If death and taxes are the only inevitabilities of human life, the past century has taught us the only inevitability in the American economy — what goes up must come down. The good times never last forever. Whenever it seems like the gravy train will go on forever, recession or depression is just around the corner.

Forget whether or not this cycle of boom or bust can be avoided through changes in economic policy … it’s what we’re stuck with. Investors in the world’s strongest economy need to accept that reality and prepare for it. Even the most aggressive investment portfolios would be well-served by diversifying into asset classes that tend to do well in recession.

So what are those? What assets are resistant to inflation? From the real estate perspective, the clear winner is multifamily real estate — that is to say, apartment complexes and mobile home parks. So why are multifamily assets so resistant to recession?

Real estate is a real asset.

First, let’s talk about real estate in general. Real estate is a real asset. It has intrinsic value, not just value assigned to it by human factors.

Compare it to another real asset — gold. Gold will never be completely worthless, and neither is real estate … especially the kind of habitable, developed urban real estate on which multifamily properties are built.

“Paper assets,” on the other hand, are very susceptible to inflation. Stock represents ownership interest in companies, and companies can and do go bust during recessions — even blue chips (Lehman Brothers, anyone?) And bonds? A bond is just a debt obligation, and companies or even countries can default on their debt obligations in a down economy.

People need somewhere to live.

So that’s real estate … Why multifamily? It’s a cliché, but it’s a cliché for a reason — people need somewhere to live.

In good times people buy what they want and what they need. In lean times, people cut away their wants and only buy what they need. Apartment complexes are selling a basic human need — shelter. If job loss and declining wages put homeownership out of reach for struggling Americans, apartments are the default fallback.

This doesn’t mean that every apartment complex will thrive during a recession. Luxury complexes tend to struggle to stay occupied as people downsize, while more basic “workforce” housing can struggle to maintain its rent base when the low-skilled workers who live there tend to face disproportionate job loss.

But overall, people will do what they have to do to keep a roof above their heads. That puts multifamily real estate in a position to weather the storm.

Multifamily has historically done well in recession.

Of course, this would all be speculation if there weren’t data. Fortunately, the data bears out these assumptions about the ability of multifamily real estate to endure a recession better than its counterpart assets.

A 2018 study by NMHC evaluated the different classes of commercial real estate against each other during the five recessions between 1980 and 2016. They found that in terms of raw return, volatility (standard deviation), and the Sharpe Ratio of risk evaluation, multifamily real estate outperformed all other classes of commercial real estate in all three metrics on hold periods of one year or longer.

Data collected from 1978 to 1997 by the National Council of Real Estate Investment Fiduciaries (NCREIF) is compounded into the NCREIF Property Index (NPI), which calculates the unleveraged total return of private commercial investment properties. This time frame covers three recessions, and it corroborates the NMHC data — apartment complexes fared best of all asset classes over the time period covered by NPI.

If past performance is a predictor of future success, all the evidence is on the side of multifamily assests to do comparatively well during a recession.


Again, not every multifamily property will do well in a recession. You need the right kind and class of property in the right kind of growth area.

Need help picking the right multifamily opportunity to protect your portfolio from an economic downturn? Reach out to All Aboard Capital today. Many of our investment properties are picked specifically to guard against recession. We’re happy to discuss what recession-resistant portfolio diversification looks like, and how multifamily fits in.