Profit + Positive Social Impact

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Did you know our country has been in the midst of an affordable housing crisis ever since the Financial Crisis occurred?

You might be thinking, “Well, the unemployment rate is at a 50-year low, and the economy is strong. What can be wrong?” While it’s true the economy has been strong, what is also true is that home prices are rising twice the pace of wage growth, with the strong economy partially to blame for rising home prices. 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 any time 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 they spend 30 percent or more of their income on rent.
  • According to the National Low Income Housing Coalition (NLIHC), a full-time, minimum-wage worker can afford a two-bedroom apartment in exactly ZERO counties nationwide. In other words, it’s impossible.
  • The NLIHC also found that the US needs more than 7 million affordable homes to meet the current 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 4 in 10 low-income people are either homeless or spend 50% or more of their income on housing.
All these factors explain why there is so much pressure on the low-end of the rental market with demand far exceeding supply.

And with many 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?

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 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 and bad times, and nowhere is that opportunity to generate recession-insulated returns more apparent than in the affordable housing segment.

However, don’t think affordable housing investments are merely for defensive purposes in the time of 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 indirectly 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 easier 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 annual returns exceeding 10% not out of the realm of possibility.

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

Partner with us and enjoy 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.