maintenance activities. “We have found that project management is the key with turns,” Harlow says. “You may have 20 to 30 things to do, but the tasks are predictable. We have found that with the right template and controls, we can be working on 100 turns at once, and because we’ve broken the process down into individual tasks in an overall plan, we can track exactly where we are with each activity.”
A growing number of multifamily operators are identifying turns as a natural candidate for outsourcing. Another service provider with an SFR heritage is Lessen, much of whose current growth is from multifamily companies focusing on turns. “A model where we take turns completely out of the scope of maintenance enables properties to have a more focused site team to work on day-to-day work orders and asset protection,” says Lessen’s Executive Vice President of Operations Brad Hamel. “We find that it takes turns out of competition with both business as usual and the inevitable emergencies, which makes it easier for operators to plan all activities.”
Hamel says that turns have been a pain point in the industry for many years: “They still get done manually by most companies. As a result, they take five to 10 days to complete. We have found that by separating them from the rest of the workforce and focusing specific resources and organization on the turn, we can get that down to
three to four days.”
Lessen uses a combination of technology and an extensive network of approved service providers to enable the outsourcing of maintenance activities. In effect, it operates as a tech-enabled GC.
The Rise of the ‘GC Role’
The “GC role” is critical in reorganizing maintenance, whether using a third-party or internal resources. Chad Moulin, Vice President of Facilities at Goldrich Kest, has been rolling out a new maintenance delivery model across several markets in California.
“The key for us has been to change reporting lines so that we put regional maintenance under a regional management structure rather than having property maintenance reporting to a property manager. When you have several properties within a few miles of one another, you can organize this way.”
Goldrich Kest’s journey toward a more centralized maintenance model has been relatively low-tech so far. Moulin says: “We still process work orders at the property level; the difference is that a regional lead coordinates the work. That enables us to foresee shoulders in demand and schedule preventative and proactive maintenance. That flexibility is important: If it’s the second of the month and a unit due to be ready on the 15th is now needed on the ninth, we have greater flexibility to redeploy our resources. And crucially, it’s up to the maintenance lead, not the property manager, to figure the problem out.”
The specialist maintenance lead is critical to the model, and it is where many of the real financial savings lie. “Ninety to 95% of the work is the same in the new model, but we’ve substantially reduced operating expenses,” Moulin says. “The savings come not primarily through staff reductions but from better decisions about how to perform activities. For example, we found that same problem fixing door closers resulted in 10 separate service calls to external vendors.
A regional maintenance director instead allocated the tasks to a maintenance tech who knew how to do that repair, so we stopped incurring the external vendor expense altogether.”
The Benefits of Specialization
The source of financial benefits is worth considering: One of the challenges of the current industry vogue of “centralization” is that it puts staff costs at the center of companies’ consideration of new staffing models. That is not usually the point of changing staffing models: Most operators are primarily motivated by making processes work more efficiently. The same is true of maintenance, where better coordination reduces costs through better management of expenses. And greater role specialization helps retain more staff by offering better career paths.
“As we’ve changed the way we organize our teams, it’s made us think about what we want our property staff to be good at,” Moulin says. “It’s important to have people be good at walking properties, and it’s difficult to have them be good at paperwork. We now have a greater variety of roles and seniority. You often hire maintenance techs into entry-level positions, and some demonstrate the potential to be regional supervisors and can now follow that path. Others more naturally gravitate to roles with more interaction with residents. The key is that we now have variety and specialization.”
Moulin describes role specialization as a lever to improve service delivery. “I can see a world where greater role specialization leads to even greater efficiency,” he says. “For example, you could have a dedicated HVAC specialist who drives a van with equipment owned by the management company.”
From these and the other examples above, it can be seen how better coordination, more flexibility and better allocation of tasks to individuals and technology will deliver operational efficiencies and service improvements. Some multifamily operators are making progress on these models, but they are still a small minority.
Technology will continue to improve, with sensors and AI offering new ways to make maintenance more proactive and cost-effective. But smarter technology will need smarter and more specialized maintenance teams if operators are to reap the benefits. Each multifamily portfolio is different, so one size will not fit all, but the rewards for identifying the path toward greater specialization are compelling.
A few short years ago, the success of SFR in delivering self-show attracted little but skepticism from operators. Now, it is an essential part of multifamily property management. It’s time for multifamily operators to move more decisively down the path already established by SFR toward a more flexible and efficient maintenance model.
Dom Beveridge is Principal with 20 for 20, a multifamily technology consultancy.