Thursday, December 1 2022

Austin Housing Conservation Illustration

New research shows that middle-income rentals have a better return on investment than luxury rentals.

A report found new information that may be of interest to Dallas developers and investors, as well as city leaders interested in solving our affordable housing shortage (watch an October Lake Highlands Avocado magazine article on the subject).

The “pioneering” study of Affordable Central Texas and the Wells Fargo Foundation refutes what it calls the “misconception” that rental apartments priced for middle-income workers – like teachers, nurses and first responders – have a lower return on investment to that of apartments with higher rent levels.

The study, according to the authors, paves the way for moderate-income rental housing to be a competitive and socially responsible investment.

The report defines a new asset class as moderate income rental housing (MIRH), or large multi-family rental properties occupied by tenants earning between 60% and 120% of the area median income (AMI) with at least the half of residents earning less than 80% of the AMI.

Analyzing data since 2011, the report demonstrates that MIRH assets outperformed rental properties with higher rents, averaged an unleveraged return of 9.4%, and had the lowest risk, 2, 6% difference compared to other real estate asset classes.

“The demand for affordable rental housing for low-income households is increasing as home ownership becomes impossible for many. At the same time, interest in environmental, social and governance investments is growing rapidly,” said David Steinwedell, CEO and President of Affordable Central Texas. “We cannot afford to lose the people who power our communities, and we have a market solution to a market problem. MIRH delivers consistent, predictable returns and makes a real difference in the lives of our neighbors.

In 2021, environmental, social and governance (ESG) funds accounted for 10% of global fund assets. (According to a new report by Bloomberg intelligence, Global ESG assets could top $41 trillion by 2022 and $50 trillion by 2025.

The report drew on data from the National Council of Real Estate Investment Fiduciaries Property Index and analyzed eight metro areas, including Dallas (Atlanta, Austin, Denver, Houston, Phoenix, Seattle and Washington, D.C. also) from the first quarter of 2011 to Q2 2021. (The nation’s three largest metros, New York, Los Angeles and Chicago, lacked enough MIRH assets to allow for analysis due to their well-documented affordability issues.)

The research was prepared by Mark G. Roberts, research director at the Folsom Institute for Real Estate at Southern Methodist University Cox School of Business, and Jake Wegmann, associate professor in the Community and Regional Planning Program at the University of Texas at AustinSchool. of Architecture.

You can download the full report here.

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