Multifamily operators are heading into 2027 budget season with less room for error than at any point in the current cycle. Supply deliveries are finally falling, but vacancy is expected to stay elevated through the year. Concessions continue to blur the line between asking rent and what properties actually collect. And expense categories, from insurance to HVAC reserves, are shifting in ways that are hard to forecast line by line. The rent rebound many operators planned around has arrived more slowly than expected, and few now expect it in 2027.
That environment is changing how budgets get built. In interviews and industry briefings this season across Multifamily Dive, Multihousing News, Apartments.com, WithMe, and Multifamily Executive, executives at firms including Kairoi, CAPREIT, The Michaels Organization, and TDC Management said they are abandoning the practice of carrying forward last year’s figures plus an increase. Instead, they are asking each line item to justify itself, cutting spending that can’t show a return and protecting the categories most closely tied to retention, asset condition, and net operating income.
This report draws on those conversations to outline the forces squeezing 2027 budgets and a four-test framework for deciding where each dollar belongs: whether it protects revenue, reduces a future expense, preserves asset value, or proves a measurable operating return. It then examines the tensions operators face in applying those tests across portfolios and ownership structures, and closes with five practical moves teams can still make before final budgets go to ownership.
The forces squeezing 2027 budgets
Multifamily operators described a budget environment where revenue growth remains constrained, and expense pressure is harder to predict category by category. Four dynamics drive most of that pressure, and together they determine where operators can reallocate spending in 2027.
A slow supply unwind. CoStar data published by Apartments.com projects that new supply will fall another 24% year over year in 2027, yet vacancy is expected to rise to 8.8% early in the year before easing only to 8.4% by the fourth quarter. Rent growth will be uneven, accelerating more slowly in supply-heavy Sun Belt and Mountain markets while more balanced Midwest, Pacific, and Northeast markets are expected to outperform the national average. Brad Dillman, a multifamily economist and founder of Florey Street Advisors, cautioned against assuming an imminent supply cliff. Marcie Williams, chief strategy officer at The Bainbridge Cos., expects only modest rent growth in 2027, with stronger growth returning in 2028 as deliveries slow.
Concessions distorting headline rent. In markets where concessions remain common, asking rent has become an unreliable basis for revenue projections. Panelists at the WithMe briefing noted that a 3% rent increase means little if achieving it requires four weeks free, a concession worth roughly 7.7% of annual rent on a 12-month lease that would leave net effective rent below a prior lease signed without concessions. Platte Canyon co-founder and CEO Brennen Degner cited elevated supply and negative new-lease trade-outs as the reasons his firm reallocated capital. Village Green Operational Vice President Karen Matkovich said the firm focuses on closing the gap between market rent and effective rent.
Retention outperforming new leasing. Renewals are providing some of the steadiest support for the revenue line. Matkovich told Multi-Housing News that Village Green typically targets renewal rates of 50% to 55%, but its clients are averaging 60% to 65% this year with rent increases of 2% to 3%. Fogelman plans to put more weight behind resident activities and engagement in 2027, and Justin Marshall, president of property services, expects slower growth in repairs and maintenance and potential marketing savings to offset that increase.
An expense base that resists broad savings. Embrey’s Karam said corporate expense growth has moderated, and no single non-elective line item faces unmanageable upward pressure. But he also sees no meaningful opportunities for broad-based cost savings, which leaves operators focused on expense discipline line by line. Insurance shows how quickly conditions can shift. Degner reported meaningful reductions on Platte Canyon’s 2026–27 property policy and a general liability renewal that appeared to land flat to slightly positive.
But he is already hearing the market is hardening, making further reductions less likely even if double-digit increases do not return. Degner also expects continued pressure on HVAC replacement reserves from elevated equipment costs and constrained parts and labor. Utilities, service contracts, and payroll, which Kairoi’s Freiling called one of the largest property-level operating expenses, round out the categories operators cited most often.
Making every dollar earn its place
Neology founder and CEO Lissette Calderon described the framework her firm uses, which captures the reallocation logic many operators are applying: every dollar should either protect revenue, reduce a future expense, or preserve asset value.
This report adds a fourth test drawn from the return standard that operators such as Kairoi, RR Living, and The Michaels Organization apply to technology, marketing, and vendor spend. Each line item in the 2027 budget should pass at least one test, and line items that pass none should be rebuilt from scratch rather than carried forward, an approach TDC Management’s co-presidents described as no longer assuming last year’s cost plus an increase is the right budget.
Test 1: Protect revenue. This test covers spending that sustains occupancy, renewal conversion, and net effective rent, including resident service, engagement programming, and the quality of leads entering the funnel. Neology’s co-branded Pilates classes with local studios, resident-only wine tastings, and World Cup watch parties fall in this category because they are designed to keep residents longer. The Bainbridge Cos. is investing in faster, more personal responses to prospects and residents to build loyalty from move-in through renewal. Key measures include renewal rate, renewal trade-out, and lead-to-lease conversion. Apartments.com’s survey of 700 multifamily marketing decision-makers found that about two-thirds rank lead quality and lead-to-lease conversion among their top priorities, while only a minority prioritize lead volume and cost per lease.
Test 2: Reduce a future expense. Preventive maintenance is the clearest example, and operators who addressed it treated it as protected spending. CAPREIT Chief Technology and Transformation Officer Savas Karas said consistent maintenance prevents more expensive repairs, pointing to annual dryer vent and gutter cleaning as work that prevents fire hazards and water damage. Cheree Lujan of The Michaels Organization said spending the right money upfront can prevent a much larger expense later. Leak detection, which operators use to help control insurance costs, and realistic HVAC and repair reserves also belong here. The discipline required is distinguishing this spending from deferral, which reduces the current-year number while enlarging a future one.
Test 3: Preserve asset value. Assumed rent premiums no longer justify capital improvements on their own, and operators are either redefining renovations as preservation or sizing them to what each market actually supports. Platte Canyon has essentially stopped renovating for rent upside and now renovates only when a returned unit is in rough enough shape, or has gone unoccupied long enough, that it requires work to become leasable, which Degner described as treating renovation more as a deferred maintenance item. PXV Multifamily Director of Asset Management Christine Ritchie said a lighter scope can often generate a higher return than a full renovation. The firm matches scope to what each market and submarket supports instead of applying a standardized portfolio scope.
Test 4: Prove an operating return. This test applies to technology, marketing, and service contracts and requires evidence that the spend improves revenue, retention, efficiency, or resident satisfaction at a specific property. RR Living applies this standard to marketing, automation, and other legacy expenses. Vendor spend receives the same scrutiny. TDC Management co-presidents Crystal Jackson and Aryne Bailey noted that waste hauling is often treated as a fixed utility expense, even though its cost depends on service levels, pickup frequency, overages, and each property’s fit. PXV founder and managing partner Matt Ferrari sees meaningful savings opportunities in actively rebidding service contracts and using portfolio purchasing power.
Applying the tests. The framework’s value lies in replacing the carry-forward default with an affirmative case for each line. Tammy Freiling, Kairoi’s chief financial officer of property management, said precedent alone is no longer a sufficient business case. Lujan described her team challenging every line item instead of carrying forward the prior year’s figures. Panelists at the WithMe briefing discussed questioning whether historical expense averages still make sense and, in some cases, starting from zero, which is the natural treatment for any line that fails all four tests.
4 tensions in applying the tests
The four tests are straightforward to state, but applying them consistently across a portfolio requires judgment that no single standard can fully provide. Operators interviewed this season pointed to four areas where the right answer depends on technology horizons, portfolio structure, ownership goals, and how aggressively the budget baseline is set.
Technology spending is splitting operators. Fogelman is deliberately avoiding new tools and platforms without a clear return. RMK Management Corp. plans to spend less on technology after two aggressive years of spending. Embrey may pace some of its AI and technology investment to support core-business growth while remaining committed to those initiatives. Castle Lanterra founder and CEO Elie Rieder said the firm will hire analysts and junior staff more slowly and invest in AI tools for acquisitions, asset management, and renovations. CAPREIT plans to increase spending on technology infrastructure and data as it reviews redundant or underused platforms. The complication is timing. Calderon characterized AI as an initial capital expense that can eventually lower payroll costs, suggesting infrastructure investments may fail a one-year return test that a point solution can pass. So technology leaders need to agree with finance on a multi-year horizon before applying the test.
Property-level precision competes with portfolio scale. Bell Partners, Kairoi, and CAPREIT all emphasize building budgets property by property, with Karas describing each project as its own micro-market. However, several savings opportunities operators identified depend on aggregation, including PXV’s use of portfolio purchasing power and shared staffing that Matkovich said can create efficiencies for Village Green clients with multiple properties in the same submarket. Operators need a governance model that lets each property set its own cost structure while preserving the purchasing and staffing efficiencies that exist only at portfolio scale.
Owner objectives change the answer. For third-party managers, the same line item can pass or fail depending on the owner’s plan for the asset. Matkovich said Village Green matches each budget to its client’s goals, noting that some owners prioritize high occupancy while others want to hold expenses steady or reposition a property for sale. A retention program that defends occupancy may clear the bar for the first group and fail it for the second. A long-payback maintenance project carries different value for an owner planning to hold than for one preparing to sell.
Budget baselines are a policy decision. Operators take different approaches to whether budgets should anchor to targets or to current conditions. Karas said that while some organizations lower revenue assumptions to 90% occupancy in a softened area, CAPREIT starts at 95% and works operationally to reach it. French said RR Living prefers achievable revenue assumptions, with upside driven by execution rather than reliance on aggressive rent growth.
Both approaches are defensible, but the choice determines how much discretionary spending to hold in reserve for mid-year adjustment. Bell Partners has already identified discretionary spending, vendor contracts, and marketing effectiveness as the first areas it would revisit if rent growth or occupancy fall short, while trying to preserve resident service.
5 moves before budgets close
Most 2027 budgets are already in progress, but operators can still apply several practices described this season before final numbers go to ownership. The following steps translate the four-test framework into concrete changes to how line items are classified, contracts are tracked, revenue is modeled, and spending is adjusted during the year.
Classify every line item against the four tests before setting amounts. Operators should require property and regional teams to tag each line with the test it satisfies, the metric that will confirm it, and whether the spend is elective or non-elective before entering any dollar figure. Rebuild lines without a passing test from a zero base. Use the elective flag to give finance a ready inventory to draw on if mid-year reductions become necessary, consistent with the discretionary spending, vendor contracts, and marketing that Bell Partners has already identified as its first areas to revisit.
Build a portfolio-wide contract calendar. The WithMe briefing identified contracts that renew outside the calendar year as a common source of budget misses, since a missed renewal date can leave months of increased pricing, fees, or other contract changes out of the forecast. Village Green relies on contract trackers for terms and expiration dates and talks with vendors a full year before each contract expires to understand increases and confirm the services match the spend. A centralized tracker of renewal dates, escalators, and equipment leases lets operators schedule rebids systematically rather than reactively.
Model revenue on net effective rent and renewal economics. Build revenue assumptions from net effective rent after concessions, modeling new-lease and renewal trade-outs separately. The two lines are moving in different directions. Platte Canyon cited negative new-lease trade-outs, while Village Green clients are averaging renewal rates of 60% to 65%, above the firm’s typical 50% to 55% target, with rent increases of 2% to 3%. A blended portfolio rate obscures that divergence, so the renewal line warrants its own conversion and pricing assumptions by property.
Audit technology utilization and overlap before contract renewals. Map each platform to the specific metric it should move, its adoption by on-site teams, and any functional overlap with other tools in the stack, the same review CAPREIT is conducting on redundant or underused platforms. Lujan offers a useful benchmark. Technology should make on-site teams’ jobs easier, not add another platform to manage. Any tool that duplicates another or fails to deliver results should justify its renewal. Infrastructure and data investments belong on the separate multi-year horizon described above.
Convert marketing and discretionary spend into variable budgets with defined triggers. RR Living has moved away from treating advertising as a static annual expense and increasingly adjusts spend based on inventory, traffic, conversion, and market conditions, accelerating investment when a community needs demand and pulling back when occupancy and traffic are strong.
Operators can formalize this approach by setting occupancy, traffic, and conversion thresholds that release or withhold funds, and by agreeing on those triggers with ownership during budget review. The WithMe panel emphasized regular communication with ownership so major performance gaps don’t surface for the first time in a budget presentation, and pre-agreed triggers extend that principle by turning mid-year adjustments into executed plans rather than surprises.
Budgeting for execution
The 2027 budget cycle marks a shift in how operators justify spending. With CoStar projecting only gradual rent recovery and vacancy remaining elevated throughout the year, operators quoted this season are treating each line item as something that must earn its place instead of carrying forward the prior year’s figures.
The four-test framework gives that discipline a consistent structure across properties and owners, asking whether each dollar protects revenue, reduces a future expense, preserves asset value, or proves a measurable operating return. Applied rigorously, it redirects capital away from renovation premiums in markets that no longer support them and toward retention, preventive maintenance, and technology with demonstrated utilization- the categories operators most often connect to NOI in a low-growth environment.
Operators that build this discipline into the 2027 budget will enter 2028 with leaner cost structures, cleaner data on what each dollar produces, and the flexibility to accelerate investment when rent growth returns. Those relying on carried-forward budgets and a market rebound overlook the lesson Ferrari drew from recent cycles: the slowdown in rent growth has already lasted longer than most operators anticipated.
– Nick Pipitone
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