The demand for affordable housing, which was already high before the pandemic, is only expected to increase in a post-pandemic economy. With widespread unemployment and a struggling economy, many people are seeking out affordable housing. As a result, the gap that already existed between the supply and demand for affordable housing is larger now than it has been in years, necessitating increased investment. This investment will come from both private and government sources, who are both motivated to invest as affordable housing stands out as an especially stable and necessary investment.
Many private investors consider affordable housing to be a safe investment option at a time when the stock market is unpredictable. Affordable housing has proven to be recession-resistant in the past and is now considered to be in a better position than many other asset classes. Further, while rent payments may seem like they would be an issue, unstable rent payments may actually be less of an issue with affordable housing than market-rate apartments. Not only do affordable housing tenants often pay a lower percentage of their income on rent than market-rate tenants, but many low-income tenants also have Section 8 vouchers that allow for government payment to private landlords in case of default. Additionally, rent collection for multifamily residents appears to be increasing in general, further mitigating the risk. As investors choose to invest in affordable housing because of its stability, development, and construction of affordable housing will be able to increase in response to high demand.
State and local government investment will also help to meet this increased demand, as governments are especially cognizant of housing needs at the moment. Housing is key to the health and safety of communities, making it a major concern to governments. Partnerships between governments and private developers and construction companies have been fundamental in bringing about affordable developments in the past and are likely to increase in the future. However, governments are also seeing their budgets depleted as they deal with the pandemic, potentially making development more difficult. Margaret Anadu, head of Goldman Sachs’ Urban Investment Group, hopes that an increased focus on housing issues will offset this financing issue and lead to new discussions and initiatives regarding affordable housing in the future.
Affordable housing has been in high demand and will become even more critical to the success of cities as they recover from the pandemic. Private and public investors recognize its importance and see benefits in investing for both the health of cities and their investment portfolios.
About the author
Melanie Tate is a J.D. candidate at Emory University School of Law. Melanie earned her B.A. in literature from Louisiana State University. She is a 2019 – 2020 legal intern at Caiaccio Law Firm.