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Sustainable & Impact Investing

September 09, 2021

Investing to Tackle America’s Housing Crisis

Insufficient housing supply disproportionately affects low-income families

The housing market in the U.S. faces growing demand and insufficient supply, which is driving up rental costs and making housing unaffordable for many low-income individuals and families. From April 2020 to April 2021, rental prices in the U.S. have increased 5.4% while wages of low-income workers have not kept pace.1 A person who works 40 hours a week and is paid minimum wage can afford a two-bedroom apartment in zero counties in the U.S. and a one-bedroom apartment in only 7% of counties nationally.2 As a result, in 2020 nearly 1 in 3 households in the U.S. spent more than 30% of their income on rent, and 50% of these households spent over half of their income on rent.3 This lack of affordability is the primary driver of family homelessness, with nearly 172,000 family members (parents and their children) homeless in the U.S. today.4,5

A spectrum of investment solutions to help address this issue

Sustainable and impact investments can be harnessed to preserve and create affordable housing and improve the livelihoods of low-income individuals and families. Investors could seek to preserve affordable housing units, particularly in urban centers, to help prevent gentrification and the resultant displacement of low-income tenants. Additionally, investors could finance the construction of new units to serve low-income tenants who are getting squeezed out of the housing market by rising rent. These investments can help address the affordable housing shortage in the U.S. while also seeking to generate competitive financial returns.6

For example, the Bridge Workforce Affordable Housing fund seeks to invest in, preserve and rehabilitate affordable housing units in the U.S. The fund also seeks to improve the livelihood of the tenants in its properties by providing resources such as workforce development and youth programs onsite.7 Similarly, TIAA-CREF Nuveen’s Responsible Investments helped finance the construction of affordable housing units for nearly 340,000 low to moderate-income residents.8 The AllianceBernstein Municipal Impact Bond Fund invested in the Philadelphia Affordable Housing Preservation program, which funds projects to provide free home repairs to low-income Philadelphia homeowners and install accessibility modifications for low-income disabled residents.9

Lingering impact of the COVID-19 pandemic

The housing crisis has been magnified by the economic effects of COVID-19 on low-income U.S. families. The federally mandated eviction mortarium expired on July 31, 2021. For 11 months, the mortarium banned evictions on renters and homeowners if they fell behind on their rent or mortgage payments. Today, 3.6 million people are at risk of being forced out of their homes and into homelessness.10 The Census Bureau estimates that out of the 51 million renter households in the U.S., 7.4 million are behind on rent and almost half face potential eviction over the next two months.11 As the crisis continues to play out, the need for impact investment capital may only increase further.

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