“Now, as capital cycles through various asset classes and downturns, affordable housing has emerged as the defensive, durable investment of choice.” West emphasized that “these investors have become increasingly sophisticated, and is no longer unusual to see affordable portfolios competing head-to-head for institutional dollars with other defensive sectors.” She pointed out not only the consistent, fully occupied nature of affordable assets, but also the myth-busting data on payment rates and durability: affordable tenants pay their rent on time.

Challenges for Smaller and Innovative Developers

Alicia Glen, founder and managing principal of MSquared, argued for the need to expand the scope of institutional capital to support more bespoke and community-driven projects, especially those led by women or minorities, which risk being overlooked as the sector grows ever more capital-intensive. She warned, “As [affordable housing] becomes basically like any other asset class, it can get harder for the really cool, smaller-scale, innovative work to secure funding.” Glen called for impact capital to be targeted towards “funky or different” development strategies, while leaving mainstream institutional allocations to larger-scale preservation work.

Balancing Financial and Social Returns

Pressure to demonstrate measurable social and environmental impact is not just coming from regulators. Williams noted that about a third of Avanath’s limited partners invest for diversity or impact reasons, and another third “could care less whether [the firm is] making widgets or affordable housing—they want consistent cash flow.” This bifurcation reflects a market where both financial and social returns are expected, sometimes in the same transaction.

Shaping the Future of Underwriting and Deals

Finally, the convergence of these factors—international capital, heightened regulatory and ESG expectations, and a more sophisticated investor base—is shaping underwriting standards, deal sizes and even the types of projects that move forward. Funds structured as open-ended vehicles are now in high demand for their ability to preserve long-term affordability, adapt to regulatory change, and meet the need for responsible exits, panelists agreed.

Instant Insights /

A New Wave of Institutional Capital is Reshaping Affordable Housing

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