New Developments: Meeting the Workforce Housing Demand

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The lack of supply of affordable housing for individuals and families making less than 60 percent of area median income is a persistent problem that spans every county in the country. This overwhelming need for low-income housing is only exacerbated by a lack of affordable workforce housing – and vice-versa. Harvard’s Joint Center for Housing Studies’ “State of The Nation’s Housing 2018” report found that for-sale inventories continue to shrink in most markets, which is leading to intense competition for the historically low supply. While there have been modest increases in the production of moderate-cost/entry-level single-family homes, as well as manufactured housing, the delivery and production of both is still far below the average production in the two decades preceding the financial crisis in 2008. Supply is not keeping up with demand, and this is causing pressure on housing affordability across the spectrum.

While facing this societal demand, developers are building larger single-family homes and higher end rental housing and less workforce and affordable housing. This is largely a story of macroeconomics driven by increasing costs. The JCHS report sums it up succinctly:

  1. There is a shortage of skilled labor;
  2. The cost of building materials has risen;
  3. Developable land has become scarcer; and
  4. Local zoning and land-use regulations are adding to costs and thus reducing the amount of new construction by delaying approvals and charging sizable fees.

And yet, despite these factors, there are strategies and solutions that can facilitate more affordable and workforce development.

First, we must continue to make efforts to bend the cost curve so that workforce housing can be economical with a minimum of subsidy. Construction and building technology is one leg of the stool. For example, developers are increasingly finding success with modular solutions which both reduce the need for onsite skilled labor and leverage the supply chain to control the ever-increasing cost of building materials. On the cutting edge are developers like Caleb Roope, CEO of The Pacific Companies, who shared at NH&RA’s Spring Developers Forum his experience with modular construction. Roope has found construction cost and time savings on his modular projects in the neighborhood of 30 percent compared to stick-built projects. Panelization solutions, such as those from Katerra, as well as manufactured structural systems, like those from Prescient, offer similar cost and speed advantages.

Second, our cities can adopt policies to rein in regulatory costs. This can include the expansion of as-of-right zoning for affordable and workforce housing, streamlined permitting processes and the reduction or waiver of various fees.

Inclusionary zoning can also help, though I do not think that alone is a scalable solution. State legislatures can show further leadership by incentivizing local governments to adopt affordable and workforce housing-friendly policies by tying subsidies to communities that have adopted density and development friendly policies.

Third, to the extent possible, we should also explore ways to leverage existing affordable subsidies to support mixed-income and workforce housing. In California, Governor Gavin Newsome is leading the charge with a proposal to expand the State Housing Tax Credit substantially, including a portion (up to $200 million) reserved for projects utilizing CalHFA’s Mixed-Income Housing Program. Local jurisdictions can expand PILOTs or other real estate tax exemptions to workforce units. Given the lack of developable land in the markets with the highest need, proactive steps must be taken to dedicate and dispose of state and city government-owned parcels for affordable and workforce housing development.

Finally, I believe it is also possible to administer the Low Income Housing Tax Credit in creative ways to leverage mixed-income housing. Adopting a flexible Average Income Election policy is low-hanging fruit. Many Qualified Allocation Plans are now promoting mixed-income housing. I believe there is promise in this approach if they adopt policies that create market incentives to add workforce units in addition to what can be developed as traditional affordable housing. Where zoning can accommodate it, perhaps it’s time to explore policy trade-offs, such as allowing for smaller unit sizes or lower cost design standards if developers can commit to adding supplemental workforce units.

You have heard all these ideas before and they have merit because at their heart they all have a common thread: they leverage efficiencies and scale. For a challenge of such large proportions we require big and replicable solutions. In this month’s issue, you will read about several examples of mixed-income and workforce housing that successfully espouse these strategies. We hope they will inspire your advocacy and your next project.

Thom joined National Housing & Rehabilitation Association (NH&RA) in 2004 and currently serves as its as Executive Vice-President and Executive Director. NH&RA is a national trade association and peer-network for affordable housing and tax credit developers and related professionals including: investors, lenders, public agencies and professional advisers. Thom directs the association’s day-to-day operations including legislative and regulatory advocacy, committee activities, conferences and events, publications, financial management and strategic planning. Thom also serves as the Executive Director of the Tennessee Developers Council, a state-wide trade association for affordable housing developers and professionals active in Tennessee. In 2013 he spearheaded the launch of NH&RA's Preservation through Energy Efficiency Project, a major educational initiative supported by the John D. and Catherine T. MacArthur Foundation. Thom also serves on the Board of Directors for International Center for Appropriate & Sustainable Technology (iCAST) as well as the Advisory Board for its ResourceSmart program, a turn-key, cost-effective, green rehab provider for multifamily affordable and market-rate housing communities and nonprofit facilities. Thom is a frequent speaker at affordable housing, sustainable development and tax credit industry events and has been published in a variety of industry journals including Tax Credit Advisor, Independent Banker, and the Novogradac Journal of Tax Credit Housing. Thom also serves as the Associate Publisher of Tax Credit Advisor, a monthly magazine for tax credit and affordable housing professionals and is an Executive Vice-President at Dworbell Inc., a boutique association management and communications firm in Washington, DC. Thom was previously employed at a national lobbying firm focusing on financial services and technology issues. Prior to moving to Washington, Thom worked in media relations in the New York State Assembly and as a research assistant for New Hampshire Governor Jeanne Shaheen. Thom graduated Magna Cum Laude from Tufts University with a double major in Political Science and History.