Low vacancies, rising rents attracting investors to workforce housing

LOW VACANCY RATES and above-average increases in rent are making workforce housing an attractive option for investors, according to research at CB Richard Ellis. / COURTESY CB RICHARD ELLIS

PROVIDENCE – Workforce housing, defined as rental communities that are affordable for low- to median-income workers, has outperformed the multifamily market for the past four years, according to research at CB Richard Ellis.

The segment has relatively low vacancy rates and above-average increases in rent, which is making it an attractive option for investors.

CBRE attributed the demand to slow wage growth over the past decade, a high number of renters and an “extreme lack of new supply.”

The commercial real estate research indicates the segment will have “strong and sustained demand” into 2019.

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Some 13.5 million households now occupy workforce housing, and most are renters of necessity because they are paying off student loans, saving to buy a house, or otherwise cannot afford homeownership or higher-quality rental housing.

“Over the past decade, only a small amount of new workforce housing has been built, while many older apartment communities have been demolished to accommodate the development of high-end properties,” CBRE reported, in a news release. “The multifamily industry removes more than 100,000 units per year due to obsolescence and these are predominantly workforce and affordable-housing units.”

The markets with the highest rent increases in workforce housing are predominantly in high-growth metro areas. Providence, which is in 18th position nationally, had a rent growth of 3.4 percent for the second quarter of 2018, according to CBRE research.

Orlando, Fla., and Las Vegas were the leaders in the U.S., with rents scaling 7 percent. Nine other metros, including Atlanta, Jacksonville, Fla., Tampa, Fla., and Phoenix, had rents that grew by 4 percent or more.

Mary MacDonald is a staff writer for the PBN. Contact her at macdonald@pbn.com.