Affordable Housing: data, challenges, and the missing capability

Spyros Karakostas, Co-founder of BRIGHTaddvalue, participated as a speaker in the “Housing Initiatives” panel at the 19th RED Meeting Point conference. In this article, he shares his views on affordable housing, the role of institutional investors, and the structural changes required to address today’s housing challenges.

The Critical Importance of Optimising Housing Size

A simple quantitative exercise clearly illustrates the challenge. By combining average residential sale and rental prices by region with regional income levels and applying the internationally accepted affordability benchmark—where housing costs should not exceed approximately 30% of disposable income—a very clear conclusion emerges.

This analysis highlights a fundamental trend surrounding the new equilibrium in residential unit size. Residential investors should pay close attention to this development, as it signals the beginning of a fundamentally different era in housing design and development.

The Added Value of Institutional Investors—and the Barriers They Face

Greater participation by institutional investors in the residential sector represents, overall, a positive and meaningful development. Institutional capital brings the expertise, financial capacity, and operational capabilities required to address today’s increasingly complex development environment, characterised by higher construction costs, lengthy project maturation periods, and the growing importance of intelligent project planning.

Large investment platforms naturally seek sizeable investment opportunities. Larger-scale developments create significant economies of scale in both construction and design costs on a per-square-metre basis. Furthermore, professional management of residential portfolios generally results in more efficient maintenance and operational practices, extending the concept of affordability well beyond the initial acquisition cost.

Institutional investors also possess considerably greater capacity to support the long-term maturation of high-potential real estate assets. Unlike smaller investors, they are better positioned to absorb the time required to resolve complex urban planning, technical, or legal issues before unlocking an asset’s full value.

Despite these advantages, several structural barriers continue to limit institutional investment in residential real estate:

• A limited supply of investment opportunities of sufficient scale that are both available and economically viable.
• Lean investment teams within many institutional organisations, reducing their ability to evaluate opportunities outside conventional investment strategies.
• A lack of reliable and transparent market comparables.
• The inherently business-to-consumer (B2C) nature of the residential market. Revenue generation—whether through sales or leasing—depends on retail-oriented marketing, customer acquisition, and ongoing management, requiring a fundamentally different operating model from the business-to-business (B2B) investment structures with which most real estate funds are more familiar.

Priorities and Practical Solutions

There are no simple or immediate solutions, nor is the current situation likely to change rapidly.

The new spatial planning framework represents a step in the right direction, but its impact will require time to materialise—while market developments continue to outpace policy implementation. Likewise, leveraging public real estate assets can contribute meaningfully, but it cannot provide a nationwide, long-term solution. The same applies to periodic government support measures, primarily tax incentives, which can offer temporary relief but are unlikely to address the structural imbalance.

Against this backdrop, three priorities stand out:

First, real estate advisory firms with specialised expertise in affordable housing can play a pivotal role alongside institutional investors by identifying, structuring, and maturing high-quality investment opportunities.

Second, stronger service platforms should be developed to support the B2C nature of residential income streams. Cost-efficient property management and leasing or sales services are essential to preserving the financial viability of affordable housing developments.

Third, housing affordability ultimately requires optimisation of residential unit size through smarter, more functional design.

As a generation, we are facing a significant adjustment. Homes will become smaller, and this is a reality we will need to embrace. However, a smaller affordable home must also be intelligently designed. Excellent floor plans can be delivered within just 60 square metres, while much larger homes of 90–100 square metres may still offer poor functionality.

The next challenge is therefore not solely financial. It is about learning to design better homes by maximising every square metre and every functional opportunity. This requires a level of architectural and design expertise that has historically received limited attention and is currently offered by only a small number of specialised design practices focused on space optimisation.

About BRIGHTaddvalue

BRIGHTaddvalue is a boutique real estate advisory firm providing an integrated range of services across the entire real estate investment lifecycle. Its expertise spans investment sourcing and acquisition, commercial advisory, technical support for new developments—including due diligence and project management—as well as legal and environmental assessments of investment assets.

Specialising in the comprehensive structuring, coordination, and delivery of complex real estate projects, BRIGHTaddvalue supports clients in transforming initial business concepts into sustainable, financeable investments, creating long-term value for all stakeholders involved.