Affordable housing is making all of the headlines these days. Affordable housing is different than workforce housing because it serves a low-income segment of the community and is often built with LIHTC. While the investment pool in this market segment is small, recent demand for affordable has caught the attention of institutional capital. However, there are limited opportunities for institutional buyers to gain significant market share in this space.

“The players that have been in the business for several years, of which there are three of four, have been the same. We have seen some bigger portfolio sales over the last two years, which has allowed new entrants to take some big bites into affordable housing,” Jonathan Needell, president and chief investment officer at KIMC, tells “That obviously affects pricing and cap rates, and probably already has. It isn’t across the board, though. It is mainly in downtown, higher density areas where the check sizes are big enough.”

The reason institutional entrants haven’t made a big impact is largely due to scale. Affordable properties are generally smaller than market-rate apartment projects. “Most of affordable housing is built in 100 to 200 units, so you really need to aggregate the portfolio,” says Needell. “If you go on the HUD website, you can download every owner of a LITEC property. A tremendous amount of it is 100 units and the vast majority is under 200 units.”

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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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