There is a growing need in the United States for attractive, well-maintained homes that offer shelter and security for America’s middle-class workers. As home ownership has become prohibitively expensive for many Americans, there’s been a surge of interest from workers and families wanting to live in communities offering affordable, and safe workforce housing.
This has created strategic opportunities for investors. Referred to in the industry as workforce housing, these properties cater to low-to-median-income earners, many of whom hold essential community jobs, such as teachers, police officers and nurses.
We at The GSH Group believe in the importance of building communities and improving lives through our real estate investments. By investing in workforce housing, we can help ensure there is quality, affordable housing for workers who are crucial to a community’s well being.
About 13.5 million households lived in workforce housing at the end of 2018, according to CBRE. Workforce housing also outperformed the overall multifamily market for the preceding four years, thanks to its low vacancy rates and above-average rent growth, CBRE reported. Due to the strong market fundamentals and value-add opportunity, workforce housing has emerged as a dynamic and growing investment class.
Workforce housing refers to Class B and C multifamily properties located near major employers or in cities with strong job growth. Properties are typically older units that have been rehabbed to offer better quality amenities. The GSH Group’s communities, called The Meadows, have had several units rehabbed throughout Michigan and several other states.
Who lives in workforce housing? Many of the individuals and families living in workforce housing hold jobs important to their communities. Residents include emergency responders, educators, grocery clerks, assembly line workers and nurses and hospital support staff. Workforce housing is generally built for people who make between 60% and 120% of the area median income. Often, these individuals can’t afford to purchase a home. In other cases, some are choosing to rent for longer periods of time. An example is Millennial renters opting to forgo the hassles of home ownership, such as the costs of maintenance and property taxes, for the convenience that comes with living in a managed property. Many of the residents of properties owned and managed by The GSH Group are critical infrastructure workers who have continued working at their job sites while the country works to mitigate the effects of the coronavirus.
Why is workforce housing important? Workforce housing fills an important societal need by creating safe homes and enabling communities to attract and keep important employees. This will remain crucial as single-family home costs continue to soar. Our management team for The Meadows properties further serves residents by providing them with links to available resources and area organizations, strengthening connections to the greater community. We have found that our residents appreciate learning about local libraries, health services and parks.
When older properties are redeveloped into attractive communities, it eliminates the potential the property could fall into disrepair. Neighborhood property values are buoyed and residents are able to live closer to their jobs, shortening commutes and enhancing the quality of life.
The GSH Group has extensive experience in locating older properties with exceptional value-add potential. The three principal partners and founders have invested in and managed real estate for a combined 40+ years. As owner/operators of over 10,000 residential and multifamily units, GSH Group combines a value-add approach with management efficiency to generate consistent quarterly returns and build long-term value.
Our experience has proven that investing in workforce housing provides the opportunity to build both a strong community and a strong real estate portfolio. Looking toward the future, landlords and investors remain bullish on the workforce rental market as stagnant or falling wages, combined with economic uncertainty, can make renting a more favorable option than purchasing. There is also growing recognition that the nation has a shortage of affordable housing. Because multifamily complexes are expensive to build, new units will remain too costly for many individuals and families. This puts additional value in older complexes than can be rehabbed. All together, these factors make a compelling case for workforce housing as a smart and strategic option for the investor looking to create value and fill an important need.