From Affordable Housing Finance, here’s a list of the Top 10 Owners of Affordable Housing. Each company is listed along with its total number of units as of January 1st. Note that companies investing in both market-rate and affordable housing are eligible for this ranking, but only affordable housing units count toward their totals.
10. McCormack Baron Salazar (14,305)
9. National Church Residences (16,233)
8. Mercy Housing (16,413)
7. Highridge Costa Companies (16,667)
6. Volunteers of America (17,319)
5. Dominium (17,940)
4. GHC Housing Partners (18,189)
3. Related Affordable (21,068)
2. Pinnacle Family of Companies (22,888)
1. The Michaels Organization (45,960)
Last Wednesday, when I was discussing the Top 10 Affordable Housing Developers in the U.S., I pointed out that this sector comes with a mix of advantages and challenges. One advantage, of course, is the staggering cost of housing in the U.S., which makes affordable housing a necessity for many households and communities, and thus a safe investment for many developers and stakeholders. In the wake of the Recession, affordable housing investment makes a great deal of sense. On the other hand, this field is vulnerable to the occasionally whimsical nature of public policy. Unlike retail, office, or even some market-rate multifamily projects–which make do with private sector capital–affordable housing depends on the support of the Department of Housing and Urban Development and various tax credits, subsidies, etc. in order to operate successfully.
In other words, investors in affordable housing depend on the stability and effectiveness of various government bodies. So you can see where challenges may pop up. Just look at the U.K., which in recent years has been revamping its affordable housing policies, attempting to shift some of the burden from the public sector to private enterprises. Recent changes have created quite a bit of controversy, with some critics arguing that affordable housing will soon become too costly for developers and operators.
In the U.S., as in the U.K., these assets exist at the confluence of public and private, which means these properties are also susceptible to market forces, sometimes in ways you wouldn’t expect. I recently read an interesting article on National Real Estate Investor, which reported affordable housing investors fared well during and after the global financial crisis, pointing out that “Tough times can help keep these affordable housing properties occupied.” A study cited in the article reports that an affordable housing owner must have (on average) an occupancy rate of at least 87% to stay afloat, which in many markets is an easy mark to reach.
But some especially battered housing markets (Phoenix, Las Vegas, parts of Florida, parts of Missouri) saw rental rates fall, closing the gap between market-rate and affordable. Ironically, it seems, some market-rate properties have cut into affordable housing’s market. For this asset class to succeed, economic contraction can boost performance, but only when it happens in moderate amounts.