Will There be an Affordable Housing Crisis in the next 1-3 years ?
I get this question pretty much everytime I speak, get on a zoom, or have a 1 on 1 with a client
I honestly believe this is happening and will happen. Here are my thoughts on why and some key factors:
1.Interest Rates & Mortgage Costs – If rates stay high, affordability will remain a challenge for buyers, keeping more people in the rental market and driving rents up. If rates drop, home prices may surge due to increased demand, still limiting affordability.
2.Housing Supply – Many markets are experiencing a shortage of affordable homes, and new construction hasn’t kept up with demand, especially for entry-level housing. It’s just not profitable to build affordable units. Supply chain issues and high material costs continue to slow development.
3.Investor & Institutional Buying – Large investors have been buying up single-family homes and multifamily properties, reducing inventory for individual buyers and driving up rental prices. If this trend continues, it could further limit access to affordable housing. I put this up here because it is a factor, it’s less than 2 % but they can influence key areas in markets.
4.Inflation & Wage Growth – If wages don’t keep pace with inflation, housing costs (both rent and homeownership) will continue to outstrip income levels, making affordability worse. Inflation is the number 1 killer of affordablity. You do not wanna be on the wrong side of this equation
5.Government Policy & Intervention – If new policies encourage more development, rental assistance, or first-time homebuyer incentives, they could help alleviate some pressure. However, if zoning laws or regulations remain restrictive, supply constraints will persist. I don’t really see this happening
What I Expect:
•Rentals: Likely to stay expensive, especially in high-demand markets like Phoenix, unless there’s a major economic slowdown.
•Home Prices: If rates drop, prices will rise again, keeping affordability a challenge. If rates stay high, sales volume could stay sluggish.
•Section 8 & Subsidized Housing: Demand will likely increase, making these investments even more valuable.
What can we do ?
From an investment standpoint, an affordable housing crisis could create strong opportunities, especially in Section 8 rentals, workforce housing, and value-add multifamily properties. Here’s how you can position yourself:
1. Section 8 & Government-Backed Housing
•With affordability worsening, more tenants will rely on housing vouchers.
•Section 8 guarantees rent payments, reducing risk, especially in downturns.
•If private rents keep rising, the government may increase fair market rents (FMR), boosting cash flow potential.
2. Workforce Housing (B/C Class Multifamily & SFH Rentals)
•Middle-class renters will struggle to buy, increasing demand for mid-tier rentals.
•Older apartment complexes and value-add single-family homes will likely remain strong cash-flow plays.
•Build-to-rent (BTR) communities are growing—partnering with developers or acquiring small portfolios could be smart.
3. Seller Financing & Creative Deals
•If mortgage rates stay high, sellers struggling to move properties may be open to creative terms (subject-to, seller carrybacks, lease options). I have done several of these deals right off MLS.. Reach out to find out how I can help you.
•Investors who understand how to structure these deals will have a major edge.
4. Buying Distressed Properties
•If affordability issues lead to foreclosures or forced sales, deals may emerge.
•Keep an eye on markets where inventory is rising but sales are slowing.
5. Short-Term Rentals to Mid-Term Rentals Shift
•STR markets are oversaturated, and regulations are tightening.
•Mid-term rentals (30-90 day stays for traveling professionals, insurance claims, etc.) could be a safer bet in certain areas.
Scaling into affordable housing makes a lot of sense right now. Here’s how you can do it strategically:
1. Expand Section 8 & Government-Subsidized Rentals
•Target markets where voucher demand is strong but supply is low.
•Look for SFHs and small multifamily properties in areas where local housing authorities have raised FMRs.
•Build relationships with housing authority reps to stay ahead of policy changes and approval processes.
2. Acquire Value-Add Workforce Housing
•Focus on C-class multifamily properties in working-class neighborhoods.
•Use BRRRR or light renovations to improve units and justify rent increases while keeping them affordable.
•Consider tenant retention programs to minimize turnover costs.
3. Leverage Seller Financing & Creative Financing
•High rates mean more sellers will be open to creative deals.
•Target tired landlords with older rentals who want out but don’t want a tax hit from a full sale.
•Structure deals with seller carrybacks, subject-to, or master lease options.
4. Watch for Foreclosures & Distressed Assets
•If affordability worsens, some landlords or homeowners may default.
•Monitor pre-foreclosure lists, auctions, and bank-owned properties.
•Partner with local wholesalers or agents specializing in distressed properties.
5. Optimize Mid-Term Rentals in Affordable Housing
•Instead of short-term Airbnb, consider 30-90 day rentals for insurance claims, traveling nurses, or corporate housing.
•Target cities with strong healthcare hubs, major employers, or disaster-prone areas where displacement housing is needed.
The Phoenix housing market is projected to be among the top 10 U.S. housing markets in 2025, with expectations of increased home sales and price growth.
However, the city faces challenges related to housing affordability. Rising home prices have made homeownership less attainable for many residents, leading to a greater reliance on rental properties. This situation presents opportunities for investors focusing on affordable housing solutions.
Investment Opportunities in Phoenix:
1.Section 8 and Government-Subsidized Housing:
•With increasing housing costs, more residents may qualify for housing assistance programs. Investing in properties that accept Section 8 vouchers can provide stable rental income backed by government guarantees.
2.Workforce Housing:
•Investing in Class B and C multifamily properties can cater to middle-income workers who are priced out of homeownership. These properties often offer value-add opportunities through renovations and improved management.
3.Build-to-Rent Communities:
•Developing or investing in single-family rental communities can meet the demand of families seeking rental options with the benefits of a traditional home.
4.Mid-Term Rentals:
•Offering 30-90 day rentals can attract traveling professionals, such as healthcare workers, who require temporary housing.
Given the projected growth and existing challenges in the Phoenix housing market, focusing on affordable housing investments can be both a socially responsible and financially rewarding strategy.
For a more in-depth analysis of the 2025 real estate trends in Phoenix, you might find the following video informative:
Phoenix is shaping up to be a prime market for affordable housing investments. The demand is there, and with the right strategy, you can scale your portfolio while providing much-needed housing. Reach out today if you ready to invest and benefit from real estate in Phoenix
Joe