Investing in Affordable Housing: A Strong Asset Class

Harvest Homes Apartments, Chicago

in affordable housing across different channels, including lending to affordable housing pro- viders, investing directly through joint venture deals and indirectly investing with sponsors who have created affordable housing funds. In par- ticular, Prudential’s impact & responsible invest- ing group likes doing direct investment deals, because it provides more insight and exposure into transactions, as well as an ability to develop more meaningful relationships with partners. In particular, Prudential is looking to partner with developers that have an authentic commit-

discussion is going on, it’s just not being taken up by as many investors as you might imagine given broader commitments to responsible investment or ESG information and those sorts of things that we associate with this growing field,” says Wood. On the impact investing side, there is still a lot of education that needs to be done on what the opportunities are and how they can fit within portfolios, he says. “There is still a disconnect between the people who have interest in taking up impact investment and the consultants and managers who have input into actual decisions on investment portfolios,” he adds. Part of the problem is spending time to convince investors that affordable housing is a worthwhile venture, and then sending them out to find opportunities. More work needs to be done in generating projects that meet social goals and are investable, notes Wood. “I have certainly talked to institutional investors who think affordable housing is an obvious target of interest; however, financial conventions push them to find vehicles that are at the right scale, that meet their criteria, that fit into their portfolio and have staff and consultants who are famil- iar with the field in order to execute on invest- ments, and that is not always easy,” he says. When asked what should be done to generate more interest in affordable hous- ing investment, one survey respondent wrote: “Increased awareness is what is really needed. Today, affordable housing is predominately considered a negative because it is seen as something that dilutes returns. I would stress the good that comes from affordable housing investments, the bene ts for the city and the bene ts outside of the ballot process. It just needs more positive press.” v

“The perception that one has to give up some returns to do good is a misconception that remains in the investment world today.” — Cherie Santos-Wuest

ment to impact that goes beyond the four walls of the unit, adds Teague. “We believe that affordable housing should really be a platform for economic opportunity, and we look for partners that have that same philosophy and are trying to implement that at the project level,” he says. For example, Prudential looks for developers who are trying to create housing that has a positive impact on tenant health, or projects with locations that afford good economic opportunities for residents, such as proximity to transit, jobs or good schools. “Those are the kinds of things that over the long run are going to make a difference in people’s earning capacity and their ability to get to the next rung on the economic ladder,” says Teague. Affordable housing can play an important role within investment portfolios in terms of delivering safe, stable returns that are often coun- tercyclical to other property and asset types. “That

Beth Mattson-Teig is a freelance writer based in Minneapolis.

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