Regardless of what the Federal Reserve does or which political party happens to be in power, the next economic recession is not a matter of if, but when. Despite the recent economic growth markers, current indicators put the risk of recession at a six-year high, according to Fortune — and 75 percent of surveyed CEOs expect a recession within the next two years.

While recessions are considered a natural part of the ebb and flow of global economics, they can still wreak havoc on your investments. This is why some experts say it’s important to include some recession-proof investments in your portfolio. If history is any indication, affordable housing is one of the most stable investments you can have in a correcting market.

Why Affordable Housing?

What makes affordable housing a recession-proof investment? Several key factors are at play here. Let’s explore a few.

  • Affordable housing is always in demand. Regardless of the economic climate, affordable multi-family complexes usually have a wait list of qualified tenants waiting for vacancies, especially as market rent rates continue to rise.
  • Demand goes up even more in a recession. As incomes drop and more people tighten their budgets, the need for affordable housing gets even higher, making ROI much easier to attain. In addition, the value of your portfolio itself goes up due to increased demand for recession-proof properties among investors.
  • Reliable cash flow. Because most affordable housing qualifies for government subsidies in the form of tax credits or Section 8, rental income is more stable for affordable housing during a recession. By contrast, luxury rentals often struggle to fill vacancies and experience higher rates of rent defaults during a recession.

What Types of Affordable Housing Should You Invest In?

While occupancy rates are reliable with nearly any form of affordable housing, some investments may still be more profitable than others. You may have no trouble keeping tenants in a Section-8 qualified single-family home, for example, but the upkeep and maintenance for a home housing only one family might not always be cost-effective.

In a recession environment, there are generally two types of affordable housing that offer the best value for the cost:

  • Affordable housing for seniors (55+). As more and more of America’s population enters the Golden Years, the need for affordable senior housing is only set to increase in the coming years — and even more so in a shrinking economy.
  • Multi-family housing. In times of recession, more individuals and families gravitate toward affordable apartment and multi-family units, not only for the lower rents but also to escape the cost and labor of upkeep. From the investor perspective, this is a win-win because the cost of upkeep for one property with multiple tenants is much more cost-efficient than upkeep for a dozen single-family dwellings on separate lots.

For best results, the time to seek out recession-proof investments is before recession hits. Olympia Management manages and maintains attractive, comfortable affordable housing complexes throughout the Southeastern U.S. To learn more about opportunities to invest in affordable housing, give us a call at 256-894-2382.