The Role of Small Apartment Properties in Workforce Housing Affordability
The growing lack of affordability within U.S. rental housing has led to the creation of new loan programs aimed at strengthening and preserving the existing stock of multifamily that’s affordable for the workforce. It turns that a large portion of housing suitable for the workforce is found in smaller apartment properties with between 5 and 50 units.
Workforce Housing Renter Segment within Small Properties
Before we get into the data, let’s define workforce housing. According to Freddie Mac, workforce housing is “unsubsidized multifamily housing affordable to the majority of low- to middle-income households.”
For the purpose of this post, we will focus on the renter segment with household income levels between 60% and 120% of the Area Median Income (AMI). Renters earning above 60% of AMI typically do not qualify for Low Income Housing Tax Credits (LIHTC), and those earning 120% of AMI would still likely need to stretch their budget to live comfortably in newer apartment assets. So this segment are the renters who would inevitably get priced out of a tightening market.
As shown above, small properties already cater to a higher proportion of workforce renters, with 72 percent of households at or below the 120% AMI mark. Large properties, on the other hand, have roughly a 65% share of renters at or below 120% AMI. Keep in mind that this number is likely lower, as the Census includes large, subsidized affordable housing developments in its apartment data.
How do Workforce Households Earn a Living?
Segmenting households by AMI levels unveils a distinct mix of occupations. At lower income levels we find an increased share of renter participation in community and local serving jobs. As the chart below shows, about 55% of working renters in the 60% to 120% AMI category are employed in legal, community and local-serving jobs, compared to only 45% in the highest income bracket.
Additionally, while the lowest income bracket (60% AMI or below) includes a significantly higher share of the legal, community, and local-serving jobs (64%), workers in the 60% to 120% AMI ‘workforce housing’ segment also include a large share of STEAM workers, demonstrating a more diverse occupational mix.
The ability to support inexpensive housing options is a critical component to maintaining the economic competitiveness of cities. Small property owners and property operators can be part of this virtuous demand cycle through the effective leveraging of custom tailored loans programs offered through the agencies Fannie Mae and Freddie Mac. To learn more, click here.