Why Workforce Housing Works for Institutional Investors

Workforce housing is garnering more attention as an institutional asset class because it offers these investors multifamily specialization and the opportunity to generate better relative returns on a risk-adjusted basis against other real estate asset classes. Supply-demand imbalances and a lower cost of capital with more favorable terms supported by the missions of agency lenders are features that are unique to this market segment.

In addition, workforce housing benefits from subsidies and other incentives without the heavy regulatory burden, providing a scalable investment strategy, given there are 7 million workforce housing units throughout the country.

A value-add supplement to portfolios

Workforce housing, generally defined as moderate-income communities at 60 to 120 percent of area median income, can add value to investors’ portfolios in ways that other multifamily segments may not.

Luxury multifamily, generally defined as high-income communities over 120 percent of AMI, is more susceptible to supply-side risks, and this segment has been in a heavily concessionary environment that has eroded rents and revenue.

Source: Multi-Housing News: https://www.multihousingnews.com/why-workforce-housing-works-for-institutional-investors/