In today’s investment environment, the term “impact investing” is garnering a lot of attention for its opportunity to do good while doing well. But while it can feel like we’re inundated with impact, is affordable housing and, more specifically, low-income housing tax credits (LIHTC), at the forefront of investors’ and policymakers’ minds when they hear this term?

From the shortage of millions of affordable housing units to average rents increasing in 2023 by 6% - and up to 30% in some areas, the headlines are daunting, yet the affordable housing crisis is only escalating.

Investors are increasingly interested in participating in this growing “impact" market, and the federal government made a generational investment in environmental impact with the passage of the Inflation Reduction Act. With a growing federal deficit, strained state budgets, and intense competition for investors among all tax credit verticals, it is essential to not only invest but assess the quality of the intended impacts and dig deeper to protect and expand the important LIHTC program.

My firm, Advantage Capital, was founded in 1992 with the mission of bringing businesses, jobs and technologies to communities that have historically lacked access to capital, while producing competitive returns for investors. But that mission requires measurement—a data-driven approach that tracks primary, secondary, and tertiary impacts for each investment. We’ve seen that when investors closely capture and consider the data, they can better predict outcomes and meet the mandates of the integral public-private partnerships that often make the positive impact possible.

For affordable housing, we are focusing on data relating to impact in four key areas:

• Housing Stability—Reducing the burden of high rent can substantially increase lengths of stay, reduce turnover, and enable residents to look forward and prosper.

• Health and Wellness—Safe and stable housing enables residents to make health and wellness a bigger priority with proximity to health care facilities, recreational activities, and healthy food options.

• Socioeconomic Outcomes—Residents can become more resilient to unexpected financial events, leverage services that ensure less reliance on subsidies, improve credit scores, and enable overall economic mobility.

• Economic and Fiscal Community Benefits—Areas improved with affordable housing development can realize job creation, employment opportunities, additional private investment, and overall capital mobilization, which all lead to opportunity and impact.

Achieving and assessing the above-outlined outcomes does not happen overnight and does not happen in a vacuum. It takes patience, participation, and policy, along with data and resident engagement. Location is not determination, and investors, developers, policymakers and other stakeholders can sustain broad economic and social impact by ensuring capital reaches the right people and the right places.

Visit AdvantageCap.com to learn more about our approach to impact investing.

By Lynn Ambrosy, Managing Director, Advantage Capital Affordable Housing