The pandemic has driven growth in affordable housing demand, but has also created opportunities to augment supply. The distressed asset market, it turns out, is a goldmine of opportunities for adaptive reuse into affordable and workforce housing. Developer Repvblik has already built a pipeline of redevelopment projects, including transforming a Days Inn hotel into a 341-unit affordable property in Branson, MO. The development is the largest affordable project to be developed without federal funding or tax credits.

Discounted distressed assets help make affordable deals—which are notoriously challenging—pencil. "A lot of these asset classes had PPP loans and other federal programs that allowed owners to kick the can down the road," Richard Rubin, CEO of Repvblik, tells GlobeSt.com. "When it comes to a lot of these programs, they eventually run out of runway. For the properties that don't have a discernable path forward, there is going to be a lot of lender-owned stock available. It is very clear to see what is happening, and I think a lot of the distress is going to be a bridge for the housing."

Hospitality and retail have seen the most dislocation, but Rubin says not to discount office space. He expects more distressed office properties to hit the market this year, providing additional redevelopment opportunities. "No one can yet quantify the amount of commercial office space that is going to become available. I think that the wave of those conversions are going to change the landscape," he says. "We are going to see a lack of relevance in office space. There is going to be a lot of distress in that asset class over the next three to four years."