By Jesse Pound | Pensions & Investments | April 30, 2026
New York City Comptroller Mark Levine’s plan to direct $4 billion of pension fund money into affordable housing could help achieve a key social objective for the city government, while also providing a potential hedging tool for investment portfolios.
Executives of investment firms that specialize in low-income housing told Pensions & Investments that their appeal to potential partners centers not only on the social impact of affordable housing, but also on it being an effective way to guard against economic recessions or downturns in other parts of the real estate market.
“Some of our investors are purely economically driven. They see affordable housing as something that is not correlated with the markets, that has inflation protection and is just really a safe investment,” said Jason Bordainick, co-founder and managing partner of Hudson Valley Property Group. “And then you have some investors who believe that as well but also want to invest for impact.” The firm has about $4 billion in assets under management focused on affordable housing.
Construction at an affordable housing complex in Los Angeles, Calif.
(Caroline Brehman/Bloomberg)
The recession hedge theory is tied into the economic concept of inferior goods, which suggests that the demand for affordable housing should rise when employment and wages decline. And despite the fact that unemployment in the United States has hovered around a historically modest 4%, demand for affordable housing is already high. The National Low Income Housing Coalition estimated that there is a need for an additional 7.2 million affordable units in the United States.
“This 7 million unit shortage is not going to be solved solely by low-income housing tax credits,” said Deborah La Franchi, founder and CEO of SDS Capital. “Not going to happen. The private sector is an important part of the solution.” SDS Capital specializes in social housing and has $1.6 billion in assets under management.
A more defensive real estate investment could be particularly attractive to investors that are seeing signs of weakness in their other residential real estate holdings. According to Zillow’s March 2026 Rental Market Report, rent rose just 1.8% nationally over the previous 12 months and is actually falling in some places that have seen rapid building of market-rate housing, including Phoenix, Arizona, and Austin, Texas.
“In the case of higher income multifamily, apples to apples, quality build projects, the vacancies are higher right now because they were overbuilt,” La Franchi said.
Asset managers can be involved in affordable housing in several ways, including through private equity funds or separately managed accounts specifically earmarked for the sector. Other asset managers that invest in affordable housing include Barings and Raymond James.
Affordable housing projects can also include considerations around tax credits and the prospect of long-term government contracts once completed. Bordainick pointed to those long-term contracts as another defensive element of the asset class.
New York City’s Plan
Levine took office as comptroller in January, calling affordable housing a top priority, and rolled out the initial overview for pension investments earlier in April. The plan calls for $4 billion of investments over four years, including requesting pension board approval for $750 million of new investments in office conversions, mixed-income housing and preserving existing affordable housing, all run by external managers.
Levine’s office oversees the city’s five pension funds that make up New York City Retirement Systems, which have a combined $319.5 billion in assets under management. The funds already have about $2.8 billion committed to residential housing, including through a Public Private Apartment Rehabilitation program, whose affiliated private lenders include JP Morgan Chase and Wells Fargo.
In January, Levine told P&I that he was open to investing in housing projects that included market-rate units as well, if they included affordable units, and that the pension system uses the same financial framework in evaluating economically targeted investments like affordable housing as in other parts of the investment portfolio.
Bordainick said that Hudson Valley Property Group would likely be interested in working with New York City on its new investment plan as more details emerge, specifically on affordable housing preservation and rehabilitation projects, which is the firm’s specialty. La Franchi said SDS did not plan on participating, calling New York City a “unique” market.
Other pension systems are investing in affordable housing, including the $5.3 billion Chicago Municipal Employees’ Annuity & Benefit Fund, which recently committed up to $20 million to open-end AEW Capital Management and Avanath Capital Management.
Potential for Upside?
In textbook financial theory, the trade-off for assets like affordable housing being good recession hedges should be that they provide less return upside. However, Bordainick and La Franchi said they don’t see affordable housing as having a weaker return profile than higher income projects, and some academic research suggests their anecdotes aren’t far off-base, at least for right now.
A working paper published by the National Bureau of Economic Research in 2025 titled “An alpha in affordable housing?” found that, when examining private sector housing in the U.S., Belgium and the Netherlands, return yields were actually higher for lower-income projects. One theory for the finding is that lower income housing may have barriers to entry that keeps out some investors, making it a less competitive market, explained Stijn Van Nieuwerburgh, one of the paper’s co-authors and a professor at the Columbia Graduate School of Business.
“The very large investors and the very small retail investors, they’re both congregating in the higher sector of the rental market,” said Van Nieuwerburgh, who added that he also works as an adviser for a real estate firm called Aequitas.
There are some caveats to those findings, such as the fact that the study was limited to private market housing and that the authors suggested that the entrance of large institutional investors, including a pension fund, could change the return dynamics. Still, the recession hedge case for affordable housing should hold even if the excess returns don’t materialize.
“That effect is about the beta of the asset, not the alpha. It’s about the risk exposure to the business cycle. It’s true that the lower rent segment is like a recession hedge or an inflation hedge,” Van Nieuwerburgh said.