Look Who's Targeting Workforce Housing

More much-needed workforce housing is on the way in the Sun Belt and elsewhere.

Hillpointe, a real estate development and investment firm focused on the development of market-rate workforce housing, has closed the Hillpointe Workforce Housing Partnership IV at its hard cap of $510 million.

The fund is aimed at developing 25 to 30 workforce housing communities, totaling 8,000 units.

Workforce housing is generally defined as housing that is affordable to households earning between 60% and 120% of the area median income, or about $45,000 to $85,000 annually. Hillpointe sees a supply/demand imbalance for this sector.

The firm said that affordable rental housing lately has “largely disappeared,” creating an “acute shortage” with quality rental housing options increasingly restricted to top-end luxury renters with the majority of newly developed rental units unattainable for median-income earners.

“It’s simple economics—the cost of housing in these areas is going up faster than wages for public workers,” James Birkey, JLL’s SVP of Government and Education, tells GlobeSt.com.

While investors, such as Hillpointe, see value in developing this product, local governments and higher education — institutions that often find their workers cannot afford to live nearby — are also making a push for this kind of development.

“At some point, [local] agencies struggle to recruit and retain professionals to serve their essential functions, simply because of local housing costs compared to the wages they can offer,” Birkey says. “So, they’re looking for their own way out of the dilemma, they go to workforce housing as a potential answer.”

He said the people living in this type of housing are typically middle-class professionals who are working in high-cost geographies, and they earn too much to fit into traditional “affordable housing” programs, but not enough to compete for available market-rate housing in that particular local market.

“The advantage for an institution setting up ‘workforce housing’ versus traditional ‘affordable housing’ is that affordable housing tax credit rules prohibit prioritizing your own employees in terms of placement,” according to Birkey.

“A lot of agencies want to be able to focus on solving their in-house problem, hence are reluctant to go through all this work to develop housing if they’re unable to use it to substantively solve their recruitment and retention issues. So, they’re going the workforce housing route, using their own land and other assets to bring costs in line with what their employees might afford.”

Vacation destinations are often sorely in need of workforce housing as well. Integra Investment’s principal Victor Ballestas points to Key West as just one example.

Wrecker’s Cay, Integra’s most recently completed project, is the largest workforce housing community in the Florida Keys in over 50 years. Spanning nine acres, the 280-unit development garnered positive local support for its significant impact, which aids in combatting the market’s shortage of attainable housing for the area’s low​-​ to moderate-income workforce.

This is especially critical as housing prices have soared and infrastructure was impacted by previous hurricanes, forcing population migration.

By the time the project completed in April 2023, Wrecker’s Cay had achieved stabilization with 100% of the units leased and numerous interested parties on the waitlist, demonstrating the need for quality, attainable housing in the region.

Another company in this space is Greystar Real Estate Partners, which recently announced the launch of a new dedicated brand, Ltd. by Greystar, that will focus on delivering more attainable housing opportunities for key populations affected by the lack of rental options in the United States.

The homes will have a sustainable, modular construction, be built off-site, and be offered at an attainable price point. The first one to open will be in Houston.