Investing in Affordable Housing: A Strong Asset Class

Preserving America’s Affordable Housing by Richard Burns

T he NHP Foundation’s (NHPF) success for the last 30 years is owed to 21 early insti- tutional investors who saw the potential of the affordable housing asset class to produce worthy returns, both financially and socially. Those initial

Incorporating the concepts of impact invest- ing and ESG criteria enhances the attractiveness of affordable housing investment. By combining these with our own empirical affordable housing investment database, we are able to demonstrate to institutional investors the benefits of including this stable asset class in their portfolios.

investments from pioneering com- panies such as Aetna, John Han- cock, Northwest- ern and PNC created the origi- nal capital that NHPF has lever- aged into today’s portfolio. Investment in NHPF coin- cided directly with the pas-

Everyone in the affordable housing ecosystem needs to seek ways to overcome these barriers and provide a host of new solutions aimed at increasing institutional investment.

We partnered with Kingsley Associates, a real estate industry research leader, to gain insight into institutional experience with this asset class. The firm conducted dozens of in- depth confidential interviews with fund man- agers to gauge their perceptions of investing in affordable housing as well as some recom- mendations for the industry. The results of the study were presented at the highly success- ful 3rd annual NHPF Symposium & Dinner. The presentation served as the springboard for a thought-provoking panel, led by Jona- than Schein of InstitutionaI Real Estate, Inc., that discussed the ongoing need to provide millions of Americans with quality, service- enriched affordable housing. As this special report will illuminate, the study found there are significant barriers ham- pering or preventing participation by institu- tional investors at this time. Meanwhile, the average full-time worker earning the minimum wage cannot afford the rent for a modest two- bedroom apartment in any state, metropolitan area or county in the United States. Everyone in the affordable housing ecosystem needs to seek ways to overcome these barriers and pro- vide a host of new solutions aimed at increas- ing institutional investment. v

sage of the highly successful LIHTC (Low Income Housing Tax Credit) tool created by Con- gress, which has made possible the vast majority of affordable housing. This remarkable, bipartisan legislation benefits everyone in the equation — renters, developers and investors. Our founding investors contributed approxi- mately $6 million, an investment which, over 30 years, has been leveraged into 100 multifamily properties containing 18,000 affordable hous- ing units. We currently serve more than 29,000 residents at 56 properties, providing over 10,000 affordable housing units in 15 states and the Dis- trict of Columbia. These early affordable housing investors were pioneers of impact investing, setting the stage for future corporate investors. Since that time, many traditional funders have success- fully entered the affordable housing market, including a variety of private equity and pri- vate debt funds. However, the need remains great. At a time when traditional investors such as pen- sion plans are falling short of their projected returns, we are calling for a new generation of institutional investors to take up the challenge.

Richard Burns is president and CEO of The NHP Foundation.


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