Many major US cities have seen massive rent increases over the last decade in both residential and commercial property. With the cost of rent so high, it’s become difficult for many Americans to maintain a comfortable standard of living. San Francisco, one of the cities most affected by rent increases, has seen jumps as high as 18 percent over 5 years. There are many ways that young professionals are compromising: long commutes to and from more affordable suburbs, tiny apartments filled with roommates, or even cutting back on essentials like food.
With all of this has come an increased demand for affordable housing units. The US Department of Housing and Urban Development defines affordable housing as something that a family can obtain for less than 30 percent of its income. They also estimate that 12 million US families spend more than half their income on rent, further underscoring the need for affordable housing. Income restrictions and other qualifying factors ensure that the families who most desperately need affordable housing can get it. A certain percentage of all units built in a city are required to fit local affordable housing regulations. The construction for many of these units is partially subsidized by the local government.
Many real estate investors don’t think to focus on affordable housing, but it can be a very reliable asset when managed effectively. There are a number of benefits of investing in affordable housing to consider.
The biggest reason to invest in affordable housing is because of its stability. The demand for affordable housing is particularly high right now, but even if rent prices were to go down, there will still always be people who need affordable housing units. This means you will never have to worry about your units sitting vacant. A 2017 report by the National Low Income Housing Coalition states that 26 percent of US renters are below the poverty line – that translates to millions of people who need affordable housing.
While luxury apartment buildings are high risk, high reward investments, affordable housing is the opposite – it’s stable and offers minimal financial risk. Investors can expect a solid return on investment month after month. Tenants who live in affordable housing have their rents fully or partially subsidized by the government, which means you won’t have to worry about chasing down late or missing payments. Many affordable housing units are also designated for seniors, who typically have reliable Social Security and pension payments in addition to any government subsidies they may be receiving.
In order for affordable housing to be a worthwhile investment, it’s important to look for properties with low operating costs. It’s also very important to take steps to maintain your property’s value, which will help you keep your rent prices and income stable.
By investing in affordable housing, you’re not just building your portfolio – you’re also investing in the health and success of your community. Affordable housing units are key to preventing homelessness. When families are able to live comfortably, they are much less likely to experience health problems and will live longer lives. A lack of homelessness also makes the city a much more pleasant place to live for all of its residents.
When low-income families move into an affordable housing unit, they can spend more of their income on other necessities, like food, clothing, and transportation, which enables them to have a more comfortable lifestyle. This stability also helps keep low-income families at their jobs and in school, which can eventually result in upward economic mobility.
While many investors don’t think to spend their money on affordable real estate, there are so many benefits to doing so. The stability that these properties provide ensure that they can remain a long-term source of income for years to come.
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