Investors may be overlookingthe profitability of the affordable housing segment of multifamilyassets. Affordable housing has recently become a popular investmentclass, but there is still a misunderstanding about the stability ofthe sector. Affordable housing has an attractive risk-returnprofile and is better positioned to perform through a recessionthan class-A apartments.

"A lot of people think this sector is riskier because of a lowerincome credit profiles or because there is more paperwork andregulatory work—and no doubt you need an experienced operatorbecause there is more work to be done—but we think that it isparticularly attractive for a few reasons," JonathanNeedell, president and chief investment officer ofKIMC, tells GlobeSt.com.

First, there is typically strong demand for affordable housing,but new apartment development this cycle and low wage growth hasdriven affordable housing demand up. "It is a paradox," saysNeedell. "The cost of new construction goes up, so the more thatyou build new, the less affordable housing is available because youhave either torn down or gentrified affordable units. On top ofthat, millennials, which is a great demand set, have an inabilityto pay for the highest quality apartments, and when you combinethat with demographic demand, you end up with a need for affordablehousing greater than it has been in the past."