Intelligent Investment

Affordable Housing Mirrors Overall Multifamily Investment Performance

December 18, 2023 2 Minute Read


Increases in affordable housing investment volume and asset values since the Global Financial Crisis have closely tracked those of the overall U.S. multifamily market.

Figure 1: Affordable Housing Investment Volume & Share of Total Multifamily Investment

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Note: For the purposes of data completeness, affordable housing investment is reported one quarter in arrears.
Source: CBRE Research, CBRE Affordable Housing Group, MSCI Real Assets, Q2 2023.

Affordable housing investment volume grew to an all-time high of $13.5 billion in 2021 from just $674 million in 2009. CBRE defines affordable housing as that which offers below-market rents resulting from certain regulatory requirements, typically associated with tax incentives or other subsidies. Since averaging a 3.6% annual share of total multifamily investment between 2009 and 2022, affordable housing’s share jumped to 7.7% in H1 2023.

As with the overall multifamily market, affordable housing investment has declined from the highs of 2021 and 2022. However, the quarterly average investment in affordable housing in the first half of 2023 is up 50% from pre-pandemic levels of 2015 to 2019, while overall multifamily investment is down by 35%.

Figure 2: Current vs. Pre-Pandemic Average Annual Investment in Affordable Housing by Market

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Source: CBRE Research, CBRE Affordable Housing Group, MSCI Real Assets, Q2 2023.

Some markets have benefited more than others from the increased investment in affordable housing. Dallas, Chicago, Los Angeles and Nashville have all seen their annual average investment increase by more than $200 million over their pre-pandemic levels, while Seattle, Boston, Miami and Portland have all seen their averages decrease by $50 million or more.

The Sun Belt has seen the biggest increase in absolute annual investment from pre-pandemic levels and now accounts for more than half of all affordable housing investment. Regionally, investment increased by 100% in the Midwest, 73% in the Sun Belt and 66% in the Mountain/Northwest, while the Northeast had a decrease of 39%. The urban hubs of New York, Boston, Chicago, Los Angeles, San Francisco, Seattle and Washington, D.C. had a combined 9% increase in affordable housing investment volume.

Figure 3: Affordable Housing Price Per Unit

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Note: Price per unit is presented on a rolling four-quarter basis.
Source: CBRE Research, CBRE Affordable Housing Group, MSCI Real Assets, Q2 2023.

Since 2009, the average affordable housing unit price has increased by 133% to $135,000 as of Q2 2023, mirroring the overall multifamily market trend. Since the Federal Reserve began raising interest rates, affordable housing’s average price per unit has decreased by 16% from its peak in Q2 2022.

Affordable housing offers investors a profitable way to increase their commitment to ESG initiatives. It also offers strong and stable fundamentals, growing investor demand and access to financing with longer loan terms, higher loan-to-value ratios and longer amortization periods.

In short, investors in affordable housing shouldn’t expect to sacrifice value appreciation for providing a critical need in the U.S. housing market today.

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