One Wall Targets Affordable Housing Supply and Demand Gap

NEW YORK CITY – One Wall Partners, an investment management firm focused on workforce housing, is placing long-term bets on workforce housing that is privately owned and operated, charging rents affordable to moderate-income or middle-class households, as the market braces for a slowdown. The firm sees strong demand and steady returns for the asset type overtime, Nate Kline, partner and chief investment officer at OneWall, tells GlobeSt.com.

Deploying funds from its recently launched Nova Appian Preferred Income Fund I, a $50m preferred equity fund aimed at transit-oriented affordable workforce housing, the firm is eyeing investment opportunities in the northeast,

OneWall sees a plethora of opportunities to buy and improve assets that are affordable because of continued demand for the asset type in the country’s high rent-growth environment.“When I look at different verticals outside of workforce housing, they’re much more elastic when the economy shifts,” Kline said. “The workforce housing space is really insulated from that,” he said.

Building new products in urbanized environments at a price point attractive to developers and for renters has become difficult due to high rates of inflation for land and construction costs. And the new product developers are introducing to the market is for a small sliver of end-users, they’re luxury multifamily units, according to Kline.

Demographic data shows Millennials are spending more years living alone in apartments, instead of moving into single-family homes. In New Jersey, there are over a million young adults still living at home with their parents, falling between the ages of 18 to 35. “The lack of people aging out of apartments, limits supply for people getting their first job or moving out of their parent’s house,” Kline said.

Generally, the current housing environment doesn’t have the corresponding ability to ramp up housing supply at an affordable price point to alleviate the gap between supply and demand.

Also, the majority of affordable housing is older, built in the first half of the twentieth century. Construction between the late 60s through the 90s focused little on multifamily. It was all on single-family homes.

Now those demographics have changed, and Millennials and Gen-Z prefer to rent an apartment than buy a home. Supply hasn’t caught up to that economic reality, and the cost structure that would meet the demand doesn’t provide developers the ability or wherewithal to service the market on the scale that is needed, according to Kline.

“Since the 2008 financial crisis, the homeownership rate has been going down, which shows there’s a real need for affordable apartments.”