Investing in the "Missing Middle" and Workforce Housing

Introduction

In recent years, workforce housing for professionals has become a fast-growing industry. The middle class remains at the heart of America's economy, and with many companies seeking to retain their employees, the demand for workforce housing is strong. This program offers an overview of this important U.S. market and will provide you with actionable insights into how you can start investing in this lucrative market that is expected to grow an additional $175 billion by 2035.

Workforce housing is the term given to rental housing units that are intended for residential use by full-time employees. These apartments are typically located close to workplaces for convenience and ease of commuting. As a result, workforce housing has gained popularity in recent years as a means of addressing the continuing issue of workforce housing affordability.

Workforce Housing Definition According to Investopedia, "The term refers to rental properties for workers who work at large firms (e.g., office buildings)." [2] It is important to note that "work" is used very broadly for this definition, including positions such as nannies, child care workers, or even freelancers. This type of housing is commonly referred to as "affordable housing" and offers comfort and value that is usually not found in other multi-family neighborhoods.

Workforce Housing Growth Trend The workforce housing industry has seen impressive growth over the past few years with the construction of new apartment buildings. There are also transportation, employment growth, and technological trends that have greatly impacted this market. The aging population has become a driving force for workforce housing. According to data from the U.S. Census Bureau, in the year 2000, there were approximately 31 million households in America consisting of senior citizens over the age of 65. Today, this number has risen to almost 38 million households. This trend has prompted more companies to build workforce housing units that are within walking distance of workplaces.

As companies continue to grow and expand, the need for workforce housing will increase accordingly. According to Abode Research, the U.S. workforce housing market is expected to reach $1.9 billion in 2017 which is a 13% increase over 2016's market numbers. At first glance, the size of this market may seem small compared to other real estate markets such as commercial or industrial properties; however, it is a fast-growing industry that is predicted to significantly expand in coming years.

The Importance of Workforce Housing

As stated previously, workforce housing is in high demand. In fact, the need for workforce housing has reached such a level that many businesses prefer to retain their employees rather than encountering problems with employee retention. For example, an American Express poll of more than 1,000 senior executives found that 98% believe "the current high cost of living" is their "most significant business challenge."

Workforce housing is generally built as part of a larger master plan for an entire neighborhood. Businesses take advantage of this concept by installing amenities such as gyms, parks and recreation areas, and other conveniences that will help to attract new residents who will use these amenities as well.

What is missing middle housing?

The missing middle housing is the new phrase that refers to a type of multi-family housing unit that is intended for use by full-time employees. According to Tom Cortese, a member of the Urban Land Institute, "the missing middle includes the types of housing that are needed to create complete communities: duplexes, triplexes, rowhouses, and townhouses."

In today's fast-paced market, demand for these types of housing units has increased dramatically. This trend has been generally attributed to their affordability as well as their ability to provide a variety of home styles and sizes that are in high demand.

How to choose a missing middle housing investment property?

Retail investment properties are a great way for investors to get involved in the missing middle housing industry. To begin, you will need to familiarize yourself with the different types of housing units that are available. There are three most popular types of apartment buildings that are used as workforce housing units:

Duplexes - These buildings consist of a smaller footprint than a single-family home and often contain only one unit. This type is ideal for a location near schools, parks, and neighborhoods with mixed-use zoning which allows for additional on-site amenities such as child care facilities. The most common unit size is a single bedroom or studio apartment.

Triplexes - These apartments are sometimes referred to as "three-towers. " In these buildings, there are usually two or three units that are joined together. These buildings offer a perfect opportunity for investment because they often require little land.

Townhouses - These apartment buildings offer additional privacy and flexibility to the homeowner by offering multiple vacant units as well as one to three-bedroom homes. This allows the buyer to customize their floorplan to better suit their individual lifestyle needs. The most common unit size is a two-bedroom home. Townhouse designs also provide more privacy because the entire structure is built around an interior courtyard that connects each home.

The Bottom Line

The foreclosure crisis has been a major economic calamity for the U.S. and has greatly impacted the workforce housing industry as it continues to take a major toll on many homeowners who had purchased homes during this time. However, the market for workforce housing is expected to reach $1.9 billion in 2017 and will continue to see an increase over the next few years as more people become displaced from their homes due to this crisis or by other means. As a result, it appears that demand for workforce housing will remain high in future years as the construction of new rental properties accelerates while homeowners continue to struggle with their mortgages.

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