U.S. Homelessness Surges by Record 18%: Opportunities for Investors in Affordable Housing

The U.S. Department of Housing and Urban Development (HUD) recently released its 2023 Annual Homeless Assessment Report (AHAR), revealing a staggering 18.1% increase in homelessness compared to the previous year. This surge, the largest in history, underscores the urgent need for affordable housing and the potential investment opportunities in this critical sector.

The AHAR report highlights several factors contributing to this alarming trend:

1. Lack of Affordable Housing: The primary driver of homelessness is the scarcity of affordable housing. According to the National Low Income Housing Coalition, a full-time minimum-wage worker cannot afford a two-bedroom apartment at fair market rent anywhere in the United States (NLIHC, 2023). The Housing Wage, which is the hourly wage a full-time worker must earn to afford a two-bedroom apartment at fair market rent, was $28.33 in 2023, more than twice the federal minimum wage of $7.25 (NLIHC, 2023).
2. Economic Downturns: Economic downturns, such as the COVID-19 pandemic, can lead to job losses and reduced income, making it difficult for people to pay rent or mortgage payments. This can result in evictions and homelessness. The AHAR report notes that the COVID-19 pandemic and the resulting economic downturn contributed to an increase in homelessness, with nearly six million households behind on rent as of 2021.
3. Natural Disasters and Migration: Natural disasters, such as the catastrophic Maui wildfire in 2023, and migration can also contribute to homelessness. The AHAR report found that more than 5,200 people were staying in emergency shelters in Hawaii on the night of the PIT count due to the wildfire. Additionally, the arrival of migrants in big cities has led to a nearly 40% rise in family homelessness, with family homelessness more than doubling in 13 communities impacted by migrants, including Denver, Chicago, and New York City (HUD, 2024).



Investors looking to capitalize on the growing demand for affordable housing can consider the following opportunities:

1. Affordable Housing REITs: Real Estate Investment Trusts (REITs) focused on affordable housing can provide investors with exposure to the growing demand for affordable housing. These REITs typically own and operate multifamily apartment communities that cater to low- and moderate-income households. Some popular affordable housing REITs include:
* AvalonBay Communities (AVB)
* UDR, Inc. (UDR)
* Essex Property Trust (ESS)
* Mid-America Apartment Communities (MAA)
2. Housing Choice Voucher Program: The Housing Choice Voucher program, also known as Section 8, is a key initiative aimed at improving housing affordability. The program provides vouchers to low-income families, allowing them to rent housing in the private market at an affordable price. Investors can benefit from the growth in the Housing Choice Voucher program by investing in companies that provide services to Section 8 tenants, such as property management and maintenance services.
3. Homelessness Prevention and Rapid Re-Housing Programs: Investors can also consider supporting homelessness prevention and rapid re-housing programs, such as the Homelessness Prevention and Rapid Re-Housing Program (HPRP). These programs help families facing housing instability and those at risk of homelessness. Investing in companies that provide services to these programs, such as social service agencies and non-profit organizations, can offer exposure to the growing demand for homelessness prevention and rapid re-housing efforts.

In conclusion, the record 18% increase in U.S. homelessness highlights the urgent need for affordable housing and the potential investment opportunities in this critical sector. By investing in affordable housing REITs, the Housing Choice Voucher program, and homelessness prevention and rapid re-housing programs, investors can capitalize on the growing demand for affordable housing while contributing to a solution for one of the most pressing social issues of our time.