By Taylor Williams
DALLAS — As is the case for many commercial asset classes and markets in 2025, there is an expectation of elevated deal volume for investment sales of affordable housing properties in Texas. But brokers in that space caution that the rebound will likely be marginal and is not necessarily indicative of ideal market conditions taking hold.
A quintet of panelists broke down this notion and others at the InterFace Texas Affordable & Workforce Housing conference on Feb. 13 at the Westin Galleria Dallas hotel. Mary Ann Bennett, senior managing director at BBG Real Estate Services, moderated the discussion on investment sales activity.
Editor’s note: InterFace Conference Group, a division of France Media Inc., produces networking and educational conferences for commercial real estate executives. To sign up for email announcements about specific events, visit www.interfaceconferencegroup.com/subscribe.
Panelist Michael Furrow, senior vice president of affordable housing at commercial finance firm BWE, took the audience of 200-plus back in time to illustrate just how quiet the past two years had been. He did so by providing statistics on affordable housing sales for Dallas-Fort Worth (DFW) between 2021 — when multifamily rents and sales prices were peaking across the board — and 2024, when they were flatlining and declining.
“For DFW in 2021 and 2022, there was $8.7 billion and $5.4 billion in total volume [respectively] across 720 transactions in 2021 and 592 transactions in 2022,” said Furrow. “In 2023 and 2024, [for both years] there was between $1.3 billion and $1.4 billion and roughly 250 transactions.”
Furrow, who did not specify the source of his data, also gave a brief numerical overview of the Austin market. His data showed that the state capital’s affordable housing investment sales market had seen “about a 65 percent discount” in volume in 2023 and 2024 relative to 2021 and 2022.
“Compared to those numbers, we should see a little bit of an uptick [in deal volume in 2025], but the market will still be a little choppy,” he concluded. “You have a ton of new supply hitting the market, plus various headwinds from a macroeconomic perspective.”
Other panelists also gave reasons for why 2025 deal volume might be subdued in its year-over-year increase. Derek DeHay, managing director at New York City-based Lument, pointed out that very few affordable housing projects were financed and built in the immediate aftermath of the Financial Crisis of 2008-2009. Therefore, the number of properties coming out of their 15-year compliance periods — normally a trigger for transacting — would be below average in this cycle.
“Tax credit investors often want to exit partnerships after properties reach their 15-year compliance period, regardless of where the market is,” he explained. “But 15 years ago, we were just coming out of the Great Recession, so we had fewer tax credit allocations in Texas those years — maybe 40 or 50, compared to a normal year in which we’d see 90 to 100 allocations. So that will keep transaction volume down some [this year].”
DeHay added that although fewer tax credit allocations 15 years ago means less opportunities to transact today, some of that activity would likely be offset by second- and third-generation sales of properties that were built in the 1980s or 1990s. He said that he’s seeing deals in which properties that came out of their second 15-year compliance period around 2015 were bought by investors who underwrote seven- to 10-year holding periods, so now some of those owners are looking to sell.
Random, counterbalancing variables like those that do not exist in the market-rate multifamily world help explain why the affordable housing investment sales market tends to be more consistent than its counterpart, DeHay said. Other panelists were quick to endorse and piggyback on that notion.
“The affordable housing sales cycle experiences less volatility than that of the market-rate [multifamily market],” said Murphy Holloway, director of affordable housing at Greysteel. “The peaks aren’t as high, and the valleys aren’t as low.”
And to be clear, in many major U.S. markets, 2021 was undoubtedly a peak year for multifamily rents and sales prices. In addition, interest rates were still historically low at that time. For all of those reasons, Holloway said, the reset in values and cap rates for multifamily assets that has been and remains ongoing should be significantly less pronounced within the affordable space than in the market-rate space.
“In a market like Phoenix, during the runup [to interest rate hikes that began in late 2022], you had ‘70s- and ‘80s- [vintage] deals that were trading at $200,000 per door,” he said. “Right now, the basis for those deals is being reset to $60,000 per door in many cases because people got irrationally optimistic about [underwriting] rents and expenses, as well as what take-out debt would like. On a tax credit deal, you don’t have that upside.”
“People didn’t get as far out over their skis in our business, so when the market jammed up and transaction volume slowed, our shops were less severely impacted,” Holloway concluded, noting that his firm did still see some slowdown in business over the past two years.
Kyle Shoemaker, managing director of Chicago-based Affordable Housing Investment Brokerage, also agreed that cyclical variance tends to be more muted in affordable housing investment sales than in market-rate. But he also pointed out that the two sides of the multifamily coin still respond to many of the same fundamental drivers and can still be hobbled by the same types of headwinds.
“This business has natural drivers that make it less volatile than market-rate [investment sales], but interest rates and insurance costs impact our product just as much as they impact market-rate multifamily,” he said.
Shoemaker also outlined a couple other reasons as to why affordable housing sales would probably rebound — but without a bang — in 2025. For starters, deals are taking longer to close, and not just because the transactions themselves include complex income-restriction contracts and subsidies in the capital stack, but also just because of the general uncertainty that has defined the capital markets for the past 18 to 24 months.
“We were down in velocity last year, but we’re entering this year with more deals under contract than we’ve potentially ever had on January 1,” Shoemaker said. “It’s a good sign for transaction velocity in the coming year, but some of that is a backlog of properties we’ve been working on selling for the past year or two in a marketplace in which buyers had been forced to be much more selective.”
And secondly, sellers in the affordable housing space typically need motivation from an outside source, such as an impending capital event or the aforementioned expiration of a compliance period. It’s unlikely that deal volume will be aided by sellers who are merely being opportunistic, Shoemaker contended.
“People who hire us to sell these deals are generally not opportunity sellers; they’re being driven by some other factor in their business that dictates that it’s time to dispose of an asset,” he said. “So they’ve been patient while we’ve worked on having the buyer side of the market catch up. But it’s starting to happen.”