What Is Workforce Housing?

United States renters spend more than 30% of their income on rent and utilities. This high cost of living particularly affects teachers, police officers, and healthcare professionals, who often struggle to find affordable housing near their workplaces. The resulting housing crunch affects these workers and the communities that depend on their services.

This widespread housing challenge has led to an increased focus on workforce housing solutions. But what exactly is workforce housing?

This article takes a close look at workforce housing: how do we define it, what is its purpose, and what are the differences from other affordable housing programs? You'll discover various initiatives at federal and state levels designed to address the challenge of housing affordability.

Explore the advantages of investing in workforce housing — and how to get involved in this expanding market. For real estate investors, workforce housing opportunities offer financial growth while addressing critical community housing needs.

Understanding workforce housing

Workforce housing supports renters who earn too much to qualify for government subsidies but not enough to afford market-rate housing. The demographic includes households with incomes between 60% and 120% of the area median income (AMI).

The primary focus of workforce housing development is to provide affordable rental options for these essential members of the community. Government programs play a role in supporting housing affordability, but some employers have also taken proactive steps to address this issue. These initiatives may include the following:

• Providing housing subsidies or stipends.
• Offering down payment assistance for home purchases.
• Partnering with developers to create housing near the workplace.

However, not everyone agrees with employer-involved housing solutions. As Reddit user QuestionableRavioli points out on r/urbanplanning, "As much as we need housing in the US, this is ABSOLUTELY not the way to go about it. Being fired or let go from your job could mean you lose your home." This perspective highlights the potential risks of tying housing too closely to employment.

Workforce housing developments can include a variety of housing types, such as apartments, townhouses, condominiums, and single-family homes. This diversity allows for greater flexibility in meeting the needs of different households and communities.

Despite its importance, the development of workforce housing faces several challenges:

• High land and construction costs.
• Making housing affordable for average earners while still providing profits for developers.
• Community opposition to proposed projects.

Affordable housing categories

While workforce housing helps moderate-income earners, other programs address the needs of lower-income households. These affordable housing units serve lower-income households earning 60% of AMI or less. These programs rely on government subsidies and programs to help reduce costs for residents. Here are the key programs.

Section 8

This federal program helps low-income families, elderly people, and individuals with disabilities afford housing. It provides vouchers that cover part of the rent while tenants pay the rest.

The U.S. Department of Housing and Urban Development (HUD) handles the Section 8 program, which provides rental assistance to low-income families, elderly individuals, and people with disabilities. Property owners receive vouchers to cover a portion of rent, and tenants pay about 30% of their income.

Recipients can choose from private rentals that meet program requirements, offering more housing options and potentially encouraging mixed-income neighborhoods. The program faces challenges, including long waiting lists due to high demand and the need for landlords to meet housing quality standards. Despite these issues, Section 8 helps many low-income households afford rent in the private market.

Public housing

Public housing refers to government-owned rental units that are available at reduced rates to eligible low-income residents. Local public housing authorities (PHAs) manage these properties, which range from single-family houses to high-rise apartments. Public housing rents are 30% of the household's adjusted gross income.

PHAs are responsible for maintaining and managing these properties. Residents must meet income eligibility requirements and may need to pass background checks.

Affordable housing programs

There are a few nationwide programs to address housing affordability, but you'll find many of these initiatives with state and local governments. Here's an overview of the grants, funding, and other credits available for real estate investors looking to develop workforce housing.

Federal workforce housing programs

• HOME Investment Partnerships Program: The HOME Investment Partnerships Program offers federal funds to states and local governments for building, buying, or fixing homes. The program requires a local match of 25% in non-federal funds. It also mandates that most rental units go to households earning 60% or less of the area's median income.
• Low-Income Housing Tax Credit (LIHTC): This federal program encourages private investment in affordable housing for low-income households. It provides tax credits to developers who create or rehabilitate rental housing units. The program also requires some of these units to be available to low-income tenants at affordable rates.
• Opportunity Zones: These zones are designated areas in the United States where investors can receive tax benefits for investing in economically distressed communities. The program offers capital gains tax deferral and reduction, making it an option for investors looking to support community development.
• USDA Rural Development Program: The program provides financial assistance and support to improve quality of life and economic well-being in rural areas. It offers loans, grants, and technical assistance for housing, infrastructure, and business development. The program helps support rural communities by improving access to affordable housing, utilities, and economic opportunities.

State-specific workforce housing programs

• California: The California Statewide Communities Development Authority (CSCDA) operates a specialized workforce housing program. This program issues government bonds to purchase market-rate apartment buildings and convert them into income and rent-restricted units. The target demographic for these units is moderate-income households earning 80% and 120% of the area median income.
• Florida: The state supports workforce housing through various initiatives. At the local level, programs like Miami-Dade County's Workforce Housing Development Program offer incentives for affordable housing development. Recently, the state enacted the Live Local Act, providing statewide incentives such as zoning preemptions and tax exemptions to encourage multifamily workforce housing development.
• New York: New York City's Mixed Middle Income Program provides financing for multi-family rental projects, including units affordable to moderate and middle-income households. New York State Homes and Community Renewal (HCR) offers various financing tools and tax credits for workforce housing developments.
• Massachusetts: MassHousing is an independent agency that funds affordable housing in Massachusetts without relying on taxpayer money. It sells bonds and uses the proceeds to finance housing for low- and moderate-income residents.
• Texas: The Texas Workforce Housing Foundation (TWHF) is a key player in providing workforce housing solutions in Texas. TWHF partners with developers to build moderate-income housing and with school districts to offer education professionals rental assistance of $250 per month. The Texas Department of Housing and Community Affairs administers tax credit programs for affordable housing developments, providing incentives for developers to create and maintain housing options.

Investing in workforce housing

Real estate investors who want to invest in the workforce housing market segment can do this directly or as passive investors. Here are a few options:

Direct property investment

Commercial real estate investors can buy Class B and C apartment complexes, renovate them, and reposition them as workforce housing. To help support your project, research local government funding and economic development incentives. You'll need to understand how to balance construction costs with the total fair market rent from the property to provide a strong return on investment.

Crowdfunding platforms

Private equity groups and real estate syndicators use crowdfunding investment platforms to raise capital for affordable housing development. Crowdfunding allows you to passively invest in workforce housing unit projects without doing all the work yourself.

As a passive investor in a syndication or fund, you'll own shares in a limited liability company (LLC) that holds the property. You'll receive quarterly rental income distributions and a share of profits when the property sells.

Real estate investment trusts

REITs provide another way to invest in workforce housing real estate without directly owning properties. Publicly traded on major stock exchanges, many REITs offer liquidity, allowing you to buy and sell them easily.

Investing in affordable housing this way brings you into the market with the benefit of professional management and diversification. You can earn returns through regular dividend payments and potential stock price appreciation.

Benefits of investing in workforce housing

• Stable demand: Essential workers always need affordable housing, which means high occupancy rates. There's often not enough workforce housing to meet demand, especially in cities where housing costs rise faster than wages. This supply shortage compared to steady demand creates a stable market for investors.
• Government support: Investors can benefit from tax incentives and subsidies aimed at promoting affordable housing development. These may include low-income housing tax credits, property tax abatements, or zoning bonuses. Such support can improve project feasibility and long-term returns.
• Lower turnover: Workforce tenants tend to stay longer, which reduces vacancy and marketing costs. This demographic often values community stability and may be more invested in their living space, leading to better property maintenance and lower repair costs. Longer tenancies can create a sense of community within the property, improving overall tenant satisfaction and reducing turnover.
• Recession resilience: During economic downturns, workforce housing often maintains steady occupancy. Middle-income workers still need housing, and some higher-income renters may seek more affordable options. This mix helps maintain a stable tenant base even in challenging economic times.

Managing workforce housing

Managing workforce housing requires you to optimize your property as much as possible. Since you have to stay below market rents and can't just increase rental income, you'll need to manage these properties as efficiently as possible to provide strong returns. Using property management software like Azibo can help. This integrated platform offers the following tools:

• Online applications: Streamline the tenant application process, reducing paperwork and saving time.
• Tenant screening: Use Azibo to conduct detailed background and credit checks to select reliable tenants. This reduces the risk of late payments or property damage and protects your investment.
• Lease agreements: Easily generate state-specific, legally compliant lease agreements that specify rental policies, terms, and conditions.
• Rent collection: Automate rent collection with online payment options, making it convenient for tenants to pay on time. This improves cash flow management and reduces the likelihood of late or missed payments.
• Maintenance and messaging: Use Azibo to handle maintenance requests and communicate with tenants. Quickly addressing maintenance issues helps maintain property value and tenant satisfaction.
• Accounting: Track income and expenses with integrated accounting tools. Azibo simplifies financial reporting and tax preparation so you can focus on growing your portfolio.
• Financial management: Get clear financial insights and reports to better understand your property's performance. This helps you boost returns and control costs.

Workforce housing program

Workforce housing supports middle-income earners and helps maintain diverse communities. As housing costs rise, the demand for affordable options for teachers, healthcare workers, and other professionals grows.

Investors can explore various opportunities in this market, from direct property investment to REITs, potentially benefiting from steady demand and government incentives. Effective management strategies like using property management software can help optimize returns.

As cities and towns across the nation seek solutions for housing affordability, workforce housing continues to help communities by enabling professionals to afford to live near their workplaces. Investors are discovering that backing workforce housing isn't just smart business — it's community building with a paycheck.

What is workforce housing: FAQs

Who is eligible for workforce housing in Florida?

Florida's workforce housing serves households earning 60-120% of the area's median income. Eligible individuals include essential workers, service industry employees, and young professionals. Applicants need to provide proof of income, employment verification, and residency documentation. Specific eligibility criteria may vary by program and location.

What is workforce housing in Atlanta?

Atlanta's workforce housing focuses on middle-income workers such as teachers, police officers, and healthcare workers. Atlanta's program often involves partnerships between the city, developers, and employers to create housing near job centers.

What is workforce housing in California?

Workforce housing in California serves middle-income workers earning 60-120% of the area median income. It supports workers priced out of expensive areas and bridges the gap between low-income and market-rate housing.