A companion problem is that working-class wages have stagnated since the Great Recession. Working-class people often lack cars and can’t find a workable way to make a move to the suburbs. All of this has created a seemingly intractable housing crisis in cities like New York, San Francisco and Los Angeles. All of this has been immensely frustrating, both for the people who live in these cities and for politicians. However, there’s also a great opportunity in this crisis, if only people will take the time to think it through.
Currently, four out of ten low income people are either homeless or spending over 50% of their income on rent, which is unsustainable in the long-term. The US is short by at least several million low income housing units. This is a tremendous opportunity for investors, if they are able to play it right. Social housing in the United States often gets a bad name. However, there are real advantages to landlords when it comes to dealing with social housing programs.
For example, section 8 arrives on time every month. Renting to lower income tenants can mean missed, partial or late payments. Dealing with government agencies means much more reliable cash flow, even if there can be a lag initially. Social impact investment firms have also made affordable housing one of their pet causes. Groups like Turner Impact Capital and Building Opportunity have made it a point to focus on affordable housing. This investment takes many forms, from crowdsourcing online to REITs.
Avalon Communities, a company known for providing corporate apartments, has also shifted their focus to renovating older buildings for more middle-income and lower-income clientele. As these big investments by big players demonstrate, there’s a very healthy future in providing low income housing.