Nuveen Real Estate’s Impact Sector: Investing in Affordable Housing
Last May, Nuveen Real Estate announced the formation of their new impact investing sector targeting affordable housing, to also include supportive services for residents. While the firm announced a goal of $15 billion AUM for the sector by 2026, Nuveen Real Estate has been supercharged in its implementation that it is already outpacing this goal. Partner Insights spoke to Nuveen’s Nadir Settles, Global Head of Impact Investing, and Pamela West, the Impact Sector’s portfolio manager, about investing in affordable housing and the positive effect it’s having for not only the residents but both the community and investors.
The Benefits of Investing in Affordable Housing
Responsible investing has always been part of Nuveen’s ethos, with 30 years of experience in the affordable housing business. The firm’s focus on the impact sector is based on the belief that affordable housing investments can provide a positive impact in communities while also being resilient and counter-cyclical in today’s market. Rents in affordable housing properties are supported by government subsidies, making the income from these properties stable and durable. Additionally, government contracts allow for some inflationary hedging in a down cycle, making affordable housing a consistent performer through market cycles.
Nuveen’s Focus on Markets with Housing Imbalances
Nuveen Real Estate focuses on markets where there are imbalances of supply and demand for affordable housing. They look for markets with barriers to entry, good liquidity, support from government entities, and long-term affordable housing programs. These markets offer opportunities to acquire and preserve existing affordable housing units, as well as develop new mixed-income, mixed-use assets. One example of a market with a significant imbalance is New York, where one of Nuveen’s assets had 70,000 applications for just under 400 units of affordable housing. By targeting these markets, Nuveen can make a meaningful impact on the housing crisis.
Creating Strong Relationships with the Community
Nuveen understands the importance of building strong relationships with local businesses and the community at large. They engage with key personnel at housing agencies, state, county, and city public leadership, and local non-profit organizations to gain buy-in and advocacy for their projects. Maintaining these relationships is essential, and Nuveen does so by delivering on their promises and being a responsible and reliable partner. By becoming as local as possible, Nuveen ensures that their investments truly benefit the communities they operate in.
Nuveen’s Vision for the Future of the Impact Sector
Nuveen has big plans for the impact sector over the next five to ten years. By January 2024, they anticipate doubling their assets under management from $3 billion to close to $7 billion. Their goal is to reach $15 billion in assets under management in about five years. In addition to their focus on equity investments, Nuveen also sees a significant opportunity in impact credit strategies. They aim to allocate 10-15% of their platform assets to impact credit, providing access to capital to Black and Brown developers and investment managers who have experience and passion for investing in their communities. Overall, Nuveen’s vision is to continue growing and making a positive impact in the affordable housing sector.
Analyst comment
Positive news: Nuveen Real Estate’s impact investing sector targeting affordable housing has exceeded their goals and is having a positive effect on residents, communities, and investors. They focus on markets with housing imbalances and develop strong relationships with the community. Their vision is to continue growing and making a positive impact in the affordable housing sector.
Market outlook: The market for affordable housing investments is expected to continue growing as Nuveen Real Estate aims to double their assets under management in the next few years and reach $15 billion in assets under management within five years. The focus on equity investments and impact credit strategies will provide opportunities for growth and access to capital for underrepresented developers and investment managers.
