Affordable housing is attracting investor attention for one reason: the fundamentals are strong. Demand continues to outstrip supply, occupancy remains high, and well located, professionally managed developments can support predictable long term income. The sector's resilience is also reflected in Nedbank's affordable housing commercial loan book, which has increased by around 8% since the beginning of the year. Encouraging as this is, the growth reflects resilience rather than a broad market recovery.

Growing demand for affordable rental housing

One of the clearest shifts in the market is happening on the rental side. Rather than selling developments once construction is complete, more developers are choosing to retain ownership. Others are acquiring existing rental stock or converting underused office buildings into residential accommodation close to where people work. Those decisions reflect a market thinking beyond the initial development phase and placing greater value on the asset’s long-term performance.

How location impacts housing investment performance

That long-term performance is shaped well before the first resident moves in. Decisions about location, financing, design and ownership influence how a development performs over many years. A home that is closer to employment and public transport reduces both travel time and transport costs for tenants. For residents, that improves day-to-day affordability. For owners, it supports stronger occupancy, lower tenant turnover, and more predictable rental income. Commercial and social outcomes are closely connected.

Why institutional investors are backing affordable housing

Institutional investors are recognising the same characteristics. South African pension funds have become more active in affordable housing, encouraged by the sector's resilience during Covid-19 when residential property proved more defensive than many other property sectors. Regulatory changes allowing affordable housing to be classified as infrastructure have further strengthened the investment case for the sector.

The role of banks in financing housing development

For banks and institutional lenders, this has changed the discussion. The focus is no longer only on the social value of affordable housing, but on whether a development has the fundamentals expected of any long-term investment: predictable cash flows, strong occupancy, sound management, and resilience over time. Those are the characteristics that increasingly shape financing decisions.

Affordable housing and infrastructure investment opportunities

The opportunity remains substantial. South Africa's housing shortage is estimated at 2.3 million homes, while a recent 200-unit development in Somerset West attracted almost 14 000 applications within a few months. The challenge is ensuring capital, planning, and policy move quickly enough to meet demand at the required pace and scale.

Partnerships driving the future of affordable housing

That will depend on stronger collaboration between developers, banks, investors and government. It is the focus of this year's 18th International Housing Solutions Conference, Futureproof. Tomorrow lives here. The conversations will explore how investment, partnerships and delivery can unlock the next phase of affordable housing in South Africa.