Catalyst Closes on Affordable Housing Fund
The fund has already facilitated the building of three communities.
Catalyst Opportunity Funds, an impact investment firm with a focus on affordable and workforce housing, has closed Catalyst Opportunity Fund II LP, with a total of $140 million in capital commitments. The fund will focus on the ground-up development of affordable housing in particularly scarce markets.
According to Utah-based Catalyst, contributors to the fund included JPMorganChase, UnitedHealth Group, American Express and KeyBank. Other investors included foundations and family offices.
Fund II will facilitate the development of workforce and affordable housing communities that serve households earning 60 percent to 80 percent of their Area Median Income. That typically includes working families and individuals who make too much to qualify for traditional affordable housing subsidies, but still find residential expenses a struggle.
Early wins
The fund has already been deployed into eight real estate projects nationwide. Three of these – Metropolitan Village in Winston-Salem, NC, The Eden in Los Angeles, and The Moraine in Tacoma, Wash., – have been completed and are currently housing residents.
The Eden, developed in partnership with Bridger Land Group, is a 235-unit community located in downtown Los Angeles. The majority of its units are affordable to those of moderate income in Los Angeles. The property opened in December.
The Moraine, developed in partnership with Ethos Development, has 160 units and is located in the Hilltop neighborhood of Tacoma. The majority of its units are for individuals and households earning less than 80 percent AMI. The property opened about a year ago.
Besides housing, Fund II also invests in mixed-use developments and commercial spaces that provide essential services. Including the most recent fund, Catalyst now has total assets under management of $350 million, with more than $1.3 billion in project costs across its portfolio.
Affordable Housing Development Poised for Slowdown
The shortage of affordable U.S. housing remains profound, but development has temporarily kicked into high gear, according to the latest National Affordable Housing Report by Yardi Matrix. Completions of affordable housing are forecast to reach 78,000 units this year, a multi-year record.
On the other hand, that figure will probably be a peak going forward. Starts of fully affordable units dropped by 28.7 percent year-over-year to 66,000 in 2024, the lowest total since 2020, Yardi Matrix reports.
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The reasons for the slowdown in starts are similar to the obstacles facing market-rate construction, whose starts dropped even more (74 percent) in 2024 compared with 2023. These are mainly land, material and labor costs, alongside entitlement delays and lack of construction construction workers, Yardi Matrix explains. With affordable housing, there is also an extra layer of uncertainty about the direction of federal policy as it relates to the sector.
