Affordable housing has quickly become a top investment asset class, and for good reason. The multifamily niche has attractive supply-demand dynamics, long-term profitability and proven resilience during market dislocations—even the current one. However, affordable deals can be challenging from a capital markets perspective, and in the current environment, they are not any easier.

"Affordable deals are not easier in this market. It is harder to get credit than it used to be or you require more equity, so your overall return is going to be muted somewhat versus pre-pandemic when you could get more leverage based on cash flow," Pat Jackson, founder and CEO of Sabal Capital Partners, tells GlobeSt.com. "A lot of the affordable housing deals are often small balance with smaller investors that are often not as liquid, that has also been muted somewhat. When you have uncertainty of any kind in the market, it is going to mute investments."

Jackson says that all forms of capital are taking a conservative approach, even Fannie Mae and Freddie Mac. "Everyone is taking a very cautious look at everything right now. That starts with the agencies," he says. "This is their sweet spot; this is their mission. They are taking a very conservative, defensive stance on the performance of the asset."