Why Institutional Capital Is Wrong About Workforce Housing With Jon Siegel – RFP 108
Most multifamily capital is crowded into the same trade: newer assets, hot markets, long bid lists. Jon Siegel thinks that herd behavior is precisely what has created the most interesting opportunity in apartments today. Siegel is Co-Founder and Chief Investment Officer of RailField Partners, a Bethesda-based multifamily investment firm that partners with institutional capital across the Mid-Atlantic, Southeast, Texas, and now the Midwest. Before RailField, he spent years inside Fannie Mae’s multifamily structured transactions group and co-founded an advisory firm that guided clients through billions in multifamily transactions. On episode 108 of The Real Finds Podcast, Siegel joined Gordon Lamphere to explain why the 2021 playbook is not coming back, why so much of the market remains frozen, and where disciplined buyers are finding real value.
Why Institutional Capital Is Wrong About Workforce Housing With Jon Siegel – RFP 108 (Transcript)
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The Playbook That Broke
Siegel describes the 2020 to 2021 syndicator formula with almost mathematical simplicity. Buy an older property with a low-rate bridge loan at full proceeds, renovate kitchens for eight thousand dollars a unit, push rents two to three hundred dollars, and watch net operating income jump thirty or forty percent. In a market where cap rates were compressing and rents were climbing twenty percent in some metros, everyone looked like a genius.
Then two things happened at once. Interest rates jumped roughly 300 basis points, and rent growth stopped. As Siegel puts it, elasticity of demand caught up with the industry: renters could only absorb so much, and operators effectively priced themselves out of their own value-add thesis. A floating-rate loan that started near three and a half percent suddenly cost more than six and a half, on a property that could no longer raise rents. The equity in many of those deals, by Siegel’s math, is simply gone. The property is worth roughly the debt, and nobody wants to call their investors and mark the investment to zero.
Extend and Pretend, Four Years On
What was supposed to be a fast correction has instead become a slow-motion standoff. Lenders do not want the properties back, borrowers keep finding extensions or fresh capital, and the can keeps rolling down the road. Siegel notes that many of the three-year bridge loans originated in 2021 came due in 2024 and 2025, only to be extended in the hope that rates would fall and rent growth would return. Neither has cooperated.
This dynamic is not unique to multifamily. As we covered in our conversation with Frank Forte about building a $400M small-bay industrial portfolio, investors across asset classes have been navigating the gap between seller expectations anchored to 2021 pricing and what current debt markets will actually support. Siegel’s version of that story is now a familiar script: a seller who paid thirty million, carries a twenty-five million dollar loan, and is marketing a property worth twenty-three. His advice is patience and discipline. Most sellers, he says, have to work through the stages of grief before they reach acceptance, and buyers who stick to their underwriting and actually close are the ones getting deals done.
What Buyers Are Actually Waiting For
Siegel argues that sophisticated investors are watching for two signals. The first is rate stability. It is nearly impossible to price a deal when the ten-year Treasury swings from 3.90 to 4.50 mid-transaction. The second, more important signal is real lease trade-outs: evidence that new leases are signing above expiring ones. It does not need to be dramatic growth, just positive momentum that supports an underwritable income line. In markets like Austin, where Siegel says rents have round-tripped back to 2019 levels after the supply wave, that evidence has been hard to find.
The supply picture is highly market-specific. Oversupply is concentrated in the Sun Belt metros where institutional capital herded during the boom. Meanwhile, Midwest markets with modest construction pipelines have kept grinding out steady rent growth. RailField recently pivoted a long-time family investor from the Carolinas into a new-construction acquisition in Indianapolis, trading speculative upside for durable cash flow. That thesis will sound familiar to readers of our State of the Chicago Multifamily Market report, which documented how constrained supply and steady suburban demand have made Chicagoland one of the most stable apartment markets in the country.
The Workforce Housing Gap
The heart of the conversation is the disconnect between where housing demand sits and where capital is willing to go. America has a well-documented shortage of attainable housing, a dynamic we have examined in our analysis of the multigenerational housing affordability crisis. Yet nearly all new construction targets the high end, and institutional buyers largely refuse to touch older vintage product. Siegel describes newer assets attracting long bid lists while 1970s and 1980s properties in strong submarkets struggle to attract offers at all.
That reluctance is the opportunity. RailField recently acquired a 1970s vintage property in a high-cost, supply-constrained Washington, D.C. submarket running at ninety-five percent occupancy with consistent annual rent growth. Equity and lenders alike hesitated purely because of the asset’s age. For Siegel, a stabilized, well-located property with a genuine demand driver, purchased at an elevated cap rate, is exactly the kind of slow-and-steady real estate deal the industry used to prize. His caution list is specific: functionally obsolete construction types, aging central systems, and commodity locations he calls “apartment city,” where fifteen identical 1980s properties line a highway an hour from employment. Submarkets, he argues, matter more than markets, a principle that applies equally to the multifamily land and redevelopment sites we evaluate across Chicagoland.
The Political Risk Nobody Prices
Asked what the industry is not discussing enough, Siegel pointed to regulation. Rent control has expanded in jurisdictions around the country, New York’s rent freeze debate has gone mainstream, and algorithmic pricing tools face mounting scrutiny. Siegel serves on the Finance Committee of the National Multifamily Housing Council, and his assessment is blunt: the industry is bad at regulating itself, the “evil landlord” narrative is politically potent, and operators who ignore policy risk are going to get hurt. In Chicagoland, where political risk already shapes which submarkets developers will touch, that warning lands close to home.
Patience, Persistence, and the Long Game
Siegel’s closing advice to his younger self doubles as a thesis for this market: real estate is a get-rich-slow business that rewards patience and persistence. Deals that once closed in sixty days now take months of problem-solving, and the buyers who stay at the table are the ones who win. For more conversations like this one, explore The Real Finds Blog, where we break down multifamily, industrial, office, and retail trends across the Midwest every week.
If you are evaluating multifamily land, development sites, or investment opportunities in Greater Chicagoland and Southeastern Wisconsin, the Van Vlissingen and Co. team brings nearly 150 years of market knowledge and 100+ closed transactions annually across industrial, office, retail, medical office, land, and investment properties. Learn more at vvco.com, email [email protected], or call 847-846-6902 to start a conversation.