Impact Funds Lose Steam With Investors, But Study Shows Their Buildings Perform Better

Withdrawals from socially conscious investment funds in the U.S. reached a record high in the fourth quarter, a reflection of pushback against ESG and diversity, equity and inclusion initiatives within the federal government, the general business community and commercial real estate.

But even as the concept of impact investing has fallen out of favor with many institutional-level investors, a slice of the multifamily world is leaning into socially conscious deals as a durable business strategy amid broader strife for apartment landlords.

“There's long-term stability in affordable housing, and you can’t say that about the market-rate marketplace,” said Pastor Martin Porter of Los Angeles-based Logos Faith Development. “lf you look at the last 10 to 20 years, there’s a lack of affordable units, so it’s a pretty stable model. It’s a truly good investment, whether you call it ‘impact’ or not.”

Logos partners with churches to turn excess land into affordable housing that also offers a variety of services to tenants. The company has 15 projects in various stages of development targeting “the lost, the least and the left out.” The mission matters, Porter said, but so does the money, with project returns ranging from 15% to 20%.

The concept of impact investing took off in the early 2020s as social movements and a nationwide housing affordability crisis ramped up, reaching about $70B in contributions to environmental, social and corporate governance funds from American investors in 2021, according to Morningstar. The trend quickly reversed, and last year, investors withdrew more than $20B.

“The market has definitely suffered in terms of fundraising over the last number of years, because it was conflated with something being ‘woke,’” said Bobby Turner, principal and CEO of Turner Impact Capital, which invests in housing, schools and healthcare. 

But multifamily projects that focus on housing stability, resident services and sustainability come with economic benefits as well as social ones, according to a new study released by the Multifamily Impact Council and the New York University Stern School of Business. 

Increasing housing stability through rent-splitting services added 3.5 months to the typical renter’s stay, according to the study. Providing housing support plans for Section 8 voucherholders cut vacancy loss and reduced legal expenses, in some cases increasing net operating income by 13%. 

And services for tenants who don’t meet typical placement requirements led to faster rent stabilization in markets with higher vacancy rates, as well as greater rental income.

These types of gains are especially attractive in today’s apartment market, which is struggling to work through a supply glut that has deflated rent growth nationwide. Average apartment rents fell by 1.7% year-over-year in April, and the vacancy rate stands at 7.2%, according to Apartments.com.

While the move away from impact investing coincided with backlash against the ESG and DEI movements, the drop in investment also came amid sectorwide financing challenges, JLL Chief Sustainability Officer Erin Meezen said.

“I don’t think of it as an either-or, like it surged or receded,” Meezen said. “Like everything, it adapted.”

The shift is better seen as a recalibration, said Bob Simpson, CEO and founder of the Multifamily Impact Council. Affordable housing seems to be rising to the top as an outlet for those making impact investments, due to the sheer need.

New York City’s pension funds announced plans to invest $4B in affordable homes in the next four years, looking to harness the opportunity created by a record-high number of households classified as rent-burdened.

Other firms are taking advantage of the expansion of the low-income housing tax credit to convert and maintain affordable units, Simpson said.

Firms expect to raise $5.2B per year for affordable multifamily investment vehicles between October 2024 and September 2026, a 43% increase from the prior five years on an annualized basis, according to a 2025 survey of MIC members. 

Jonathan Rose Cos., a multifamily developer focused on social impact, raised $660M last July, saying in a statement that three-quarters of capital came from return investors who were attracted to the impact analysis of the company’s previous developments. 

Placing money in these projects isn’t about trying to create demand. It is about solving a problem, Turner said. The nation’s shortage of quality housing, education and healthcare are massive challenges — but also opportunities. 

With the relatively poor quality of affordable housing and significant turnover in resident populations, investing for better quality of life reduces vacancy rates and improves tenant experience and net operating income. 

Turner Impact’s first housing fund nearly doubled lease duration and increased NOI by 13% per year, ultimately delivering a 25% return. The company’s second fund is on pace for a 10% return.

As more owners and investors look for ways to stabilize assets in a softening rental market, impact‑oriented strategies may increasingly be judged less by political framing and more by performance, which in turn has benefits for communities.

“The best way to run a good business is to take good care of your customers,” Simpson said. “I've never really thought of it as ESG. I've always thought of it as just a really old-fashioned, boring real estate business.”