Deep Need for Affordable Housing Fuels Value-add Investment

The deep need for affordable housing is fueling value-add investment in the asset class. Sage Apartment Communities is focusing on elevating affordable multifamily communities in target markets throughout the US. Affordable housing is already in tight supply and demand is only expected to grow. Generally, Sage upgrades bathrooms, cabinets, fixtures, and paint as well as implements a property management strategy to maintain the asset.

“Housing affordability remains a topic of concern throughout the U.S., and we anticipate that dialogue and public concern surrounding this issue will grow in the next 12 months. This in turn will drive even stronger demand for well-appointed affordable apartments that offer a high quality of life at a reasonable rent,” Amber Monte, president of Sage Apartment Communities, tells GlobeSt.com. “We foresee a continued need for affordability in the future and believe this will be a high-performing and lucrative investment strategy for years to come. Our focus is on providing solutions that give our residents a better quality of life while investing in the long-term growth of our assets. We do this through a measured approach to acquisitions, renovations, and management.”

The affordable housing supply decreased by 60% from 2010 to 2016, and is likely to get tighter in the next year. “This dearth of supply presents a tremendous opportunity for owners and operators of affordable housing who already know how to acquire and manage this product type,” says Monte. “Further, the supply of affordable housing is set to decline over the next 12 to 24 months, as many communities see tax credit expirations, and often are acquired and converted into market-rate units.”

In addition to improving the interior units, Sage also focuses on elevating the community amenities. “Improvements were also made to the leasing office, as well as community amenities, including the laundry facilities, on-site playground area and basketball court,” explains Monte. “Parking areas and carports throughout the community received new roofs, asphalt driveways and fresh coats of paint. Each of these improvements results in a more comfortable and attractive offering for residents, without over-the-top additions that would strain NOI and require rent increases to substantiate the investment.”

Sage has a robust portfolio of 7,133 units, but that includes a wide-range of multifamily property types. For its affordable strategy, the firm plans to focus on California, Georgia, Hawaii, Idaho, Michigan, Minnesota, Nevada, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, and Washington. Most recently, it renovated a 120-unit affordable community in Lancaster, CA. “Looking ahead, we expect to substantially increase our assets under ownership and management, and to continue to improve our portfolio of existing assets to deliver the highest quality of life possible, while also achieving strong risk-adjusted returns for our partners and investors,” says Monte.