Defining Workforce Housing

10 min read

The location equation

As housing costs increase in communities throughout the country, the need for workforce housing has emerged as a frequent topic of conversation.  But a precise definition of what it encompasses seems to vary according to the locality.

Almost everybody loves the concept of housing our public servants and essential workers comfortably within the communities they serve. But not everyone is prepared to act on the idea; at least, not right now.

“The narrative has to be there for people in authority to attach it to a person they know, or could know,” says Caleb Roope, Founder, President and CEO of the Pacific Companies, headquartered in Eagle, Idaho, that builds affordable and workforce housing across eight western states. “Otherwise, it is a lip service situation – a conceptual, intellectual understanding. So it’s our job to deal with that: to connect the dots on a local level.”

What Are We Talking About?
The first requirement for any serious discussion of the subject is to define what workforce housing actually means. It is a term that is frequently invoked to the point that it has become an industry buzzword, but the meaning has evolved and altered over time.

An early common usage hearkens back to the 1970s, in the ski resorts of Aspen and Telluride, Colorado. In these areas that attracted high-income, often part-time residents where the land area for residential construction was limited by mountains – the very features that made them attractive resort areas – the army of workers necessary to service the resort economy and maintain a functional municipal life were effectively priced out of the market.

The Aspen Institute convened a conference to figure out the problem, and among the solutions to emerge were a separate housing market based on local wages. For those buying houses, these units would be covered by a deed restriction that insured the resident lived and worked full-time in the community. When the house was sold, it could only go to someone meeting the same criteria.

Palm Beach County, Florida, passed a controversial rule in 2006 requiring a portion of all new construction be set aside with long-term price controls for the workforce. When the Florida building boom fizzled two years later, so did workforce housing construction. Now that the market has picked up, Suzanne Cabrera, President of the Housing Leadership Council of Palm Beach County, told the Sun Sentinel newspaper, “This is the time to ensure that you have these [price] restrictions moving forward. There’s room for everybody in housing everywhere.”

Today, the Urban Land Institute’s definition is generally accepted: those earning between 61% and 120% of area median income, with a particular emphasis on teachers, police, firefighters, nurses and other personnel critical to the maintenance and stability of the municipality. And one aspect of workforce housing is not economic but psychic: It is in every community’s best interests to have civil servants emotionally invested in the areas they serve, particularly police officers and firefighters who can be called upon to risk their lives.

Roope says, “We need to invest in the middle-income workforce so they can be near their jobs and live comfortably, and then the community prospers. What is the quality of life for a teacher who has to commute two hours each way? She suffers, her family suffers and the students suffer. And if she loses her job because she can’t withstand that daily grind, she could end up needing [lower-income] affordable housing.”

A Hot Button Issue
The term workforce housing has lately become a hot button in itself. Some people object on the grounds that it implies that those below the 60th percentile of AMI – who qualify for what is traditionally thought of as affordable housing – are not in the workforce, whereas in most cases, their full-time jobs simply do not pay enough to afford decent accommodations. This battle is being waged across the country, with activist groups stressing the lower end of the workforce range.

And as Roope says, “We don’t want to lose the narrative that affordable housing residents in the range that qualifies for tax credits are also workforce.”

Timothy M. “Tim” Chapman of Chapman Development LLC in the Washington, D.C. metropolitan area points out that workforce housing is a key component of the affordable range and is defined by the area. He says, “In this and other expensive areas, you almost need to be at 150% AMI.” Chapman is also Chairman of the Board of the Virginia Housing and Development Authority, and sees Virginia making great strides in eliminating homelessness.

He considers “clean, decent, safe affordable housing” throughout the income range a basic right. “It’s your life. It’s your foundation. It’s your freedom of thought. You can’t worry about anything else if you’re worried about where you’re going to live.”

Says Roope, “Housing is the stability for just about everything in life.”

Local, Local, Local
As Roope suggests, “local” is the key concept in the workforce sphere. As with the entire range of affordable housing development, it is critical to have the support of the local community and city council or municipal authorities. Also, various federal programs are directed at lower-income affordable housing, including Low Income Housing Tax Credits, Section 8 contracts and Rental Assistance Demonstration (RAD) conversions. But in the workforce income range, any help or concessions in developing the building must, for now, come from the local level, or occasionally the state.

“The main reason workforce housing doesn’t get built is that there are no subsidies, says Roope. “Everything has to be local. I take a lot of my time just learning what is going on in each community. You have to have a good working knowledge of politics.”

While there are no federal subsidies specifically aimed at the workforce cohort on the purchase side either, some municipalities have offered alternatives. In some areas, developers have been able to buy unused land from municipalities at below-market rates and/or obtain density waivers or zoning concessions that allow them to sell houses for lower prices, generally in return for a deed restriction or some other agreement to keep them in the workforce-affordable sector.

If “Location, Location, Location” is the mantra of the real estate world, Chapman insists it is “Engagement. Engagement. Engagement” for affordable and workforce housing. “The resources are so scarce and it is so competitive, and in this area, cheaper land doesn’t exist. So you have to build trust and a compelling argument.”

A Diversity of Approaches
The problem is most pronounced on both coasts, with metropolitan regions like Boston, New York, Philadelphia, Washington, D.C., Seattle, San Francisco and Los Angeles representing the greatest challenges. Inland cities, such as Chicago, Minneapolis and Denver, also have workforce housing shortages.

The Urban Land Institute estimates that 40,000 workforce households in the D.C. metropolitan area are priced out of rental and for-sale housing proximate to where they work.

Since workforce housing is all about local support, certain regions around the country have come up with their own approaches.

The Iowa Economic Development Authority is offering up to ten percent investment tax credits for the rehabilitation of building stock for workforce housing with at least three residential units.

Members of the California legislature are pushing for workforce housing tax credits, though there is substantial pushback from those who say traditional affordable housing need is a bottomless pit, and so should supersede subsidies for those with somewhat higher income. “California is resource-strapped and can only do so much,” Roope observes. And he points out that in a state so large, housing challenges are not all similar. “In the San Francisco Bay area, essential public servants at 130 to 200% of AMI are priced out of the market. In the Central Valley, you can get by at 90%.”

Through competitive grants to build rental properties, the Minnesota Workforce Housing Development Program targets communities where a shortage of housing makes it difficult for businesses to attract workers. One of the criteria for an award is a statement from local businesses that a lack of housing makes it difficult to recruit and hire.

Under a proposal awaiting approval in Ann Arbor, Michigan, developers would be encouraged through zoning incentives to designate ten percent of new residential floor area for workers in the 50% to 80% brackets of AMI.

Massachusetts has often taken the lead in addressing affordable housing challenges, and in May, Governor Charlie Baker announced a $100 million MassHousing Fund for the creation of workforce housing, emphasizing the economic benefits that will accrue to the state.

“Making affordable housing options available to working Massachusetts families is essential to economic growth and development in communities throughout the Commonwealth,” the Governor declared. “These working middle-class families are the foundation of our economy and talented workforce, and the creation of this $100 million fund by MassHousing will advance opportunities for them to thrive and prosper.”

The aim is to create 1,000 new units for those in the 61% to 120% of AMI and will have a deed restriction of at least 30 years.

Governor Baker’s announcement was made in Lynn, Massachusetts, near the future site of Gateway Residences – a 71-unit, mix-income development that is receiving financing for ten workforce housing units and additional funding for its low-income residences.

This strategy has worked in other places. Roope has had success with mixed-income buildings. “We carve off 80% for tax credits and 20% for workforce,” he explains. “The workforce component generally ranges from about 80% to 120% of AMI, and I try to shoot for an average of 100%. If I can do that, I can offer a 20% market advantage to workforce renters, which is a good deal for people in expensive coastal markets.”

Traditionally, there has been wariness between the different cohorts of a mixed-income residence, but Roope says he has had “no problem whatsoever.” “It is true that market-rate developers don’t like inclusionary or tax credit housing. But here, everybody understands they’re getting a deal and live in a place they otherwise couldn’t afford, so there is a common bond.”

Chapman has had the same experience: “I remember some time ago walking through the courtyard of one of our buildings and seeing a corporate executive sitting down over a glass of wine with someone on a voucher.”

Each year, the Urban Land Institute’s Terwilliger Center for Housing gives out the Robert C. Larson Housing Policy Leadership Awards for innovative ways the public sector has addressed the affordable housing crisis. This year’s finalists present a cross-section of model solutions.

Arlington County, Virginia, has implemented a comprehensive set of policies to mitigate the impact of its workforce from sharply rising rents and home prices. These include low-cost financing to developers, rental assistance and zoning incentives for mixed-income development.

Chicago is aggressively acquiring run-down buildings that, when rehabilitated, will provide low-cost and workforce housing. So far, more than 16,000 rental and for-sale units have been preserved.

New York City, facing perhaps the greatest challenge to workforce affordability, has stretched available funding to support increased mixed-income development and simplify the compliance process for developers.

The Personal Motivation
One element that appears the same between workforce housing and the general affordable industry is the motivation that led its practitioners to enter or stay in the field.

“The job has changed over the years, and it’s way harder to do things today,” says Caleb Roope. “But I still love to see the change in the lives of the people who benefit. It’s still very purposeful, very meaningful to me and I’ll be in it as long as the marketplace will have me.”