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Affordable housing in many areas of the US is in high demand while supply has remained stubbornly low.
AFFORDABLE HOUSING • IMPACT INVESTING
This is slowly starting to change as the private market has more incentive to build affordable housing due to changes in zoning, more subsidies, and financial and political support from companies and local governments who want all sorts of workers to be able to live locally, including teachers, police, firefighters, retail/restaurant/hotel staff.
There is a big difference between quality affordable housing that is well-planned, well-financed, and well-built and “slumlord” type housing that benefits only the owner. Quality affordable housing is typically built near public transportation, schools, and parks which can play a critical role in making communities more secure and vibrant, both socially and economically.
Underinvested in for decades despite strong growth in demand, we believe that quality affordable housing is both a prime investment opportunity and a way to help alleviate the US housing shortage. Our focus at Citizen Mint is finding those investments in the private markets that fund affordable housing – either through debt or equity – that are most likely to deliver a reasonable return on investment as well as quality housing for individuals and families.
For Perspective:
Some 44 million U.S. households are renters, and the vast majority of these – 80% — have household income of between $36,000 and $60,000 a year. (Source: National Low Income Housing Coalition [NLIHC])
About 25% of U.S. households were already living in some type of affordable housing in 2019, and we believe this number has increased since then due to a surge in rents the past two years. (Source: Census Bureau 2019)
For every 100 low-income households, only 37 affordable homes are available and no single state has an adequate supply. (Source: National Low Income Housing Coalition [NLIHC])
Affordable housing can be a sound long-term investment for many reasons:
High demand for affordable housing means units are quick to fill-up when new buildings are complete. This lowers vacancy risk and helps create a consistent return on investment (ROI).
Rents can be subsidized by federal, state and local agencies. This translate into steady cash flow for investors as the property is almost always full or near capacity.
Properties stay in demand throughout the economic cycle, and especially during recessions as people lose jobs and are priced out of more costly rentals.
Real estate prices and rents can continue to rise in an inflationary environment.
Affordable housing as an asset has low correlation with public equities, allowing it to add to portfolio stability during times of market volatility.
Depreciation on investment real estate, including affordable housing properties, is allocated (flows through) to the individual investors and can be used to lower income and capital gains taxes generated by other investments.
There are a variety of risks associated with affordable housing including:
Entitlement Risk: Not getting the permits or approvals necessary to build.
Construction Risk: Finishing the construction of the product after breaking ground.
Stabilization Risk: Filling up the property with renters.
Financing Risk: Ability to secure and the cost of financing can change throughout a projects lifecycle which can increase risk to a project’s completion and lower the expected return.
Leverage: Taking on too much debt can increase the risk of a project if rent expectations or stabilization takes longer than expected.
Government Incentives: Some affordable housing developments may need federal or local assistance to be viable given similar construction costs to non-affordable options and rents that are lower than market.
Read more about risks and how Citizen Mint addresses these, affordable housing case studies, and other topics such as Opportunity Zones by downloading our white paper below.
Summary
Citizen Mint believes that new affordable housing can have a large, positive impact in many cities and other areas as they struggle to deal with complex issues around homelessness, crime and inequality. We are excited to bring numerous opportunities to our investors on both the equity and debt side of these deals.
Invest to change the world, invest with Citizen Mint.
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*Financial projections or returns displayed on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results.
Disclosures: No communication by Citizen Mint Inc. or any of its affiliates (collectively, “Citizen Mint”), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice. Nothing on this website is intended as an offer to extend credit, an offer to purchase or sell securities or a solicitation of any securities transaction.
Any financial projections or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. Estimated projections do not represent or guarantee the actual results of any transaction, and no representation is made that any transaction will, or is likely to, achieve results or profits similar to those shown. In addition, other financial metrics and calculations shown on the website (including amounts of principal and interest repaid) have not been independently verified or audited and may differ from the actual financial metrics and calculations for any investment, which are contained in the investors’ portfolios. Any investment information contained herein has been secured from sources that Citizen Mint believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefor.
Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by Citizen Mint or any other party, and MAY lose value. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. Investors must be able to afford the loss of their entire investment.
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