Impact Growth Capital Newsletter

 This week at IGC:
The Fed Eases, But Caution Remains: Implications for Affordable Housing Capital

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Hi everyone,

Today (Dec 10, 2025) the Federal Reserve cut rates by 0.25%, and Chair Jerome Powell’s remarks made one thing clear: this was a supportive move, but the Fed is signaling patience rather than a rapid series of cuts. Below is what we think matters most for Impact Growth Capital and our focus on impact investing in affordable housing.

The headline: “Cut, then wait”

Powell’s core message was essentially: we’re prepared to wait and evaluate the data. That means the Fed is not committing to a fast or predictable path of further cuts.

He also discussed how tariff-related effects have contributed to inflation dynamics, framing much of it as a level effect while emphasizing the Fed will remain data-dependent.

What this means for affordable housing (in plain English)

1) Financing should improve but gradually

A 25 bp cut helps, especially at the margin, but the “wait-and-see” tone suggests a slower easing cycle. For affordable housing, this typically translates into:
• Incremental improvement in borrowing costs rather than an immediate step-change.
• Continued lender focus on conservative underwriting (DSCR, reserves, sponsor track record).
• A longer “price discovery” period as buyers and sellers adjust expectations.

2) Refinancing pressure eases modestly for near-term maturities

For projects with floating-rate exposure or upcoming maturities, today’s cut can reduce interest expense slightly. But if cuts pause, the big story remains: refinancing success will be driven more by cash flow stability and structure than by hoping rates quickly return to prior lows.

3) Values: cap rates may not compress quickly

Affordable housing tends to benefit from durable demand and policy support, but valuations still key off the broader cost of capital environment. Powell’s tone implies cap-rate compression could be slow, so we’re continuing to underwrite with discipline rather than assuming a quick rebound.

What we’re doing at Impact Growth Capital

In this environment, our approach remains consistent with our mission and risk discipline:
• Prioritizing durable cash flow and essential demand. Affordable housing fundamentals remain strong because demand is structural, not cyclical.
• Staying conservative on leverage. We emphasize resilient debt structures and avoid “rate-path dependent” assumptions.
• Targeting opportunities created by refinancing stress. As some owners face maturities, we expect selective chances to acquire or recapitalize well-located assets at more rational bases.
• Maintaining an impact-first lens. We seek outcomes that preserve and expand affordability while aiming for strong risk-adjusted returns.

Looking ahead: Powell’s term and the next Fed

We expect Powell to remain through the end of his Chair term in May 2026. The bigger market variable is how the next Chair (and the broader Fed) balances inflation vigilance vs. growth support and how that influences longer-term rates that affect real estate financing.

Bottom line

Today’s move is constructive, but Powell’s message suggests we should plan for a measured, uneven path rather than a rapid return to ultra-low rates. For affordable housing, that reinforces a strategy centered on stable demand, prudent capital structures, and selective opportunities created by market dislocation

Understanding the cycle matters. Positioning for it matters more.