As the property costs carry on increasing and the real estate cycle prolongs, several professionals of commercial real estate all over the country are facing challenges to recognize the scopes for value-added acquisition. One of the few exceptions that exist here is the workforce housing segment says Maxwell Drever.
Everyone knows the lack of affordable homes in prominent metros like New York City and San Francisco. Hence, our society needs to do an improved job of evolving and increasing affordable housing for middle-income households. Luckily, the current dynamics for demand and supply led to the development of workforce housing properties right in the markets of strategic growth close to the city centers. Hence, a few attractive investment prospects are available today.
Understanding the workforce housing
According to Maxwell Drever, workforce housing denotes housing that caters to the requirements of individuals and families that earn between 60% and 120% of the AMI (area median income). The Pew Research Center, which analyzed the U.S Census Bureau statistics, highlighted that the overall number of U.S households has maximized to 7.6 million between 2006 and 2016. On the one hand, the homeowners stayed flat, and the renters expanded to 36.6%, which indicates one of the increased renter ship rates that the country witnessed in the last five decades.
The millennial demand
Today, about 65% of the millennials are in renting. Hence, the market especially for millennials in-migration, possess greater demand. Also, these millennials are less drawn to their own houses in comparison to the earlier generations. Based on an Urban Institute report in 2018, the millennial homeownership is approximately 8% lesser than the earlier generations because of generational reasons, which comprises delaying marriage and birthing a kid at a later age.
Another thing that is crucial here is territorial preference. Research shows that millennials love to reside in high-expense cities. Where the housing supply is not inelastic. And inside a city, the millennials want to live in countries with an urban ambiance. In which the house cost has risen more in comparison to the nearby areas. And this shift is usually amongst the highly educated millennials. The young professionals prefer a neighborhood with costly housing. Purchasing a house is not a choice that leads to maximized rental demand in the communities. Irrespective of the development flurry that has occurred, the workforce housing construction is rather restricted. Also, the stagnant supply has improved occupancy and boosted the investment appeal.
The intangibles in the market
To completely capitalize on the renter demand, the investors aim to acquire the workforce housing properties to recognize the market suitable for growth. Maxwell Drever says that coming to the correct acquisition needs good research and a focus on the intangible elements of the market. It comprises proximity to the job centers, easy access to mass transit, school districts, and strong entertainment and retail. In such markets with a muted supply and strong demand. The investors can come across something compelling which can pose a restricted risk. It can also offer scope to add value via physical enhancements. Along with proactive practices for management.