The challenges of affordable housing are manifold. However this presents an opportunity to private investors, real estate companies, and developers. With the growing global trend for impact-based investments, many institutional investors have begun to consider the merits of this asset class.
This book examines not only the profitability of these assets, but also whether these assets rely on government subsidy. It discusses why investors have become more interested in this product and which investment criteria influence the financial performance of these assets. The authors employed a mixed method approach to collect data at two tiers, first through surveys and afterwards through interviews of 8 firms (3 publicly listed companies, 3 private equity companies, 1 foundation, and 1 state bank) across Germany, the United Kingdom, and the United States. Investment criteria are analyzed using inferential statistics, specifically the Hierarchical Algorithm Cluster Analysis. The financial characteristics of the companies are examined and compared using descriptive statistics and the qualitative interview output is explored using the thematic Latent Coding Analysis.
Furthermore, the book explains how the bond-like nature of affordable housing is a profitable impact investment option, and how this strategy is particularly worthwhile for institutional investors. It also describes that profitability of affordable housing products is not dependent on subsidy. Still, affordable housing products supported by government incentives in the United Kingdom and United States are most attractive. The book illustrates six important investment strategies identified by veterans in this field to have an influence on the financial feasibility of affordable housing products.
Author(s): Deepiga Vigneswaran, Michael Truebestein, Matthias Daniel Aepli
Series: Contributions to Finance and Accounting
Publisher: Springer
Year: 2022
Language: English
Pages: 131
City: Cham
Acknowledgement
About This Book
Contents
About the Authors
List of Figures
List of Tables
Chapter 1: Introduction
1.1 Understanding the Teetering Supply and Demand of Affordable Housing
1.2 Research Topics and Aims
1.3 Research Question
References
Chapter 2: Foundational Concepts
2.1 Status of Affordable Housing Stock in OECD Countries
2.2 A Comparison of Various Real Estate Investment Vehicles and Strategies
2.2.1 Public Versus Private Markets
2.2.2 The Market for Impact Investment
2.2.3 Open- Versus Closed-End Investment Vehicles
2.2.4 Real Estate Investment Trusts
2.2.5 Strategies Within the Real Estate Asset Class
2.3 The State of Affairs of Affordable Housing in the Sample Countries
2.3.1 Historical Conditions and Current Context of Affordable Housing in Germany
2.3.2 Historical Conditions and Current Context of Affordable Housing in the UK
2.3.3 Historical Conditions and Current Context of Affordable Housing in the US
References
Chapter 3: Literature Review
3.1 Contributions to the Literature
3.2 Identifying Gaps in the Literature
References
Chapter 4: Research Design
4.1 Research Hypothesis
4.2 Methodology and Research Design
4.2.1 Research Design
4.2.2 Population and Sampling Strategy
4.2.2.1 Description of Population
4.2.2.2 Nonprobability: Convenience and Purposive Sampling
4.2.3 Data Description and Collection Method
4.2.4 Data Collection Method
4.3 Data Analysis Methodology
4.3.1 Thematic Coding
4.3.1.1 Tools of Thematic Coding
4.3.2 Descriptive Statistics
4.3.2.1 Tools of Descriptive Statistics
4.3.3 Inferential Statistics
4.3.3.1 Tools of Inferential Statistics
4.3.3.2 Cluster Analysis
4.3.3.3 Types of Clustering
4.3.3.4 Measure of Proximity
4.3.3.5 The Use of Two Cluster Analysis Methods for the Purpose of This Research
4.3.3.6 Hierarchical Clustering
4.3.3.7 K-Means Clustering
4.3.3.8 Properties of a Good Cluster Solution
4.3.3.9 Cluster Validation
4.3.3.10 Choosing the Right Number of Clusters
4.3.3.11 Summary of Analysis Design
References
Chapter 5: Research Analysis
5.1 Description of Selected Data
5.2 Review of Quantitative Data Output
5.2.1 Descriptive Statistics of Participant Profiles
5.2.2 Inferential Statistics Using Cluster Analysis on Preferred Investment Criteria
5.2.2.1 Results of Data Output from Question 10
5.2.2.2 Results of Data Output from Question 12
5.3 Review of Qualitative Data Output
5.4 Data Limitations
5.4.1 Small Data Set
5.4.2 Challenging Type of Data
5.4.3 Self-Reported Data
5.4.4 Lack of Data
5.4.5 Lack of Additional Scale
References
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Chapter 6: Discussion of Results
6.1 Description of Results
6.1.1 Investment Strategies that Influence Affordable Housing Return
6.1.1.1 Cluster Analysis Results: Question 10
6.1.1.2 Factors with the Largest Influence on Net Return
Location
Leverage
6.1.1.3 Factors with Neutral to Some Influence on Affordable Housing Return
Government Subsidy
Uncontrollable Risks/Costs
6.1.1.4 Factors with Minor Influence on Affordable Housing Return
Tenant Turnover rate
Exit Strategy
6.2 Investment Strategies Based on the Different Business Models
6.2.1 Affordable Housing Business Models of Publicly Listed Companies
6.2.1.1 Government Subsidies in Germany
6.2.1.2 Rent Determination in Germany
6.2.2 Affordable Housing Business Models of Open-End Fund Structures
6.2.2.1 Government Subsidies in the UK
6.2.2.2 Rent Determination in the UK
6.2.3 Affordable Housing Business Model of Closed-End Fund Structures
6.2.3.1 Government Subsidies in the US
6.2.3.2 Rent Determination in the US
6.3 Research Quality
6.3.1 Quality Criteria Test of Quantitative Component
6.3.1.1 Quality Criteria Test of Cluster Analysis
6.3.2 Quality Criteria Test of Qualitative Component
References
Chapter 7: Study Recommendations
7.1 Affordable Housing as the New Norm for Institutional Investors
7.1.1 Benchmark Comparisons of Affordable Versus Traditional Real Estate
7.1.2 Why and How Investors Are Acquiring Affordable and Social Housing
7.1.3 Investment Strategies that Enable Financially Feasible Affordable Housing
7.1.3.1 Buy-Hold Strategy
7.1.3.2 On Ground Strategic Partnerships
7.1.3.3 Financing Through Mixed Tenure Versus Government Subsidy
7.1.3.4 Access to High Degree of Leverage
7.1.3.5 Digitalization of Daily Tasks
7.1.3.6 Existing Know-How of the Affordable Housing Space
7.2 Critical Reflection of Research Topic and Methods
7.2.1 Study Limitations
7.2.2 Recommendations for Future Research
References
Appendices
Appendix A: Survey Questions
Appendix B: Interview Questions
B.1 Introduction
B.2 Business Model and Structure
B.3 Comparison to Market Residential
B.4 Criteria for Success
Appendix C: Survey Analysis
