What Is Workforce Housing and Why It's Crucial

The term "workforce housing" focuses on housing built to serve families that have income levels between the true affordable housing options and luxury housing. They are middle-income households that seem to have gotten left behind in the housing market.

There are a few versions out there for workforce housing. However, it comes into play when governments serve families earning between 80 to 120 percent of the median income. Still, the exact amount depends on the state, county, and whatever market you happen to be in.

Within this housing space, companies want to create a product that serves everyone; in this case, it is working families. However, a family's household income might be insufficient and is dropping lower each year. They don't make enough to qualify to get luxury housing and make too much for affordable housing, which is government-subsidized housing.

There's a wide gap between the two spaces, which is caused when housing costs and rents go up because of urban development but wages and incomes stay the same. Ultimately, these workers are in the middle, and affordability through workforce housing could be the key.

Workforce vs. Section 8 vs. Affordable Housing

The primary terms, Section 8, affordable housing, and workforce housing, are often confusing and seemingly overlap. Communities use the terms broadly, and it's important to understand the differences, whether you're in New Hampshire or a large city like New York.

With that, expensive housing is often focused on in many cities, according to Brookings Institution. However, public employees and households with two or more workers can rarely afford that with their income options.

Affordable Housing

The definition for affordable housing includes any home that services households at/below 60 percent of the median income. Ultimately, this is what local governments claim to get affordable rental housing for families. Typically, the household income of returning veterans, the young, and the old, is much less than this.

When you factor in traffic congestion and the fact that people must pay bills, affordability for homes is a crucial factor.

Workforce Housing and Area Median Income (AMI)

Workforce housing is anywhere from 61 percent to upper figures. Essentially, these workers make a middle income and aren't dependent on government-subsidized rents. However, the area median income (AMI) can be even higher for a workforce housing unit, such as in New York. Everything is more expensive there.

Though household size doesn't make a difference, some people feel it should. In most cases, about 80 to 120 percent of people fall into the category of middle-income households. They tend to live in close proximity to others.

Still, workforce housing includes their employment options and should focus on the affordability of specific workers and households to rent or own property in the area.

Generally, employment is thought of as anything that provides income. However, some households have extra fees that aren't included in traditional income options. For example, a family member might have to pay child support for another kid, making it harder to find affordable housing options.

Section 8

Section 8 focuses on both workforce housing and affordable housing units. This program is often called public housing and gives a voucher to the family like most local governments do through their programs. There are tons of families on the waiting lists that must be helped by the local governments in those areas.

Generally, the HUD program allocates vouchers through a local housing authority and the market for that project.

A Section 8 tenant can visit any unit that accepts vouchers. In California, a law was passed claiming that landlords can't bar Section 8 tenants because of the voucher. However, employment and income concerns are loopholes.

With that, other criteria landlords can check include rental history and credit history.

The way it currently works is that the voucher gets issued by the area's housing authority and is given to the family. They find a housing unit that accepts the voucher. Rent is consistent with the standard for that area and can be changed based on what's appropriate.

Though it's important to check published figures defining the Fair Market Rent, HUD can determine the FMR rent value based on what it thinks a tenant should pay for a unit with a voucher. Then, the tenant moves in. The voucher covers what the tenant can't pay from their income.

Workforce Housing Tax Credits

Right now, there are no workforce housing tax credits on the market. However, this should and is likely to change in the future. If housing prices and similar incomes continue to widen, something is bound to come along.

Remember, moderate-income housing is there for those households that don't make enough or are considered right at the middle-income line. Affordability is crucial to ensure that they can afford the housing prices and still make ends meet.

With that, though, some states do have initiatives out there to help capital flow into those marketplaces. They're not tax incentivized, but they can work well for companies.

Workforce Housing Programs

There are no grants out there now for pure workforce housing. You must be careful about it because some people look at the tax credit as workforce housing.

If you're looking at true affordable housing, most of the programs move the capital to families with a very low income. To get such tax credits for affordable housing, you must do income averaging on the tax credit project to have 80 percent rents. However, with that, you may have lower rents down to 10 percent of the median income. If you achieve that 60 percent or lower, you can qualify under those tax credit programs.

There are specific rules defined throughout the industry. This is because of places like California, where there's a great need for permanent supportive housing and homeless services. In those areas, the incomes must be lower.

In a sense, you have nonprofits and others in the space that have a goal to get incomes throughout the project to be as low as possible. This requires capital or subsidies from the government. Ultimately, this illustrates a need to see rent driven down to be as low as possible to help everyone.

Affordable By-Design Options

Attainable housing is a term people use to refer to one type of affordable housing, which is different from what was mentioned earlier. Ultimately, attainable housing describes the development of the housing to make it more affordable without using a government housing subsidy.

In some cases, it could be affordable housing by design where the developer uses low-priced construction materials for the workforce housing units. Thereby, the rent is lower for these units in those communities.

Ultimately, low housing costs work well for middle-income households. However, high housing costs are still the norm because most companies want to sell their land and goods for the highest possible price.

Investment Opportunities

To start with, you should recall that workforce housing and affordable housing are different. True affordable housing is such that residents use government subsidies to make ends meet and to stay sheltered. Usually, this means that they are on welfare and Medicaid.

A workforce housing program refers to any housing sitting between affordability options and high-end ones. Usually, these houses are designed for middle-income workers. What that means is the opportunities for investing in each development option are different.

Remember, workers make up the brunt of middle-income households and are more likely to use workforce housing. Affordable housing is used by those who may or may not work and use government assistance whenever possible.

Affordable Housing Investments

Developing affordable housing is much different than market-rate housing. The first thing you must know is that there are fewer affordable housing programs and developments out there. Federal, state, and local governments have ultimately moved away from such policies involved with warehousing or storing lower-income folks in huge housing projects. This is partially because of the stigma surrounding the housing.

Now, most affordable housing focuses on using a certain percentage or number of units designed for low-income households earning less than middle-income workers. That way, the development doesn't end abruptly, and affordability is still at the top of the game.

From there, the rest of the units are at market rents. This approach works well in large cities, such as California. However, it's found in many states, counties, and cities throughout the country.

True affordable housing offers some benefits over the market rate option. Much of the cash flow comes from the government directly instead of from unreliable tenants. With that, amenity, maintenance, construction, and land costs might be lower for such developments when compared to others. That's because you can get more federal, local, and state tax benefits and incentives for developers who work within that space.

Workforce Housing Investments

Workforce housing focuses on a bigger segment of the market compared to the others. In practice, it describes market-affordable housing, which is more affordable than the rest but doesn't rely on government subsidies. Such housing fills the gaps between the free market and government housing systems to offer middle-income workers a nice place to live.

Such housing assistance from a workforce housing program is a great approach for most because homeownership is out of reach for thousands or millions of working Americans. The demand for workforce housing units should continue to increase.

When others develop in this space, there are fewer regulations to consider compared to government-sponsored options. Therefore, as a developer, the tenant base is bigger and comes with its own perks. This is because affordable housing tenants are quite limited by the government assistance available at any given time. Alternatively, workforce housing means that you're constrained by market demand alone.

FAQs

Are Section 8 and Workforce Housing the Same?

Workforce housing isn't the same as Section 8, though the vouchers can be used for workforce housing properties. Still, Section 8 focuses on government-subsidized vouchers, which are given to underprivileged families and individuals.

With workforce housing, affordability is still a concern, but it refers to a specific type that fills the gap for the middle-income earners out there.

What's a Workforce Housing Program?

Ultimately, the term "workforce housing" designates programs that are focused on tenants and buyers earning a middle income. They make too much for standard subsidies and don't qualify as being able to own luxury accommodations.

For government officials thinking about such house program options, it's important to use various tools to determine the outcome. For example, inclusionary zoning, density bonuses, and upzonings are great options. With that, incentives should be provided to developers and landlords in these markets.

Options could include waiving building permit fees or lowering water/sewer fees.

Is Workforce Housing Important and Why?

Yes, a workforce housing program is crucial because some people earn a middle income and can't afford luxury or new construction. They still make enough to live comfortably but don't get the benefit of government subsidies. Even though they don't qualify for such subsidies, they still need something affordable, and workforce housing programs can fill those gaps in all communities.

With that, the locations for such homes and properties matter, too. It's important to be located near work areas and all the rest. With that, school quality is a huge concern, as many of these families have children and two working parents.

Many homes were built before World War II and are now falling apart. Therefore, developers must work to maintain those structures or demolish them. Still, housing affordability is crucial here; there's no need for more luxury accommodations. People want things that they can be comfortable in and pay for without going into debt.

Conclusion

Many workers, such as police officers and teachers, can't afford to live luxuriously, but they can still be comfortable. Workforce housing continues to be something government officials think about.

The goal is to have something affordable in a nice area.

However, the workforce housing program isn't as popular yet as it could be. Many developers are skeptical about building new places for those who are middle-class. Ultimately, more incentives are necessary so that everyone feels comfortable about this new wave of the future and embraces it.