A massive shortage of affordable workforce housing for the income group that earns $15 to $30 hourly is turning into a full blown housing crisis in the US as high construction costs and aging housing stock are among various factors precipitating the crisis, observes Maxwell Drever. The huge rental cost becomes unbearable for the workforce as they cannot save money and plan for a better future which makes it difficult for the communities to attract businesses that can provide employment.
The stagnation of wages mainly relates to affordability. However, there is another side to the problem arising from scarcity in the supply of affordable housing. As the cost of living increases, it is becoming increasingly difficult for middle income earners to rent or buy houses because the wage increase does not match the increased cost of living. Workers are keen to stay close to the workplaces. The affordability and non-availability of workforce housing are compelling them to the region’s fringes that compel workers to commute long distances, which impairs the quality of life.
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What is workforce housing?
According to the established norms, workforce housing indicates the type of housing affordable to those with an income between 60%t and 120% of AMI or area of median income. Workforce housing is for middle income workers, including professions like firefighters, police, healthcare workers, teachers, retail clerks, and those working in similar roles. Households that need workforce housing often do not qualify for LIHTC or Low Income Housing Tax credit program of section 8, now renamed HOPE or Home Ownership and Opportunity for People Everywhere program.
Opportunities for investors in real estate
Investments in real estate contribute to economic development, and workforce housing offers good investment opportunities to investors and developers, believes Maxwell Drever.
Workforce housing is an important area of investment in real estate that provides considerable opportunities of generating a steady income by constructing homes for the workforce either for selling or renting out. Most of the workforce housing is rental properties meant for middle income workers for whom housing availability is more important than affordability.
The opportunities of investment in workforce housing are many more than that in the affordable housing segment that caters to the low income group. Workforce housing constitutes a much broader segment of the market than the affordable housing segment. However, the workforce housing segment does not receive government subsidies like the affordable housing segment.
Why is workforce housing so important?
Developers of workforce housing target clients who cannot afford luxury or new construction but at the same time do not qualify for government subsidies as they belong to the middle income group. Since housing is essential for all groups of people regardless of their income to support public health, as seen especially during the Covid19 pandemic, workforce housing fills the gap between supply and demand for affordable housing by bringing more people under its ambit.
As the high demand for houses coupled with the rising price of housing which has gone up by 20%, is keeping housing out of bounds for most people, the thrust on affordable housing is increasing.