The Affordable Housing Shortage and the Case for Value Restoration via Stabilization
October 2026
The national affordable housing conversation is typically framed around the lowest-income renters. The band just above them is where the squeeze has tightened more precipitously and where it is least discussed. These are workforce households, earning roughly $40,000 to $75,000 in annual household income (depending on the market), who earn too much to qualify for most deeply targeted assistance and too little to absorb the rents that new construction requires.
Among renters earning $45,000 to $74,999, 49 percent were cost burdened in 2024, spending more than 30 percent of income on housing, a rate that has climbed 9.5 percentage points since 2019 alone. Nationally, 22.7 million renter households were cost burdened in 2024, a record high and nearly half of all renters. Looking at supply rather than burden, the National Low Income Housing Coalition counts 27.6 million renter households at or below 80 percent of area median income against 24.5 million homes affordable and available to them, a shortage of roughly 3.2 million units, and notes that many homes in that price range are themselves occupied by cost-burdened households.
The shortage deepens further down the income scale, and that floor matters because it sets the pressure under the workforce band. For extremely low-income renter households, meaning those earning at or below either the federal poverty guideline or 30 percent of area median income, there are 11 million households and 3.8 million homes affordable and available to them, a shortage of 7.2 million, or 35 homes for every 100 households that need one. Seventy-four percent of those households are severely cost burdened, and the median renter household earning under $30,000 was left with $210 a month in inflation-adjusted residual income after rent and utilities in 2024, a record low and a 60 percent decline since 2001. No state and no major metropolitan area has an adequate supply at that level. Cumulatively, the shortage is roughly 8.3 million units for renters at or below 50 percent of area median income.
decline in units renting under $1,400,
inflation-adjusted, 2014 to 2024
of renters earning $45,000 to $74,999
were cost burdened in 2024
growth in the total US rental stock,
2010 to 2024
The shortage is commonly discussed as a construction problem. The data also describe a second dynamic, which is the movement of existing rental housing out of the price range of workforce and lower-income renters.
Between 2014 and 2024, on an inflation-adjusted basis, the number of US rental units renting for under $1,000 a month fell by more than 7 million. Units renting for under $1,400 fell by 9.3 million. Units renting at $1,400 or more grew by 11.8 million. At the deepest end of the market, units renting for under $600 fell by 2.5 million, a decline of about 30 percent. The rent distribution shifted upward over the period, with losses in the lower-rent bands and growth in the higher-rent bands. Those bands correspond to household income. The Joint Center for Housing Studies treats $1,000 in monthly rent as roughly the affordability limit for a household earning $40,000; applying that same 30 percent standard, $1,400 corresponds to a household earning about $56,000, a figure derived here rather than published by JCHS. The inventory that disappeared was the inventory serving the workforce band.
This did not happen because the country stopped building. The total US rental stock grew by 5.5 million units between 2010 and 2024, and multifamily completions reached 608,000 units in 2024, the highest annual volume since 1986. Despite a 20 percent drop in completions, 488,000 units were added to the market in 2025. That pipeline is now cooling: in February 2026 the National Association of Home Builders forecast that multifamily starts would decline about 5 percent in 2026 to an annual pace of 392,000 units, a forecast rather than an observed result. The Joint Center for Housing Studies reports that growth in the rental stock over the past decade has been exclusively in higher-rent units, while the units renting for less than $1,000, roughly the affordability limit for a household earning $40,000, were lost outright or converted to higher rents. Supply expanded substantially. It expanded above the price point where the shortage sits.
Renter incomes rose 9 percent in real terms between 2001 and 2024 while median rents rose 30 percent. New development also carries costs that are visible in what public programs pay to deliver units. The City of Chicago announced on April 1, 2026 that 15 developments awarded under its 2025 Qualified Allocation Plan would create or preserve 1,223 housing units, with estimated total development costs of $711 million, or approximately $581,000 per total unit. That calculation divides total development cost by total units and is not a construction-cost-only or cost-per-affordable-unit measure. Separately, Public Law 119-21, Section 70422, permanently increases the 9 percent Low-Income Housing Tax Credit state housing credit ceiling by 12 percent beginning in 2026.
Much of the lower-rent inventory falls into what the industry calls naturally occurring affordable housing, or NOAH: existing, unsubsidized multifamily rental property that is affordable to lower-income households without public subsidy. NOAH lacks a consistently applied industry definition and is not well tracked. McKinsey has estimated that it represents roughly three quarters of the affordable housing supply in the United States, an undated estimate the firm presents as method-dependent rather than as a current national count. NOAH is generally understood to be unsubsidized and is not subject to Low-Income Housing Tax Credit affordability restrictions solely by virtue of being NOAH, although local, contractual, financing, rent-regulation, or recorded restrictions may apply to individual properties.
Operating costs are rising against that inventory. According to the Joint Center for Housing Studies, citing Trepp, multifamily property insurance costs doubled between 2019 and 2024. Payroll, administrative costs, and utilities increased by more than 20 percent, while marketing, taxes, and maintenance rose by more than 10 percent. These are cost trends across the sector and do not by themselves establish the operating outcome of any individual property.
The stock absorbing those increases is old. US rental units are older than at any point on record, with a median age of 45 years, up from 36 years in 2003. The Joint Center for Housing Studies reports that 3.6 million renter households lived in moderately or severely inadequate housing in 2023, and the Federal Reserve Bank of Philadelphia estimated that 18.8 million renter-occupied units, about 41 percent, had at least one repair need in 2024, valued collectively at $70.1 billion.
Within that inventory sits housing that operators describe as out of service, or down units, meaning units that have deteriorated past the point of being rentable. This is an operational category rather than a statistical one. The Census Housing Vacancy Survey does not define or count a category of down units, and its classifications cannot establish how many out-of-service units are included in or excluded from vacancy statistics. What the definitions do show is that Census excludes units exposed to the elements and units with positive evidence of demolition or condemnation, while including some vacant units that need repairs or are currently being repaired or renovated. Returning a specific unit to service may require capital, construction work, permits, inspections, and approvals, depending on the property and the jurisdiction.
Capital entering older Class C multifamily generally takes one of two approaches, and they point in different directions for the lower-rent inventory described above.
The first is repositioning, commonly described as value-add. An investor acquires a Class C or B-minus building, renovates unit by unit, and raises rents to match the improved product, moving the asset toward a higher class. It is a widely used and legitimate strategy, and it depends on the market absorbing the higher rents. Where it succeeds and rents move above what lower-income renters can pay, those units leave the lower-rent bands.
The second is stabilization. Rather than moving the asset to a new class, the objective is to make an underperforming building function as what it already is: raising occupancy and collections toward market norms, restoring units that have gone out of service to habitable condition, repairing building systems, and rebuilding management, while holding rents within the range the existing resident base can pay. Units end up safe and habitable without being uniform. Rent adjustments occur primarily at natural turnover rather than through a wholesale re-tenanting.
Consider, as a hypothetical illustration, a 300-unit property at 78 percent occupancy with 40 units out of service. Repositioned, it becomes a better building whose 300 units are re-tenanted at higher rents. Stabilized, the 40 offline units are returned to habitable condition and the property operates at close to its full 300 units at rents nearer where they started. Both paths involve private capital, private ownership, and a return requirement. Both improve the physical asset. This example is illustrative and does not describe any particular property, market average, or measured affordability outcome.
The distinction matters for the supply question because most of the affordable rental inventory in the country is privately owned and unsubsidized. Public programs shape a portion of the market. Which approach private capital takes shapes a much larger one.
For an investor, the difference between the two approaches is less about the buildings than about where the return is expected to come from, and the two sources behave differently.
A repositioning strategy is underwritten substantially on rent growth and, in most cases, on cap rate movement; i.e. compression. Both are market conditions rather than management decisions. Current conditions show how much that matters. National asking rent growth has hovered near zero since mid-2023. In the first quarter of 2026, asking rents for professionally managed apartments fell 0.5 percent year over year, the first national decline since early 2021, with declines concentrated in the South and West where new supply has been heaviest. The national apartment vacancy rate stood at 5.1 percent, against 2.5 percent in early 2022. Over the same period the cost side moved the other way: property insurance costs doubled between 2019 and 2024, payroll, administrative costs, and utilities rose by more than 20 percent, and marketing, taxes, and maintenance rose by more than 10 percent. A strategy that requires rents to keep rising is exposed to both movements at once.
Stabilization is underwritten against a different variable. The value sought is the gap between how a building currently operates and how a competently run building of the same class operates: occupancy, collections, delinquency, and units sitting out of service. Closing that gap is an execution question. It does not require the market to deliver higher rents, and the work is available in a soft rental market as well as a strong one.
The demand data show a large and enduring shortage in the lower-rent segment. Eleven million extremely low-income renter households are competing for 3.8 million homes that are affordable and available to them, and no state or major metropolitan area has an adequate supply. In our view, a shortage of that magnitude, set against a construction pipeline that is cooling, is structural rather than cyclical; that characterization is our logical interpretation rather than a finding of the underlying data.
Our view is that these facts point to a return driver different in kind from the appreciation cycle that most real estate allocations already carry, and that this is the argument for holding a stabilization strategy alongside an appreciation-oriented one rather than instead of it. That is reasoning about where returns originate, not a measured outcome. National shortage data does not determine occupancy, collections, or credit loss at any individual property, and no diversification or performance result should be inferred from it.
Clear Investment Group is a vertically integrated real estate investment firm focused on distressed Class C workforce housing multifamily. Our strategy is the second of the two approaches above. We acquire underperforming Class C properties, work to stabilize them as Class C properties, return offline units to service, and aim to hold rents within reach of the residents already living there.
For investors evaluating where a strategy like this fits alongside the rest of a real estate allocation, we welcome the conversation. For over two decades, we have specialized in rehabilitating workforce housing to unlock latent value. As a stagnating pipeline of new housing starts and escalating construction costs exacerbate the national housing shortage, the supply-demand imbalance within the Class C multifamily sector has reached a critical juncture. Because demand in this segment is highly inelastic, the rapid stabilization and return of these units to the market is paramount.
Our investor relations team is available to discuss our targeted market selection, underwriting methodology, and asset stabilization strategies. Our model delivers asymmetric return profiles for investors while driving meaningful, positive transformation for the communities and residents we serve.
Chief Executive Officer
amy@clearinvestgroup.com Inside the Office of Amy Rubenstein Clear Investment Group
105 W. Madison Street, Suite 1700, Chicago, Illinois
Marketing and Investor Relations Associate
stamos@clearinvestgroup.com312.883.5480 ext. 220
For informational purposes only. Not an offer to sell or a solicitation of an offer to buy any security or interest in any fund, and not investment, legal, or tax advice. Market data are drawn from the sources cited above, with those sources’ definitions, populations, and time periods. Statements identified as Clear Investment Group’s views or strategy are company-stated positions, not verified results. No property, fund, or portfolio-level performance, affordability, occupancy, collection, credit-loss, diversification, or investor-return result is represented. Views are as of the publication date and subject to change.
Sources
