Avanath CEO: Opportunities for Innovative Affordable Housing Investors Will Abound
The economic downturn will have a minimal negative impact on the affordable housing sector, according to Daryl Carter. Here’s why.

Daryl Carter, Founder, Chairman & CEO, Avanath Capital Management. Image courtesy of Avanath Capital Management
Today, debt availability and the prospect of yet higher interest rates make it extremely difficult for multifamily investors and owners to secure capital with favorable terms for additional affordable housing investments.
However, this environment can bring new opportunities to “smart and innovative investors,” according to Avanath Capital Management Founder, Chairman & CEO Daryl Carter. Between November and early January, the company closed on more than $205 million in additional equity commitments to its Affordable Housing Renaissance Fund, reflecting the strength and resilience of affordable housing investments.
Carter has more than four decades of experience in multifamily, so we asked him to share his views on what affordable housing investors should pay attention to as the economy prepares to enter recession territory.
How do you expect the looming economic downturn to impact the affordable housing sector this year and beyond?
Carter: With the current economic outlook, I’d venture there will be minimal negative impact to the affordable housing sector. If anything, any potential downturn just increases the demand for more affordable housing in the U.S. and we don’t have enough of it as it is. We see continued high occupancy rates and very low rent delinquencies. Unemployment remains at all-time lows, although there could be some concern if layoffs expand. For now, it seems limited to the tech sector which over-expanded in recent years—and those workers are not typically the population we serve.
Inflation seems to be coming down from its heights, but things are still more expensive, and our residents are hit hard when inflation rises even a little. So, the sector from an ownership and investment perspective will be fine. That said, the population that needs access to affordable housing will be impacted if there is a downturn of any magnitude or length.
Do you think uncertainty and risk aversion will create new opportunities for at least some affordable housing investors, or on the contrary?
Carter: Opportunities for smart and innovative affordable housing investors will abound. Uncertainty comes into play with interest rates, but there are numerous ways to improve your financing to get deals done. I see more public-private partnerships, like the deal we did in Los Angeles‘ Baldwin Village with the Housing Authority for the City, as a model to reduce risk and get more investors involved in affordable housing.
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Given the current market conditions, how should affordable housing investors act to protect their holdings? What is your advice?
Carter: Deals certainly must be underwritten carefully. Cap rates have gone up, which means values have come down. Choosing the right properties is critical. Our business model is to identify assets that are fundamentally sound and purchase them below replacement cost, and to invest efficiently in amenities that add value to the residents and the properties. For example, at our recently acquired Novato, Calif., communities we will be adding washers and dryers to the units as well as replacing aging lighting, mechanical systems, and hot water heaters. Growing the value of the properties by making wise investments is a great way to protect the long-term value of your holdings.
How is the federal government supporting the affordable housing industry in 2023? What legislative changes would be beneficial to the sector?
Carter: Congress is doing its job. The fiscal year 2023 budget includes funding for many existing HUD programs with a 10 percent increase in allocated funds. So that’s a huge benefit to the sector. Current Housing Choice Voucher contracts will be covered in full, as will Project-Based Rental Assistance program contracts. The spending bill also includes a ‘Yes in my Backyard’ initiative designed to incentivize communities to end exclusionary zoning and land-use policies and spur new housing construction.
The HUD’s job is to make sure the programs and the funding are spent appropriately. Its 2022-2026 strategic plan has as one of its strategic goals to ‘ensure access and increase production of affordable housing,’ so at the Federal agency level there is an understanding of the crisis in access to affordable housing. The FHA needs to continue insuring multifamily mortgages to keep the supply of housing growing—albeit there is no amount of mortgage insurance that could accelerate development fast enough given the demand.

Bay Vista at Meadow Park, one of the Novato, Calif., properties that Avanath purchased earlier this year. Image courtesy of Avanath Capital Management
What are your company’s short- and long-term plans? Have they changed, given the current volatile times?
Carter: Last year was a significant one for Avanath. We completed the initial close of our first open-ended fund in 2021, so that drove a lot of our buying. This fund’s structure gives us much longer-term horizons for our investments. We expect to grow it from the current $1 billion to $7 billion in the next 5 to 6 years.
In 2023, we see the possibility of investing at least $500 million in new purchases. The current market conditions may slow some of our acquisition plans, but we continue to be very bullish on the existing market.
We also are getting more involved in new development in 2023 and beyond. We will be considering conversions of excess or adjacent land on certain portfolio properties into additional housing units. We have a project in downtown Oakland, Calif., that we believe can accommodate up to 70 additional units, while another project in Los Angeles is also being discussed. In Detroit, we are working through a public-private venture to deliver about 200 new units—and see a total opportunity to build 2,000 units over the next 5 years.
You previously mentioned the two Novato, Calif., properties. Your purchased them for a total of $131.5 million, bringing your total portfolio in Northern California to 18 communities. Do you intend to keep expanding in the area?
Carter: Northern California communities continue to have high rents compared to the national average. Currently, only 26 percent of the total units in the market are designated as affordable housing. While planning to develop new properties exists within the market, only 16 percent of newly completed units would be affordable.
There is a genuine affordable housing crisis, and we are determined in our mission to contribute to its resolution. Adding more units to our portfolio only strengthens Avanath’s economies of scale in the region and allows for more efficient operation. We expect to continue looking for opportunities in the Bay Area.
Are there any new markets in the U.S. that you are targeting in 2023?
Carter: We currently operate in 15 states in the U.S., mostly in urban markets where demand for affordable housing is high and the supply is low relative to the demand. We are quite deliberate in our evaluation of new markets—and will consider new markets that have strong demand for affordable rentals.