Key Elements of Affordability

Although they say March comes in like a lion and out like a lamb, we think the opposite could be true for multifamily impact investors. With the Fed indicating a potential interest rate decrease in the coming months, investment momentum may start accelerating by the end of March—and with that should come increased appetite for impact investing.

The truth is multifamily impact investing is a smart move to consider regardless of prevailing economic conditions. Investors have an opportunity to make a real, positive difference in people’s lives through this sector, which could not be more meaningful than in times of uncertainty.

Equally, when the economy is booming and market-rate rents are soaring, multifamily impact investing helps enable the development of affordable and workforce housing for those in lower income brackets. It’s an evergreen win-win for investors and renters.

If you haven’t yet reviewed or adopted our Multifamily Impact Framework™, March is also a great time to do so as we’re still in the first quarter of the year. This market-based set of standards for multifamily industry impact principles and reporting guidelines is a must-have for organizations interested in deepening their impact, and it’s free to download.

Speaking of deepening impact, we could all learn a lesson or two on this subject from Avanath Capital Management, one of our Silver Founding Members. Avanath is a veteran in the affordable housing space that has set a high bar for others in the industry. In the interview below, we speak with Avanath’s Founder, Chairman and CEO Daryl J. Carter about one of the Multifamily Impact Council’s seven principles: affordability.

We hope you enjoy this month’s newsletter—particularly our fresh new, easier-to-read design. Here’s to a successful March!

Bob Simpson

President and CEO

Daryl J. Carter directs the overall strategy and operations of Avanath Capital Management, LLC, a California-based investment firm that acquires, renovates, and operates apartment properties, with an emphasis on affordable and workforce communities. Avanath is a Silver Founding Member of the Multifamily Impact Council.

1. Why is affordability so important?

Affordable housing is really about people. In the end, we are trying to help people elevate their lives and become healthier, happier members of society in all ways possible. This starts with one of the most basic essentials of life: having a place to live. In order for that essential element to be in place, it must be accessible to the people who need it most—those in the lower income brackets. This is where affordability comes in. Without the affordability piece, the rest is insignificant.

There is no better time than now to think about affordability. According to the National Multifamily Housing Council, rising interest rates are causing a sharp reduction in both apartment sales volume and new apartment construction, leading to higher rental prices and worsening affordability conditions in the long run. In addition, tight monetary policy is threatening the strength of the broader job market and economy, which has not yet fully digested the rate hikes already enacted.

2. How is Avanath addressing affordability in its communities?

One of the methods we have found extremely effective for keeping our communities affordable is by entering into public-private partnerships. Many investors may not realize that public agencies are very proactive and open minded and are happy to discuss innovative solutions with private organizations. Along with supporting projects that protect and preserve affordability in some of the most unaffordable markets, these partnerships unlock a multitude of benefits for investors, including resilience, stability, and a reliable income stream.

3. How has Avanath utilized public-private partnerships to deliver affordable housing communities?

We have found municipality grants to be very useful for providing affordable housing financing. Governments of cities where rental rates are high and housing affordability is shrinking are often eager to work with residential owners and operators to deliver attainable apartments to their constituents. Utilizing city grants is a creative public-private partnership solution for delivering housing that is within reach in areas where the cost of living—and the cost of multifamily development—is high.

Public-private partnerships also work well with corporations located near the affordable housing communities we own and operate, as these companies typically have a stake in the surrounding communities.

In addition, with available land for affordable housing construction at a premium—especially in cities—we often look to create infill development by developing these properties on unimproved parcels of vacant land owned by a city. Partnerships like these can help relieve urban blight and revitalize neighborhoods while offering much-needed affordable housing to residents of those areas.

4. What are some obstacles owners/operators and service providers need to know about making a property affordable? How can they overcome these obstacles?

While financing affordable housing properties is one of the biggest obstacles stakeholders encounter in this space, they should not be afraid to think outside the box. In addition to LIHTC credits and additional legislation being created to promote affordable housing development, there are quite a few entities willing to partner with developers to deliver this much-needed housing. Being willing to reach out to discover those entities and make those connections is vital. Right now, there is a lot of dry powder available to invest in multifamily housing, and many investors are eager for their capital to have a positive impact in the world. The time is ripe to create and nurture those relationships.

Another obstacle owners and operators may encounter is delivering amenities without jeopardizing a community’s affordability. Amenities are vital to affordable housing communities and can help make them indistinguishable from market-rate apartment developments in the same area of the country. It’s crucial for affordable housing providers to focus on amenities that will have the greatest impact on residents rather than investing in fads or trends that may soon fade.

5. Anything else you would like to add?

Achieving affordability in multifamily communities becomes much easier when you concentrate on what is best for the residents. Often, sustainability will help guide the way toward affordability, which is why Avanath formalized our approach to ESG through our +Amplify program, a comprehensive ESG framework for environmental and social responsibility and guides our operations. +Amplify is the foundation of our commitment to continue a wide range of social programs for our residents, reduce the environmental impact of our assets, and deliver value to our investors. We believe prioritizing social equality, responsible investing, and a healthy environment supports greater prosperity for all.

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