Nuveen Real Estate is remaining committed to sustainable and responsible investment in its efforts to help address the country’s chronic shortage of affordable housing.
When The Real Deal last talked with Nuveen Real Estate about its impact investment strategy, the team discussed its two-pronged approach to both preserve existing affordable housing stock and create new supply. During 2023, the $1.1 trillion asset manager of TIAA has continued to strengthen its position as one of the nation’s largest institutional managers of much-needed affordable housing. Nuveen Real Estate has more than doubled in size with $6.4 billion in affordable housing assets under management (AUM) with plans to continue to build on that momentum.
Over the past decade, Nuveen Real Estate has invested considerably in affordable housing and recently acquired a portfolio of assets from Omni Holdings Company, significantly expanding its affordable housing platform. Nuveen Real Estate now manages 161 affordable housing assets with approximately 32,000 apartments across 24 states.
During the second quarter, Nuveen Real Estate also launched its U.S. Impact Housing Strategy. The strategy focuses on building resilience among low-income communities in the U.S., primarily by investing in rent-subsidized, income-restricted, and Naturally Occurring Affordable Housing (NOAH) assets. The platform recently announced a $250 million commitment from the TIAA General Account, further bolstering Nuveen Real Estate’s position to deliver impact investing solutions to the country’s undersupply of affordable housing.
Growing need for private capital
The undersupply of affordable housing in the U.S. has become even more acute throughout the pandemic and subsequent economic downturn over the past few years. Compounding the problem is the continued reduction or loss in the existing affordable housing stock, especially for residents who are earning 60% of Area Median Income (AMI) and below. Nuveen Real Estate estimates there are another 650,000 units at risk of losing their affordability protections by 2030 unless there is active intervention. That looming risk is further propelling Nuveen Real Estate’s Impact Housing strategy. “It’s an immediate crisis and we continue to preserve and invest in more and more assets to extend their affordability,” says Pamela West, Senior Portfolio Manager of Impact Investing at Nuveen Real Estate.
Nuveen Real Estate’s impact investing strategy targets true affordable housing. Most of its portfolio – 96% – serves renters who earn 60% of AMI or below. The firm’s overall strategy goes beyond simply investing in real estate and focuses on improving sustainability at the property level with a holistic, people-centric approach that provides quality housing and services that can change the trajectory of people’s lives and build strong, healthy communities.
Nuveen Real Estate is seeing evidence of the demand for affordable housing across its portfolio with huge wait lists in every property that has qualifying income restrictions. At the same time, there is an opportunity to bring solutions to bear with the help of private capital. “We often see an influx of capital come into the affordable housing sector during a down cycle, and we’re also seeing investors stick to this investment strategy now that they’re more educated on the sector,” says West. Investors like the double bottom-line benefits affordable housing offers with a solid real estate strategy and a high social impact. “Affordable housing is such a great diversifier in that it has very stable, durable cash flow and a lot of downside risk management,” she adds.
Turn the clock back a year, and Nuveen Real Estate had a sizable affordable housing portfolio with roughly $3.5 billion in AUM. However, the company was working with several third-party partners to help execute its strategy. “What has always been our strategic path is to vertically integrate to try and create a best-in-class affordable housing platform,” says Nadir Settles, Global Head of Impact Investing at Nuveen Real Estate. Nuveen Real Estate is now able to control the experience and supportive services for residents that allow them to experience stronger support from their landlord. “When you’re vertically integrated, your execution is aligned, and may enhance investment performance as well as the social impact you’re delivering to residents,” he adds.
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Creating a roadmap
Scale and the ability to execute at a high level are both critical elements needed to help move the needle on the country’s affordable housing crisis. “Affordable housing is not going to be tackled by 100 units here and 100 units here. We’re building relationships that can yield off-market opportunities, which may amount to thousands of units at a time,” says Settles. “That gives us a unique value proposition to continue the accelerated growth that we’ve had.”
That enhanced execution benefits residents, investors and communities. “When we’re moving into these communities, we have to think about it in a holistic format and think about that specific community, not just the asset that we’re developing,” says West, pointing to the need to better connect housing with access to healthcare, education, retail and office. “We should focus on the broader community, and I think that’s where we see our investments through an impact lens, with an intentional focus on upward mobility and financial inclusion,” she says. “That’s the forward view of what we want to execute in this part of the market.”
Several communities in need of affordable housing have faced disinvestment and lack access to amenities that other communities have as table stakes, such as fresh produce, healthcare and childcare. “Building this larger ecosystem is extremely important to allow communities to be self-sustaining and create commerce,” adds Settles.
Nuveen Real Estate remains committed to advancing its U.S. Impact Housing Strategy, which includes building relationships that create an important bridge between private capital and public resources. “We know that solving the affordable housing crisis can’t be all private capital, and it can’t rely solely on public capital,” says Settles. “The traditional model has to be reimagined to where municipalities, government and private capital realize that in order to tackle this issue, we have to do it together.”
Incentivizing private capital to invest in affordable housing means that it must be self-sustaining. As a fiduciary, Nuveen Real Estate has a responsibility to make good investments for its investors. At the same time, there is a keen focus on making sure the substance is there on the product that is built and how it is operated. Ultimately, the goal is to blaze a trail that other investment firms will follow. “We can’t single-handedly address every single market across the country,” says West. “I do hope that this serves as a roadmap and that other institutions will bring their capital to the table to specifically address this part of the market.”