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Nuveen knows: Upcoming urbanites

Impact investing: Let’s ensure that we make room for everyone in our growing cities


Smart investments can preserve quality affordable housing options for low-income and elderly people — while also offering competitive returns


As we envision the future of American cities, we must acknowledge that the continued influx of people will only make housing costs rise, both for owners and renters. As city populations rise, neighbourhoods gradually gentrify to appeal to the sensibilities of middle-class urban dwellers. This trend, helped along by investment capital that seeks lower-risk returns, continually drives up housing costs until there are few quality housing options for lower-income and elderly people.

No doubt, many of these individuals benefit from government housing programs: An estimated 2.5 million housing units in the U.S. have federal tax credit subsidies. However, more than one million of these subsidies are expected to expire over the next decade, according to a report by Harvard’s Joint Center for Housing Studies. Additionally, about 38 million households spend more than 30% of their income on rent, which squeezes every other aspect of the family budget. The number of cost-burdened households in the U.S. is estimated at 39 million;8 more than 19 million households spend over 50% of income on housing costs.9

One powerful solution to the diminishing supply of affordable urban housing is impact investing that’s aimed at preserving rent at affordable levels while refurbishing the housing stock to create livable communities. Conceptually, this means striving to preserve affordable housing for the long term, making safe, energy-efficient apartments and properties available to working families so that those communities can thrive today and in the future. In this context, impact investments involve investing in solutions that create and preserve safe, affordable and sustainable housing while generating material cash-on-cash and residual returns for investors. 

These solutions include:
  • Regulated or restricted affordable housing based on 40% – 80% AMI (HUD standards)
  • Naturally Occurring Affordable Housing (NOAH)
  • Mixed-income housing (affordable, workforce, market-rate)
  • Other solutions appropriate for specific underserved or vulnerable populations (e.g., senior, student, military)

Difficult for renters to keep up
Impact investments in real estate offer the potential for steady, long-term income backed by strong market demand and high barriers to entry.

Nuveen’s work in the affordable housing arena constitutes investments in the properties themselves. The acquisitions process involves seeking out partnerships with developers or operators active in this asset class and whose views of its potential — in terms of being an attractive investment opportunity coupled with preserving affordability — align with ours. We look for properties that are already affordable and that have features that can be enhanced through such steps as making retrofits that optimize energy efficiency and improving common spaces.


We also seek opportunities to improve properties in ways that can improve the quality of life for residents. For example, we have discovered that many affordable housing properties have community rooms that are rarely used or are nonexistent, in some cases. If such a property is geared toward families with school-age children, we might redesign a space to accommodate after-school programs. If, on the other hand, a property primarily serves seniors, we would transform that space into a comfortable, interactive area where residents might want to participate in activities. Such a space could also be used by community service providers, such as hot-meal services or library programs that are geared toward seniors.

Our investments in affordable housing are strategic and often sizeable. One example of this is a recent investment of $50 million in a joint venture with Enterprise Homes, which is a nonprofit, affordable housing developer affiliated with Enterprise Community Partners. The joint venture will help ensure that more than 4,100 rental homes in Central Maryland, Southern Pennsylvania, Northern Virginia, and Washington, D.C., will stay affordable to low-income residents in those regions. This investment opportunity was compelling because of the consistently high quality of the properties within the portfolio and their location in high-demand housing markets.

As with all of Nuveen’s impact investing, our strategy for affordable housing is to adhere to an intentional, disciplined process that focuses on generating specific, measurable outcomes over the long term. We understand that impact investors vary in what they expect in terms of risk and returns. My orientation is to pair a risk-adjusted financial return with a commitment to outcomes that will be evaluated over time. The data we collect as part of that evaluation is critical, both because we report it to stakeholders and capital providers, and because we use it to optimize how and where we invest in the future.

We do not view our investments as trading performance against achieving social aims. Both aspects of our investments are critical for success. By preserving existing affordable housing stock, our investments generate both rental income and financial returns, while also supporting the community and the vitality that drive a city’s economic performance over time. Everyone wins.

Rent burden lies heavy on many in U.S.

According to an April 2018 study by The Pew Charitable Trusts, the U.S. has seen an increasing share of income going toward paying rent, which can impact the stability of renter households as well as the overall economy. 

The study found that in 2015:
  • 38% of all renter households were rent-burdened, compared to about 19% in 2001.
  • 17% of renter households were severely rent-burdened — spending 50% or more of their monthly income on rent.
  • 46% of AfricanAmerican-led renter households were rent-burdened (versus 34% for white households).
  • 50% of senior-headed (65+) renter households were rent-burdened.
  • 64% of rent-burdened families had less than $400 cash in the bank.
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8 Joint Center for Housing Studies. “The State of the Nation’s Housing”2017
9 Urban Institute,“The Cost of Affordable Housing: Does it Pencil Out?”2016

Index definitions

MSCI ACWI ESG Universal Index. The MSCI ACWI ESG Leaders Index is a capitalization weighted index that provides exposure to companies with high Environmental, Social and Governance (ESG) performance relative to their sector peers. MSCI ACWI ESG Leaders Index consists of large and mid cap companies across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries*. The Index is designed for investors seeking a broad, diversified sustainability benchmark with relatively low tracking error to the underlying equity market. The index is a member of the MSCI ESG Leaders Index series. Constituent selection is based on data from MSCI ESG Research. 

MSCI ACWI Index. The MSCI ACWI captures large and mid cap representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries*. With 2,489 constituents, the index covers approximately 85% of the global investable equity opportunity set. 

Risks and other important considerations 
This material is provided for informational or educational purposes only and does not constitute a solicitation of any securities in any jurisdiction in which such solicitation is unlawful or to any person to whom it is unlawful. Moreover, it neither constitutes an offer to enter into an investment agreement with the recipient of this document nor an invitation to respond to it by making an offer to enter into an investment agreement. 

This material may contain “forward-looking” information that is not purely historical in nature. Such information may include projections, forecasts, estimates of yields or returns, and proposed or expected portfolio composition. Moreover, certain historical performance information of other investment vehicles or composite accounts managed by Nuveen may be included in this material and such performance information is presented by way of example only. No representation is made that the performance presented will be achieved, or that every assumption made in achieving, calculating or presenting either the forward-looking information or the historical performance information herein has been considered or stated in preparing this material. Any changes to assumptions that may have been made in preparing this material could have a material impact on the investment returns that are presented herein by way of example.

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Nuveen to be reliable, and not necessarily all-inclusive and are not guaranteed as to accuracy. There is no guarantee that any forecasts made will come to pass. Company name is only for explanatory purposes and does not constitute as investment advice and is subject to change. Any investments named within this material may not necessarily be held in any funds/accounts managed by Nuveen. Reliance upon information in this material is at the sole discretion of the reader. Views of the author may not necessarily reflect the view s of Nuveen as a whole or any part thereof. 

Past performance is not a guide to future performance. Investment involves risk, including loss of principal. The value of investments and the income from them can fall as well as rise and is not guaranteed. Changes in the rates of exchange between currencies may cause the value of investments to fluctuate.

This information does not constitute investment research as defined under MiFID.

Nuveen Real Estate is a real estate investment management holding company owned by Teachers Insurance and Annuity Association of America (TIAA). Nuveen Real Estate securities products distributed in North America are advised by UK regulated subsidiaries or Nuveen Alternative Advisors, LLC, a registered investment advisor and wholly owned subsidiary of TIAA, and distributed by Nuveen Securities, LLC, member FINRA.