The United States government’s clean energy spending has delivered benefits for both tenants and investors in class B rental housing, a large-scale holder of Class B apartment buildings maintains. Al Rabil, cofounder and chief executive officer, real estate, with the investment platform, Kayne Anderson, confirms that key elements of his company’s alternative asset strategy piggyback on policies that prioritize disadvantaged communities.
“We have a dedicated multifamily fund that is focused on ESG, but also focused on very high returns,” he reported during a recent online discussion sponsored by IPE (Investment & Pension Europe) Real Assets. “There’s a big focus on the E of that ESG and utilizing government subsidies that are available — local, regional as well as federal.”
Kayne Anderson, which boasts USD $36 billion in assets under management, launched its attainable housing strategy in 2021 to target acquisition and development of Class B apartment properties. That’s the same year the Biden administration introduced the Justice40 Initiative with the goal that 40 per cent of the benefits from federal climate, energy, affordable housing and other designated spending should flow to communities that suffer from underinvestment and/or pollution burdens.
For investors in what’s dubbed workforce housing, consistent demand from “middle market renters” is projected given rising home ownership costs and a new supply imbalance in the U.S. that has skewed nearly 85 per cent of multifamily rental starts to Class A during the past 10 years. As well, about 70 per cent of existing rental housing in the U.S. is at least 20 years and at a stage where energy and sustainability improvements are warranted.
“There are a significant number of incentives that are available to buyers and builders of affordable housing for everything from solar to geothermal heating and cooling to lower water utilities and a number of other dynamics,” Rabil said. “For those who have the capabilities of developing and utilizing these subsidies, they are a return enhancer, as well as, obviously, providing more affordable housing.”
That’s an outcome that may help keep some investment tax credits in place regardless of what happens in the upcoming U.S. election. “On a going forward basis, larger incremental incentives may not be on the table regardless of who’s in office if we have divided government, but I don’t think we’re going to be setting the clock back and trying to roll back the Inflation Reduction Act,” Rabil speculated.
