Demand For Workforce Housing

7 Replies

I don't get too caught up in national market forces as they are highly unpredictable but there seems to be one undeniable trend that is hard to ignore and that is the continued and growing lack of supply of affordable housing.  There are too many causes to list but here are a few:

  • Too costly to build
  • Existing workforce housing communities are getting re-positioned to a higher class
  • Zoning restriction on mobile home parks are limiting their supply
  • Aging population with limited savings
  • Wage stagnation
  • Tighter lending standards
  • Low interest rates have pushed housing demand and prices up
  • Tax law change will make low income housing tax credits less valuable (future impact)

Below is one of many articles on the subject.

 https://multifamily.cushwake.com/Download/File?Pat...

Would love to hear others feedback.

In California, the only way I've seen this addressed is through construction grants from one or all three levels of government. In some areas, I've seen affordable housing construction outpace Class A construction due to grants. 

I'd be curious to hear ideas on how to address the issue without government assistance. 

Originally posted by @Sam Grooms :

In California, the only way I've seen this addressed is through construction grants from one or all three levels of government. In some areas, I've seen affordable housing construction outpace Class A construction due to grants. 

I'd be curious to hear ideas on how to address the issue without government assistance. 

The irony in seeing the words "affordable housing" and California in the same sentence...

Tax credits is the only thing I see incentivizing new construction. And of course Father Time creates work force housing too. But otherwise land and construction costs are too high for you to not decide that highest and best usage is not a newer Class A property.

Zoning and Development codes are simply not compatible with Affordable Housing, period.

IMO you need a tax abatement to make it worthwhile. It's something I would strongly consider doing in 5-10 years if I have the land because there is a major need for it in NJ. You either rent in a 300 apartment sized garden apartment that is outdated or you pay 75% more and rent luxury. There is no in between anymore. 

@Mike Dymski It's interesting in my area because there is construction at the high-end of the market and also at the very low-end but nothing in the middle. It's only cost effective to build class A apartments that rent for $1000/month plus so plenty of them are getting built.

But at the same time, as others have alluded to there are lots of low-income properties getting built because our local housing authority is flush with cash and also developers are building for the tax credits.

So you either have to make enough to pay the highest rents in the market or your income has to be around or a percentage above the poverty level. Everyone in the middle is being squeezed because there is lots of demand and zero new supply. This is causing high rent growth and very low vacancy.

It seems like it's just another example of what's happening in the overall economy, higher income/wealthier people are fine and poorer people are fine with government assistance. The middle class is disappearing and getting pushed one direction or another with probably the vast majority getting pushed down.

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