Investing in affordable housing is a compelling opportunity with the potential to provide a range of economic & social benefits, from diversification, the potential for some inflationary hedging and regular income to the fundamental community impact created through preserving affordability for residents.
The State of Affordable Housing
According to the National Low-Income Housing Coalition, there is a national shortage of 7 million affordable and available rental homes for families at or below 30% of AMI.
Existing stock is largely being replaced with more expensive market rate apartments due to a confluence of factors; rising construction costs, growing regulatory burdens, and affordable housing challenges these developments face in local communities.
More Americans—a total of 44 million households—are renting now than any time in the last 50 years. These include senior citizens, working families, professionals, veterans, and students.
The median household income of all renters is $38,944, or roughly 65% of the median income of all households in the United States.
Our Investment Approach
Acquire existing affordable communities in high barrier to entry locations with value-add potential
Address deferred maintenance and complete targeted capital improvements while driving results by improving operational efficiencies over a 5–10-year period
Execute exit strategies based on market dynamics with the potential to appreciate while further preserving affordability of each community
Construction/Rehab of Low-Income Housing Tax Credit (LIHTC) Property*
Developer constructs or rehabilitates property using 15- year tax-credits to finance equity portion of the cost and agrees to operate the property with affordable rents for up to 50 years.
*LIHTC is a dollar-for-dollar tax credit given to investors over a 10-year period with an additional 5 years of recapture risk for a total 15-year compliance period
Beginning of Post-Tax Credit Benefits “The Lost Middle”
Upon expiration of 15-year compliance period, investors seek to exit the investment while affordable requirements regulating rent and income levels remain in place. Properties are sold through off-market transactions and through major brokerage firms averaging $10 billion in affordable housing annual sales volume.
Properties are typically not eligible for new tax-credits yet need re-capitalization to address capital repairs as needed. Additional opportunities exist to instill professional management, focus on operations, and implement energy efficiencies.
Re-Development of Affordable Housing
Properties are positioned for substantial rehabilitation utilizing new tax credit/tax exempt bond financing.
PEF Advisors’ Acquisition Strategy
Utilizing data, discipline, and our extensive network, we seek to identify and acquire affordable housing properties throughout the United States.
Quality Results While Preserving Affordable Housing
Differentiated Management Strategy
Relationship Focused with Dedicated Team of Experienced Professionals
The PEF Advisors’ Advantage
Through our acquisition strategy we attempt to develop multifamily-driven returns, durable revenue streams and preserve affordability for low-income housing.
PEF Fund 1
California Preservation Equity Fund
- Prototype fund raised to prove investment thesis
- CA-only footprint
- $25M closed and fully invested by 2019
- Preserved $108 million in affordable housing
PEF Fund 2
Nationwide Preservation Equity Fund
- High-cost housing markets throughout the U.S.
- $100 million closed with anticipated final deployment in Q1 2023
- Approximately $230 million in affordable housing preserved