EP 31 | Profit + Positive Social Impact

On this episode of The Impatient Investor, Andrew talks about the affordable housing crisis in the U.S. Andrew explains why the demand for affordable housing is going to continue to rise, and what this means for investors. Enjoy!

“Private investment opportunities in the affordable housing segment are available to qualified investors everywhere with low barriers to entry and without sacrificing return.”

Full Transcription:

Did you know our country has been in the midst of an affordable housing crisis ever since the financial crisis occurred? And what do you think is going to happen to affordable housing post COVID? You might be thinking prior to COVID-19 the unemployment rate was at a 50-year low, the economy was strong, what could be wrong? While that’s true, the economy has been strong. What is also true is that home prices have been rising at twice the pace of wage growth. With a strong economy, partially to blame for rising home prices, as well as record-low inventory.

This means homeownership is out of reach for many people in our country. Here are some key factors that explain the high demand and low supply of affordable housing. For 59% of the country renting a home is more affordable than buying. Nearly two-thirds of renters nationwide say they can’t afford to buy a home and saving for a down payment will not happen anytime soon. 11 million Americans spend more than half their paycheck on rent. According to a Harvard report, nearly half of renters were cost-burdened, meaning that they spend 30% or more of their income on rent. According to the national low-income housing coalition, a full-time minimum-wage worker can afford a two-bedroom apartment in exactly zero counties nationwide. In other words, it’s impossible. 

They also found that the U.S. needs more than 7 million affordable homes to meet the housing demand for the nation’s more than 11 million, extremely low-income families. New development of affordable housing is impeded by local planning boards, plagued by the not in my backyard or NIMBY attitude, favoring mid-level and high-end development projects to preserve local real estate values. 

The center on budget and policy priorities found that four in ten low-income folks are either homeless or spend 50% or more of their income on housing. All of these factors explain why there is so much pressure on the low end of the rental market with demand far exceeding supply. And with baby boomers set to retire in the coming years, many of them with inadequate savings, there will be a flood of potential affordable housing tenants looking to downsize, which will ensure demand for affordable housing will continue to soar.

What does the affordable housing crisis mean for investors? Well, it means that investors willing to commit to affordable housing will be rewarded with high risk-adjusted returns in a segment with a social component, providing housing to an underserved and overlooked segment of our society where demand is not expected to taper anytime soon. Affordable housing not only offers consistent income but is also the least volatile commercial real estate segment since the economic downturn. 

Demand will only increase. Wealthy investors and institutions have been relying on commercial real estate for decades to create income in good times and bad. And nowhere is that opportunity to generate recession insulated returns more apparent than in the affordable housing segment. However, don’t think that affordable housing investments are merely for defensive purposes in the time of a recession. Real estate investors all over the country have proven that affordable housing can be profitable and offer high, risk-adjusted returns even when offering below-market rents. 

To take advantage of affordable housing investments, anyone looking to avoid the challenges of acquiring a property on their own, and being a landlord, has options. The wealthy have deferred to the expertise of more experienced commercial real estate investors for decades by investing directly through private equity and debt real estate funds. With the rules recently loosened by the SEC on the advertising of private investment opportunities, finding and investing in them has never been easy for qualified investors. That means that private investment opportunities in the affordable housing segment are available to qualified investors everywhere with low barriers to entry without sacrificing return with the opportunity to earn high annual returns, exceeding 10%, not out of the realm of possibility. 

I’ve been addressing the affordable housing crisis for years by finding neglected or underperforming assets, making improvements to these assets to increase capacity, and put more units into the pool of affordable housing in these local markets. All the while we’ve been able to generate above-market returns for our investors backed by a hard asset and shielded from the stock market volatility. It’s been a financially, as well as a socially rewarding endeavor for us. 

To find out more about the financial benefits that come with investing in the affordable housing segment along with the added benefit of making a positive social impact with your investment, go to www.stoptradinghours.com.


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S P E A K E R | I N V E S T O R | P O D C A S T E R

Andrew is a founder and Managing Member of Four Peaks Capital Partners. He oversees the company’s acquisitions, asset management, and investor relations. He also co-directs the overall investment strategy along with Mike Ayala. He brings to the company over 10 years of experience in general management and new business development

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