Lenders Favor Workforce Housing Deals

The affordability crisis striking California has spurred demand for workforce housing. Developers and investors alike have answered that call, and in the last year, California has seen a dramatic increase in both value-add workforce housing investment and ground-up workforce housing development. Now, lenders are showing increased interest in workforce housing deals, compared to market-rate multifamily, according to Jonathan Lee, a principal and managing director at George Smith Partners. Lee recently secured construction financing for a 51-unit ground-up workforce housing project in Koreatown on behalf of a joint venture between Index Real Estate Investments and Ketter Construction. We sat down with Lee to talk about the lender demand for workforce housing.

GlobeSt.com: What is lender demand like for workforce housing ground-up development?

Jonathan Lee: Lenders are very keen on workforce housing and tend to be slightly aggressive on these deals when compared to market rate multi-family, provided rents and return on cost stand up to scrutiny. Some banks feel a lot of rental supply has been brought on-line in the past three years, and there could be a flattening of the upward trajectory we have seen in rents. That is a concern in core areas that are trying to achieve rents of $3.00 and sometimes $4.00+/PSF.