Impact Growth Capital Newsletter

The Middle Class Is Shrinking But Not the Way You Think

Impact Growth Capital
November 24, 2025

This week at IGC:
The Middle Class Is Shrinking But Not the Way You Think

Impact Growth Fund

Join Us In Solving The Affordable Housing Crisis

Own a Piece of the GP — Not Just the Fund

For the first time, accredited investors can access General Partner economics — including a share of management fees, promote, and equity. This insider structure is typically reserved for founding partners and offers revenue-based participation. A rare, strategic opportunity to own a piece of the GP is now open.

Click here to learn more from a previous newsletter.

The Big Shift You’re Not Hearing About

How middle-class compression and rising housing costs are reshaping demand for affordable rentals

New data shows that America’s middle class is shrinking, but not because people are earning less.

In fact, Pew Research reports more households moving upward into higher income tiers.
But even with rising incomes, families are facing record-high housing costs that outpace wage growth.

Treasury data shows rents rose faster than incomes in 88% of U.S. counties for two decades straight.

Today, 22.6 million American renters are cost burdened, and 12.1 million are severely cost burdened, spending more than half of their income on housing.

Who Now Relies on “Affordable Housing”?

Historically, naturally occurring affordable housing (NOAH) served low-income households.

That’s no longer true.

Today, NOAH is becoming the fallback housing option for:

Teachers
Nurses
First responders
Service workers
Households earning $60k–$120k
Even some families earning $150k+ in coastal or high-growth markets

Why?

Because new construction is too expensive.
Suburban sprawl is too far from jobs.
Supply can’t keep up with population shifts.

Affordable housing is no longer a niche.
It’s becoming the default housing tier for middle-income America.

Why This Matters

Four trends every investor should pay attention to

1. Demand for NOAH has permanently expanded.

Middle-income renters are now a core driver of demand.
This broad base creates stability across economic cycles.

2. Supply constraints are structural.

Zoning limits, regulatory bottlenecks, and rising construction costs mean we cannot build enough housing fast enough.

High demand + fixed supply = long-term pricing strength.

3. The affordability gap is widening.

More households are earning more but their cost burdens are rising even faster.
This pushes millions into the NOAH segment, where rents are stable and attainable.

4. Market volatility is pushing renters toward affordability.

Economic uncertainty, inflation sensitivity, and unstable mortgage markets are funneling more households into affordable rentals.
In volatile environments, NOAH becomes the most dependable and resilient housing option.

What This Means for Investors

Affordable and workforce housing has become one of the strongest real estate positions of the next decade.

Here’s why:

NOAH performs in both strong and weak markets.

Demand doesn’t soften in a downturn it grows.
This leads to consistently high occupancy and predictable cash flow.

Federal and local support is increasing.

Governments are expanding incentives, grants, tax credits, and vouchers to support affordability.
This improves returns while lowering operational risk.

The demographic math favors affordable housing.

More middle-income households + rising rents + constrained supply =
One of the most resilient, high-demand asset classes in the country.

This is not speculative.
It’s structural.

Our View at Impact Growth Capital

At IGC, we believe the next decade of real estate will be shaped by:

The erosion of traditional “middle-class housing”
Rising cost burdens across income levels
The rapid expansion of workforce housing demand
Public–private partnerships driving new affordability solutions

Naturally occurring affordable housing sits at the center of these shifts.

It addresses a critical societal need,
performs with consistency across market cycles,
and aligns with the future of demographic and economic reality.

This is where we’re focused, and where we believe the strongest long-term opportunities lie.