THE GREATER THE WORKFORCE HOUSING PROFILE OF YOUR PROPERTY, THE MORE EXPOSURE THERE IS TO NON-MARKET FORCES.
THE FMV PROBLEM: WHEN GOVERNMENT RENTS OUTRUN THE MARKET
The most distorted and dangerous layer of risk emerges when Fair Market Rents and voucher payment standards exceed real, private-market clearing rents. This is particularly pronounced in Class B and Class C properties.
Elevated voucher limits can appear attractive. Owners can raise rents, stabilize occupancy, and create the appearance of strong net operating income growth. But this is not organic growth. It is policy-driven inflation.
When government-set rents rise above what non-subsidized tenants can or will pay, owners become structurally dependent on voucher households to support valuations.
This creates three serious risks:
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Artificial rent floors distort local pricing and push out market-rate tenants.
Downward resets when HUD formulas change or funding tightens can collapse revenue faster than any normal market correction.
Exit liquidity deteriorates as buyers and lenders discount cash flows that rely on voucher driven income.
These risks are present in both high- and lower-regulation markets, but the mechanisms differ. In high-regulation states, the impact is amplified by additional rent and habitability controls. In lower- regulation states, the volatility is tied more directly to funding changes and market absorption risk.
WHY OWNERS’ EXISTING CLASS B AND C ASSETS SIT AT THE EPICENTER If you own existing Class B or C properties, you are sitting at the intersection of the highest regulatory and political risk. These assets are not just more
The greater the workforce housing profile of your property, the more exposure there is to non-market forces. This is not theory. Owners across the country are seeing these risks play out daily in underwriting, refinancing conversations, and acquisition screens. Understanding how your existing portfolio is positioned relative to voucher exposure, regulatory layering, and source-of-income protections is now critical for maintaining cash flow, valuation, and long-term liquidity.
likely to participate in voucher programs. They are more exposed to the compounding effects of regulation, especially in jurisdictions where source- of-income protections prevent owners from limiting participation. Many of these properties are older, more operationally intensive, located in politically sensitive areas, and more likely to fall under expanded tenant protections and retrofit mandates.
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