Investors may be overlooking the profitability of the affordable housing segment of multifamily assets. Affordable housing has recently become a popular investment class, but there is still a misunderstanding about the stability of the sector. Affordable housing has an attractive risk-return profile and is better positioned to perform through a recession than class-A apartments.

“A lot of people think this sector is riskier because of a lower income credit profiles or because there is more paperwork and regulatory work—and no doubt you need an experienced operator because there is more work to be done—but we think that it is particularly attractive for a few reasons,” Jonathan Needell, president and chief investment officer of KIMC, tells

First, there is typically strong demand for affordable housing, but new apartment development this cycle and low wage growth has driven affordable housing demand up. “It is a paradox,” says Needell. “The cost of new construction goes up, so the more that you build new, the less affordable housing is available because you have either torn down or gentrified affordable units. On top of that, millennials, which is a great demand set, have an inability to pay for the highest quality apartments, and when you combine that with demographic demand, you end up with a need for affordable housing greater than it has been in the past.”

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.

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