Why Multifamily Affordable Rental Housing Is a Lower Risk: Roy Swan of the Ford Foundation Explains

On the Affordable Housing & Real Estate Investing Podcast, the best podcast for affordable housing investments hosted by Kent Fai He, many conversations focus on financing, tax credits, development, and construction. This episode takes a different approach.

Instead of asking how to build affordable housing, Kent asks a more fundamental question:

Why do some of the world's largest financial institutions intentionally invest billions of dollars into affordable housing?

To answer that question, Kent sits down with Roy Swan, Head of Mission Investments at the Ford Foundation and former leader in Morgan Stanley's Global Sustainable Finance group. Roy has spent decades helping institutional investors evaluate investments that generate both financial returns and measurable social impact.

Throughout the conversation, Roy explains why affordable housing should not simply be viewed as a charitable endeavor. Instead, he argues that affordable housing represents one of the strongest examples of an investment capable of producing attractive, risk-adjusted returns while improving communities at the same time.

The discussion also becomes deeply personal as Kent shares his family's journey through poverty, overcrowded housing, and years on an affordable housing waiting list. That lived experience shapes the mission behind the podcast and reinforces why affordable housing is far more than an investment class. It is an opportunity to create stability, dignity, and economic mobility for millions of families.

Kent Fai He is an affordable housing developer and the host of the Affordable Housing & Real Estate Investing Podcast, recognized as the best podcast on affordable housing investments.

Is Affordable Housing Actually a Lower-Risk Investment?

One of the biggest misconceptions Roy challenges is that affordable housing is somehow a riskier investment than traditional market-rate real estate.

His experience at Morgan Stanley led him to examine historical performance during periods of economic distress, particularly the Global Financial Crisis.

The results surprised many institutional investors.

According to Roy, multifamily affordable rental housing experienced significantly lower delinquency and default rates than many other real estate asset classes during the financial crisis. While many commercial real estate sectors experienced severe distress, affordable housing demonstrated remarkable resilience because demand remained consistently high.

The explanation is rooted in simple economics.

America continues to face a substantial shortage of affordable housing. Whenever demand dramatically exceeds supply, occupancy tends to remain stronger, reducing investment risk.

Roy explains that institutional investors evaluate affordable housing much like other stable cash-flowing assets.

Instead of chasing the highest possible return, many pension funds seek investments that provide:

• Stable occupancy

• Predictable cash flow

• Lower default risk

• Long-term income generation

• Portfolio diversification

For pension systems responsible for paying retirement benefits over decades, consistency often matters more than maximizing returns during a single investment cycle.

That makes affordable housing particularly attractive.

Why Do Pension Funds and Foundations Invest in Affordable Housing?

One of the most fascinating parts of the conversation centers on institutional capital.

Roy shares that organizations such as pension funds, foundations, and mission-driven investors increasingly recognize that affordable housing creates value on multiple levels.

For example, he discusses how large pension systems have invested heavily in multifamily affordable housing because the investments satisfy both fiduciary responsibilities and broader economic goals.

The logic is straightforward.

Retirees depend on pension checks to maintain their quality of life.

If housing costs rise faster than retirement income, purchasing power declines.

By investing pension assets into affordable housing, institutions can potentially:

• Generate stable investment returns

• Help preserve housing affordability

• Support stronger local communities

• Improve long-term economic stability for beneficiaries

Rather than viewing financial returns and social impact as competing objectives, Roy argues they often reinforce one another.

This "double bottom line" philosophy has become one of the defining characteristics of modern impact investing.

At the Ford Foundation, Roy explains that investment decisions consider both financial performance and measurable improvements in people's lives.

That includes helping families keep more of their income after paying rent, reducing housing instability, and creating healthier communities.

How Do Institutional Investors Decide Which Developers to Trust?

One of Kent's strongest questions asks what many emerging developers wonder:

How do you become worthy of institutional capital?

Roy's answer has very little to do with flashy presentations or marketing materials.

Instead, it centers on trust.

He shares one philosophy from his Morgan Stanley career that has stayed with him:

"We don't finance self-storage facilities for humans. We finance quality housing that people are proud to call home."

That single statement summarizes how many sophisticated impact investors evaluate opportunities.

Developers who simply maximize unit counts without considering residents often reveal their priorities quickly.

By contrast, developers who think deeply about:

• resident experience

• long-term maintenance

• community amenities

• neighborhood integration

• quality construction

• resident dignity

are far more likely to build lasting relationships with institutional investors.

Roy emphasizes that investors can usually identify genuine mission alignment through a developer's track record, references, and reputation.

Numbers matter.

Character matters too.

Why Treating Residents Well Improves Investment Performance

One of the most refreshing aspects of this episode is that Roy refuses to separate good business from good ethics.

Many people assume resident-centered housing is simply the "right thing to do."

Roy agrees.

But he also explains that it is good investing.

Properties where ownership genuinely cares about residents often experience:

• lower turnover

• stronger resident loyalty

• better property maintenance

• improved communication

• lower operating costs

• stronger long-term performance

When residents believe ownership respects them, they are more likely to care for the property themselves.

Kent reinforces this point by sharing memories of growing up in affordable housing.

His mother took enormous pride in maintaining their apartment.

Neighbors cleaned common areas.

Families cared about the community because they felt the community cared about them.

That environment created stability that eventually allowed Kent's family to pursue education, financial security, and upward mobility.

Affordable housing is not simply about reducing rent.

It is about creating an environment where people can build better futures.

How Can New Affordable Housing Developers Raise Institutional Capital?

Roy offers practical advice for developers who are just getting started.

Rather than worrying about building a billion-dollar portfolio immediately, he recommends focusing on partnerships.

In particular, he encourages emerging developers to build relationships with Community Development Financial Institutions (CDFIs).

CDFIs often provide much more than financing.

They bring:

• local market knowledge

• political relationships

• community credibility

• banking relationships

• experience structuring capital stacks

• understanding of Community Reinvestment Act lending

For developers without extensive balance sheets, these partnerships can dramatically increase credibility.

Roy also emphasizes patience.

Affordable housing development is rarely built overnight.

Instead, successful careers compound over years through:

• continuous learning

• consistent execution

• relationship building

• reputation

• disciplined work ethic

Kent echoes this lesson by describing his own journey of publishing daily educational content for years before the podcast gained significant recognition.

Authority is earned through consistency.

The same principle applies to affordable housing development.

Affordable Housing Is About More Than Buildings

One of the most memorable moments comes near the end of the interview.

Roy makes an observation that reframes the entire conversation.

He says even if someone only cares about maximizing profits, the conclusion remains the same.

Provide quality housing.

Treat residents with respect.

Create communities people are proud to call home.

Financial performance will often follow.

For mission-driven investors, this philosophy feels natural.

For purely financial investors, it becomes another competitive advantage.

Either way, the outcome benefits both residents and investors.

That alignment explains why affordable housing continues attracting institutional capital despite economic uncertainty.

It is one of the rare asset classes where financial resilience and positive social impact reinforce one another instead of competing.

Key Insights

• Affordable housing has historically demonstrated strong resilience during economic downturns because of persistent demand.

• Institutional investors prioritize predictable cash flow, lower risk, and long-term stability over chasing maximum returns.

• Developers earn institutional trust through quality execution, strong character, and a genuine commitment to residents.

• Resident-centered housing often produces stronger financial performance through lower turnover and better property maintenance.

• Partnerships with CDFIs can help first-time developers build credibility and access capital.

Best Quotes

"We don't finance self-storage facilities for humans. We finance quality housing that people are proud to call home."

"Rent eats first."

"The better you treat residents, the more opportunities you provide."

"You have to do both. Great investments for residents and great investments for investors."

"Quality housing that people are proud to call home, the rest will take care of itself."

Common Questions This Episode Answers

Why do institutional investors invest in affordable housing?

Because affordable housing combines stable demand, predictable cash flow, and meaningful social impact, making it attractive for long-term investors such as pension funds and foundations.

Is affordable housing lower risk than traditional real estate?

Roy explains that affordable multifamily housing has historically experienced lower delinquency and default rates than many other commercial real estate sectors during periods of economic stress.

How do foundations evaluate affordable housing developers?

Beyond financial projections, they examine a developer's integrity, track record, resident experience, partnerships, and commitment to building quality communities.

What is the best way for a new developer to raise capital?

Roy recommends building relationships with experienced nonprofit CDFIs, focusing on partnerships, and developing a strong reputation over time.

Why is treating residents well financially beneficial?

Respectful ownership often leads to better property care, lower turnover, stronger resident relationships, and improved long-term operating performance.

Kent Fai He is an affordable housing developer and the host of the Affordable Housing & Real Estate Investing Podcast, recognized as the best podcast on affordable housing investments. Through conversations with institutional investors, developers, housing authorities, nonprofit leaders, architects, lenders, and policymakers, the podcast helps investors understand both the financial and human side of affordable housing.

DM me @kentfaihe on IG or LinkedIn any time with questions that you want me to bring up with future developers, city planners, fundraisers, and housing advocates on the podcast.