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Is Workforce Housing the Answer to America’s Affordable Housing Crisis?

Is Workforce Housing the Answer to America’s Affordable Housing Crisis?

Increasingly, the people who make our communities run – our teachers, police officers, and facility workers – can no longer afford to live where they work.  “Workforce housing” is an increasingly popular solution to this problem.  What is it, and does it represent an equitable solution in the fight against America’s affordable housing crisis?

Killington Ski Resort in south central Vermont claims many titles in the skiing world.  Not only does it have the largest vertical drop in New England— 3,050 feet — it’s the largest ski area in the eastern United States. For residents of the surrounding towns, it’s also a chief driver of the local economy, providing employment, either directly at the resort or though supporting businesses, and supplies millions in tax revenue annually. 

However, in rural Vermont, where the housing market is already extremely tight and ever more unaffordable for locals, that creates a challenging situation for the resort to maintain the staffing levels it needs. That’s why the announcement in October 2023 of a $700,000 donation to workforce housing in partnership with housing developer Great Gulf made a significant wave. The money will be used to develop 250-300 housing units on a 70-acre plot at the resort over the next several years, with 6-8 multifamily apartment buildings and 16-20 duplex or single-family homes.

“We are excited to offer this funding to the town of Killington in support of future workforce housing in the area,” says Killington president and general manager Mike Solimano in a press release. “We all know the area is in need of this type of development, which will provide housing for the workers who support the whole community and will be integral to the success of the new ski village by Great Gulf.”

Killington is not alone in recognizing the need for workforce housing and taking steps to meet it. Indeed, projects around the country are proliferating, as appreciation of the importance of meeting housing demands is more regularly incenting action. Here’s how.  

What is workforce housing?

As the name indicates, this type of housing aims to give workers in a given area an affordable and dignified residence near their places of work. Properties can be owned or rented, but they need to include a mix of one-, two-, and three-bedroom units of reasonable size, for example, from 802 to 1,137 square feet as demonstrated by one new workforce housing complex in Cocoa, Florida

That’s not the same as affordable housing, though, which is differentiated, in part, by the necessary economic threshold applied to prospective residents.  The Urban Land Institute, for example, defines workforce housing, as meeting the needs of households earning between 60 and 120 percent of area median income or the median income for a family of four. Affordable housing, on the other hand, serves families at or below 60% of median income.

Another difference is the target. Workforce housing primarily targets workers who play key supporting roles in community and business life—teachers, police officers, firefighters, builders, retail clerks, and the like – and it is available at different price points, some affordable, some less so. 

Despite these distinctions, the terms “workforce housing” and “affordable housing” are sometimes used interchangeably.  Individual projects may include units that meet criteria for both, and distinctions between them can become blurred.  

That relationship is important, says Gabriel Nagy; a housing developer and urban planner with more than 20 years of experience in capital investment, public and private finance, and affordable housing—and board member of Robert Schalkenbach Foundation. “What the country needs is affordable workforce housing, consuming no more than 30% of a household’s income.”

Where is it being constructed?

The Killington project represents one among hundreds of workforce housing developments happening around the country. Winter Park Resort in Colorado, for example, began construction on a 330-bed workforce housing complex in June 2022 for seasonal and year-round workers. The project is now nearing completion. Similar projects are ongoing in Breckenridge Colorado, Park City, Utah, and more.

Also in October, Maine governor Janet Mills broke ground on a new workforce housing project in Madison. The project, 55 Weston Avenue, aims to create 36 units for employees of Maine-based companies such as New Balance and TimberHP, with the first 18 units completed by late spring, 2024. A 60-unit workforce housing complex is also underway in Petoskey, Michigan, albeit covering both affordable and workforce rates of 30%-120% of the local median income, which translates to units costing between $316 per month for a one-bedroom unit to $925 for a three-bedroom unit.

And more plans are in the works. In Napa, California, Napa Methodist Church is partnering with Burbank Housing and Napa Valley Community Housing to create 46 units of workforce housing that will replace several buildings on the Methodist campus—should it go forward. Creating workforce housing is imperative, said Dave Whitmer, with Napa First United Methodist Church. “Right now, there’s an awful lot of folks who work in Napa but can’t afford to live here,” he said.

Across the country, in Hanover, Maryland, the Eagle Park project will create 120 rental units for county workers, families, and older adults. In Maui, Kaulana Mahina workforce housing project, which is accepting applications for a lottery drawing on November 20, takes on greater significance after wildfire destroyed about 1,500 homes this past summer. 

What laws are being put in place related to it?

For workforce housing plans to truly meet demand, legislation and amendments are required at the state and federal levels. And efforts are underway to do just that. Significantly, Representative Elissa Slotkin of Michigan introduced the bill H. R. 5733 in September 2023 “to support the construction, preservation, or rehabilitation of affordable workforce housing in areas with shortages of affordable

housing units for sale, and for other purposes.” 

Essentially it would establish a grant program at the U.S. Department of Housing and Urban Development that encourages local governments, nonprofit organizations, public housing agencies, community based organizations, community financial institutions, and the private sector to invest in increasing productivity by constructing affordable homes for local, low-income workers.

A lack of affordable housing is an issue I constantly hear about in the district when I meet with constituents and community leaders,” said Slotkin in a press release. “It’s an acute issue, from extremely limited attainable housing for first-time homebuyers to exorbitant rental prices that make it next to impossible for people to live and work in the same place. We need to focus on addressing this crisis head-on, and creating grant opportunities that support affordable housing is a step toward that goal.”

State-level action is happening, too. In October 2023, the “Essential Worker Housing Access Act” was introduced by the Anne Arundel County Council in Maryland. It would force rental developments to reserve 15% of units for people earning 75% of the area median income or below. For new sale developments with more than 20 units, 10% would have to be reserved for people earning no more than 100% of the median.

Wisconsin has already moved ahead on a package of five bills addressing affordable and workforce housing, which the governor signed into law in June. One of these, AB 265—also called the “Main Street rehab” bill—establishes a revolving loan program to renovate vacant or underutilized units on the second and third floors of retail spaces. Another in the package, AB 268, creates a loan fund program under the Wisconsin Housing and Economic Development Authority to cover the costs of converting a vacant commercial building to workforce housing.

The housing omnibus bill, SB 998, passed in June in Connecticut includes a tax break to individuals and businesses that invest in new “workforce housing” while easing permitting and tax requirements for developers at the same time. 

Obstacles to Progress

Despite the progress, serious long-term obstacles must be overcome to ensure more workforce housing options become available—and for everyone. 

That means acknowledging and overcoming huge gaps in equity between white and traditionally underserved Black and brown communities. In fact, in 2019, the gap between the homeownership rate for white non-Hispanic Americans was 31.2% higher than among Black Americans—the largest gap since the US Census Bureau began tracking it in 1994. While not as big, the gaps for Hispanic or Latino Americans, American Indians and Alaska Natives, and Asian or Pacific Islander Americans remained significant, at 25.8%, 22.5%, and 15.6% respectively. 

Nagy points to a range of other issues that must be addressed, too. These include flexible planning systems, appropriate taxation and financial regulation, creative design, innovative construction technology, and better land management.  Addressing these, he says, will help remove some remaining obsticacles to building workforce housing. 

NIMBYism also remains an issue. While many see and express the need for workforce housing, they don’t want it in their own backyards, for fear it will lower property values or otherwise change their neighborhoods for the negative. A good example is a proposed $4.7 million development in Haddonfield, PA, held up for nearly 20 years by local resistance. “There is some feeling of ‘the other,’ or of the bubble being burst, when we welcome everyone into a community,” Mayor Colleen Bianco Bezich said in the Philadelphia Inquirer. “That’s the furthest thing from what we want to see. We can’t wait [to welcome] the 20 individuals or families who are going to be part of the fabric of Haddonfield.”

California addressed that issue by requiring local governments to fast-track the construction of multi-unit buildings in pre-existing neighborhoods that haven’t met their housing construction targets, which is almost everywhere. This has helped bypass local opposition. A new study from the Terner Center for Housing Innovation at UC Berkeley shows it’s working, counting 156 projects with more than 18,000 units approved or under review Between 2018 and 2021

The Federal government is also trying to break down barriers. Earlier this year, the U.S. Department of Housing and Urban Development announced up to $10 million in competitive grants for communities seeking to  remove barriers such as outdated zoning policies, slow-moving development procedures, and dwindling housing stock. The funds can be used to reform land use policy, streamline permitting, and improve the quality of existing affordable housing, among other approaches.

Conversion as Solution

Rather than building entirely new properties, workforce housing planners and advocates often point to conversion as a solution. Essentially, this means transforming existing properties, including hotels and office buildings—especially in the wake of the pandemic, when many emptied out. The reasons are many. Firstly, the cost of conversion is generally far less than construction. Newer complexes also cost more to renters and buyers, pushing them out of reach for much of the workforce. 

Conversion also tends to happen much faster, Kelby Collier, senior commercial appraiser at Osceola County Property Appraiser noted in a presentation at this year’s IAAO Conference and Exhibition. Whereas new developments can take up to 18 months or more, she points out, conversions can be completed in 6 to 12 months.

The conversion approach also fits trends among younger generations who are seeking smaller living spaces. If these homes are close to work, retail, and entertainment, and also walkable, that’s even better, especially to those concerned about reducing their carbon footprint. For residents who need to drive, conversions do better on that, too, as many of the office buildings, hotels, and other properties considered for conversion have parking areas already. 

Land Value Tax Solution

Adopting a land value tax may provide municipalities and developers another tool to increase workforce housing, particularly when it comes to upgrading existing properties or building new ones on vacant land. As seen in Detroit, property owners may have little impetus to improve their properties or develop vacant land owing to the current tax structure. It’s simply cheaper for them to hold onto parcels until more favorable conditions come for a sale. Implementing a land value tax would make land speculation more expensive and provide a strong impetus to sell and/or develop unproductive land. 

Indeed, Nagy emphasizes, “Henry George saw urban land speculation as a driver of urban inequality; by reducing the supply of buildings it raised rents for tenants and made home-ownership prohibitively expensive to most.”

A force for work; a force for good

Building strong, robust, and productive communities and business requires a present, accessible, satisfied, and motivated workforce. However, all too often these elements — and workers — are not present, as recurrent data on the ongoing labor shortage shows. 

That fact also poses several questions that challenge notions of community and housing. Is it okay that the people doing the work to keep our communities thriving are only able to afford modest housing options, such as converted hotel rooms? And who are the people that society considers deserving — and undeserving — of pay that would afford them access to the single-family housing market?

Even a short skim of the numbers compiled by the U.S. Census Bureau and U.S. Bureau of Labor Statistics shows the disconnect between the work we need done and the pay we’re willing to offer for it. In Asheville, North Carolina, for example, the average median income was $60,516 in 2021, yet the national median income of essential workers such as bakers ($31,459), school bus drivers ($31,488), childcare workers ($25,365), construction workers ($40,054), preschool and kindergarten teachers ($34,569), and retail salespersons ($39,546) falls woefully short of this number.

“I consider affordability the problem,” stresses Nagy. “Millions of Americans can’t buy or rent a house. Many families live overburdened, overcrowded, and in substandard conditions. The only way to solve the housing problem is to build more and increase the supply of housing.”

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