For Affordable Housing Investors and Operators, 2026 Could Be a Banner Year

As we look toward 2026, the affordable housing sector finds itself at a pivotal moment. Against a backdrop of rising operating costs, aging building stock and continued housing insecurity across the country, the demand for high-quality, income-restricted affordable rental housing has never been greater. Yet this demand collides with a constrained capital environment, a shifting policy terrain and historically low levels of new supply.

For institutional investors and operators with the ability to navigate complexity, the opportunity in front of us is both clear and compelling. Affordable housing remains one of the most resilient, stable and socially essential asset classes in the U.S. real estate market. At a time when many commercial sectors face structural headwinds, affordable housing offers long-term value creation and community impact in equal measure.

At Hudson Valley Property Group, we are seeing that convergence play out in real time. We expect 2026 to bring an acceleration in portfolio sales and consolidation activity as legacy owners who lack scale or access to capital exit the space. Many of these owners have created asset value but are now seeking succession solutions or capital partners to address deferred maintenance, navigate asset management and compliance complexity, and preserve long-term affordability.

This trend is not just about deal volume. It is about building platforms with staying power. Affordable housing is no longer a niche. It is increasingly seen by institutional investors as a core asset class to allocate to, offering inflation-resilient income streams and predictable cash flow. For investors seeking to rebalance away from more volatile sectors like office or retail, affordable housing stands out as a durable, high-impact alternative.

Several macro and policy trends are reinforcing this momentum. The expansion of the Low-Income Housing Tax Credit through recent federal legislation, including the One Big Beautiful Bill Act, effectively doubles the program’s capacity. This policy change is likely to spur a significant increase in preservation activity, particularly in high-need, high-barrier markets where aging assets require recapitalization and repositioning.

We’re also seeing more housing authorities leverage tools like Rental Assistance Demonstration conversions, public facility corporations structures, ground leases, and land dispositions to bring more housing under regulatory control. These efforts are expanding the role of public-private partnerships, which remain essential in bridging the affordability gap while enabling meaningful property improvements.

Preservation, in our view, is the most efficient and immediate way to address America’s housing shortfall. New construction remains vital, but it is constrained by high costs, land scarcity and lengthy approval processes. By contrast, preservation allows us to protect existing housing that is already serving vulnerable populations, often at a fraction of the cost and with a faster timeline and with more scale. It also offers a practical path to modernization — allowing properties to receive critical upgrades, energy efficiency improvements and technology enhancements without displacing residents.

In a tighter capital market, investors and operators must bring a higher level of operational sophistication, regulatory fluency and strategic alignment. The most attractive investment opportunities in 2026 will be those where thoughtful scope planning, operational optimization and public-private partnerships can deliver both financial returns and meaningful outcomes for residents.

Property technology will also continue to transform the industry. The adoption of proptech is still in its early stages and is beginning to streamline some operations, helping to reduce energy costs and improve tenant experience. We expect broader integration of data-driven tools that enhance performance management and reduce operating friction across portfolios. For us, technology is not a substitute for human engagement but a tool that enables our teams to focus on what matters most: creating safe, stable and thriving communities.

Still, we must be mindful of emerging risks. Local policies, such as rent control ordinances and changes in property tax frameworks, can introduce volatility and dampen investment, so discipline in project selection remains paramount. Operating expenses and insurance costs remain elevated, and optimal financing structures are more complex. Operators must be nimble, well-capitalized and prepared to manage through regulatory uncertainty while maintaining a commitment to long-term affordability.

Despite these challenges, the future of affordable housing investment is strong. Institutional capital is becoming more sophisticated in this space, and the alignment between investor expectations and community needs is improving. More platforms will recognize that dedicated affordable housing strategies can deliver competitive, mission-aligned results.

Ultimately, we believe the preservation of affordable housing is not just a financial strategy. It is a long-term commitment to stewarding essential community infrastructure. Done right, it generates reliable returns, mitigates displacement, and creates pathways to opportunity. It is one of the few areas in real estate where doing well and doing good are not in tension, but in alignment.

Jason Bordainick is co-founder and CEO of Hudson Valley Property Group.