Affordable Housing Projects Show Strong Returns, PGIM's Marcus Says

Affordable housing investments are emerging as a compelling asset class, according to Marcus at PGIM, which manages over $1.2 trillion in assets. The firm reports that its portfolio of affordable housing developments delivered an average annualized return of 8.2% between 2021 and 2025. This outperformance is driven by the Low-Income Housing Tax Credit (LIHTC) program, which provides federal incentives to developers and investors. The 8.2% return exceeds the 5.7% average for core residential real estate investments during the same period. PGIM's Marcus points to consistent occupancy rates above 96% across its managed properties, even in urban markets like San Francisco, New York, and Seattle, where housing costs remain among the highest in the U.S. These high-demand areas benefit from long-term tenant retention and predictable cash flows. Investment volume in affordable housing has grown by 34% since 2022, reaching $28.7 billion in 2025, according to internal firm data. PGIM has deployed $4.1 billion into 35 new projects over the last two years, primarily in the Midwest and Southwest, where land costs are lower and construction timelines are shorter. The firm expects tax credit reforms under the Inflation Reduction Act to further boost project viability. The trend is attracting institutional investors, including pension funds and endowments, seeking stable yields in a volatile macro environment. With inflation pressures easing and interest rates plateauing, fixed-income alternatives like affordable housing are gaining traction. The sector’s resilience during economic downturns underscores its appeal as a defensive real asset.