The need for affordable homes has grown at an unprecedented rate over the past five years, ignited by the housing-centered recession of 2007-2009 and continuously fueled by the changing needs and preferences of the American population. Even as housing markets recover, a growing number of homeowners and renters of all income levels struggle to find reasonably priced homes or keep the homes they have. At the same time, developers, funders, and supporters of affordable housing wrestle with the challenge of sharply reduced resources. After such rapid and significant change in housing markets in recent years, existing affordable housing development and finance models must evolve to replace lost resources and meet growing demand.

The overall housing market continues its steady recovery and home prices are reaching affordable levels in many markets across the country. Two issues make it difficult for LMI households to enter or rejoin the market as homeowners. First, since early 2012, market trends in several large metropolitan areas reveal the rapid rise of institutional and individual investors purchasing distressed properties in large quantities for cash, elbowing out potential homebuyers who lack these cash resources. In markets with a large stock of foreclosed properties, including Phoenix, Las Vegas, and Miami, investors seeking to buy properties with cash are now a strong force in the market, with large institutional investors behind more than 20 percent of sales in some markets.3 Investors purchase these distressed properties in bulk and hold them off the market or convert them into single-family rental homes, a fast-growing segment of the housing market.