The Wall Street Journal's Keiko Morris looks at how market-rate investors are increasingly chasing yield, and long-term stability, by taking on deals that qualify as affordable housing.

In New York, which features some of the nation's lowest cap rates, investors such as Treetop Development are going "outside the box" by pursuing communities built via low-income housing tax credits. While not as dynamic as market-rate housing, affordable housing developments are seen as a hedge against downturns since they offer slow but steady cash flow.

In July, the Aspen Cos., an affiliate of Treetop Development, paid $24.6 million for two Morris Heights properties that had been built using a mix of low-income tax credits. The deal came with more paperwork, regulations, and scrutiny than the typical market-rate transaction but will extend the firm's reach into the Bronx and boost cash flow ...

Within the rental residential market, the city’s affordable-rate residential buildings, which have rental limits based on a tenant’s income, have attracted more types of investors in the past three to five years, said Victor Sozio, executive vice president at real-estate-services firm Ariel Property Advisors.

In some cases, an experienced local operator will join with institutional investors or wealth advisers representing high-net-worth individuals or families to invest in affordable apartment properties, which are built or redeveloped with government subsidies, said Mr. Sozio, whose firm brokered Treetop’s recent deal in the Bronx.

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