Workforce Housing: A Growing Opportunity
‘Workforce housing’ is one the most misunderstood terms in the business. It also represents a growing opportunity for apartment investors.
The term is most often confused with ‘affordable housing’. For purposes of this post, we’ll define ‘workforce housing’ as properties serving renters who do not qualify for formal housing programs, but who fall between 60 percent and 120 percent of the Area Median Income (AMI).
With stagnant wage growth, a growing population and apartment construction focused on Class A product, the need for safe, clean and affordable workforce housing should only increase.
In previous posts, we highlighted that in comparison to large properties, small apartment buildings tended to have younger households with children and lower per unit average rents. Household worker characteristics complete this picture by helping explain how households meet their housing expenses.
Consider the following:
In 2014, small properties (5 to 49 units) had an average of 1.4 workers per household. Large properties (50+ units) averaged one worker per household.
At the same time, the average personal income of workers in small asset properties was 30 percent lower compared to their large building counterparts.
Small apartment households meet their monthly housing costs in part by drawing on higher number of workers that offset lower income levels.
In keeping with the broader trend, workers living in small properties are also younger. The average age of workers in small building households was estimated at 36 years, compared to 39 years in large properties.
Workers in small apartment buildings skew younger compared to those in large buildings. As shown above, nearly 63 percent of all working residents in small buildings were between 20 years and 40 years of age, compared to about 57 percent in large apartment buildings.