Finding Scale and Impact in Multifamily Affordable Housing
Among institutional investors, tax-exempt loans and municipal bonds have long been dismissed as low-yielding investments. But these often-overlooked investments offer meaningful potential for scale and real-world impact, alongside tax efficiency and competitive risk-adjusted returns.
Growing opportunities in tax-exempt loans stem from the much-needed funding for developing or rehabilitating affordable multifamily apartments. At a time of limited budget capacity for state and local governments and increased uncertainty about the nation’s overall economic outlook, limited governmental resources such as Low-Income Housing Tax Credits represent an underused resource that could be a key source of financing for housing.
State and local agencies issue tax-exempt loans and bonds which can play an essential role in addressing the nation’s shortage of affordable housing. These loans financing affordable multifamily housing can offer a higher yield than BBB corporate debt, particularly on a tax-adjusted basis. Moreover, high demand for affordable housing drives robust operating performance in tax-exempt affordable housing loans across market cycles and supports reduced investment risk.