Workforce housing

Strategies For More Workforce Housing Abound

By Anthony SanFilippo

With the unemployment rate at its lowest point in more than a half-century and an influx of jobs in the United States, it’s easy to assume the economy is booming, which, in turn, would benefit the housing market.

Not so fast.

Despite an influx of jobs, wage growth hasn’t… well…  grown. As such, middle income Americans are still feeling a financial squeeze and are often unable to find available affordable housing.

The market is impacting cities in such a way that the housing gap has grown larger and larger.

Cities are starting to realize that entire swaths of their workforce are bearing more of the weight of housing costs than ever before, and that isn’t going to end any time soon unless steps are taken to rectify it.

“The allure of a major metropolitan areas… is causing a simple macroeconomic conundrum – demand is greater than supply, which drives up the price.”

Land and development costs are expensive and that makes it more difficult for cities to develop and build new affordable housing, which is a significant problem in urban metro areas.

With an influx of talent coming into cities as these new jobs are created, the need to live within a short driving distance to work or to have convenient mass transit options plus the allure of being able to enjoy what major metropolitan areas have to offer in terms of activities and entertainment is causing a simple macroeconomic conundrum – demand is greater than supply, which drives up the price. However, with wages stagnating, affordability is the biggest issue.

The problem stems from cities not being proactive during the recession and building more affordable housing at a time when it would have been more affordable to do so. With a lot of belt tightening going on at the time, there wasn’t a concentrated focus on what would happen when things took a turn for the better with the economy, as it is now.

Some cities are trying to eradicate this issue now by emboldening themselves to create incentives to build more affordable housing for these new workers in the forms of tax breaks for developers and less red tape for builders to cut through as they develop multi-family units.

Philadelphia’s West Poplar Neighborhood

Take Philadelphia for example. The city has ramped up efforts to create more workforce housing. Earlier this year the city released a comprehensive plan to address this need which would create 6,000 new workforce units by 2028.

A model effort in the West Poplar neighborhood of Philadelphia finds 26 new homes being built that will have a capped sale price of $229,999. Each home will be a two-story, brick townhouse with three bedrooms, two bathrooms and a private yard.

The big catch? A 10-year tax abatement on each of the properties.

Additionally, these properties aren’t available to the average investor looking to earn money either through flipping it down the road or eventually renting the property.

Instead, the target audience is hard-working, middle income Philadelphians who make up to 120 percent of the area’s median income.

In Philadelphia, the median income is slightly north of $73,000 for a single person, $84,000 for a couple and roughly $105,000 for a family of four.

These first 26 homes are being built on land coming from the Philadelphia Land Bank, a fledgling institution that was established by the Philadelphia City Council to make the sales and acquisitions of vacant or tax-delinquent land easier.

According to the Philadelphia Inquirer there are 40,000 vacant parcels of land in the city, and approximately 8,500 of those are owned by the city.

The concept of the land bank is to take those parcels of land and turn them into affordable or workforce housing or other tax-generating projects.

But it goes beyond that.

The Philadelphia Redevelopment Authority offered the developer of these 26 parcels additional support through its credit enhancement program.

As such, the authority will assume 25 percent of the default risk on the loan taken out to develop these parcels, helping the developer to get the construction financing from the city’s Reinvestment Fund.

The plan is to use this as a template to help build more workforce housing across the city.

But it’s not just in big cities like Philadelphia where there is an intense focus on developing workforce housing or making existing units more affordable to potential renters or buyers.

New Incentive Programs

In Vermont, the state Senate wants to expand an existing incentive program that offers cash to workers who relocate to the state. The Senate is seeking $1.5 million annually for incentives, to offer new workers up to $7,500 each, which is an attractive amount toward the purchase of a home or would cover a several months rent.

In Delaware, the Governor recently certified a comprehensive plan for Sussex County that outlined the creation of a Community development Fund that would stimulate construction of workforce housing.

And in Washington, D.C., the Mayor recently announced enhancements to the existing Opportunity Zone program to target more affordable and workforce housing in the Nation’s capital.

These upgrades would include the creation of the OZ Community Corporation, enabling community organizations and small businesses to tap into pro bono advice from lawyers and other experts; an online Opportunity Zone marketplace that anyone can access where projects can be submitted online; and a commitment of $24 million to other projects that support affordable housing, workforce development and the growth of small businesses.

Investors Are Taking Notice

As more and more states and their cities work to create more programs and incentives to develop affordable and workforce housing, more and more investors will be willing to cannonball into the pool to help make it happen.

For example, Round Hill Capital, one of the top global real estate investment, development and asset management firms in the world, announced recently that it is sinking its dollars into a workforce housing development project in Ft. Lauderdale, Fla. that qualifies as an Opportunity Zone under the Tax Cuts and Jobs Act of 2017.

That legislation provides tax incentives for certain long-term investments in order to spur economic growth.

The project will create 142 moderately-priced rental units in Ft. Lauderdale with high-quality amenities included for those who have been priced out of living downtown.

This is the first of a series of investments Round Hill will be involved in along with their local partners in Florida with the intent on creating more housing options for middle income workers in the city where they work.

Many cities and states recognize the conundrum that has grown in terms of a housing gap for hard-working residents, the process is under way in many places to find ways to close that gap and find homes that are far more affordable for both homeowners and even renters.


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