Real Estate's ‘Missing Middle’ Looking At Opportunities In Workforce Housing

Posted by Brad Weinig on Sep 17, 2020 9:28:53 AM

3 Minute Read

Over the last decade, income growth for many American families has not kept pace with rising housing prices leading to a shortage of affordable dwelling units for a significant segment of the population. These forces have created demand for ‘workforce housing,’ a term that has come to mean housing options that are affordable, by design, to those who don’t qualify for housing assistance but find it too difficult to rent or buy housing available in reasonable proximity to their workplace.

Below, we explore:
– Why there is demand for workforce housing.
– The kinds of solutions that are attempting to meet the demand.
– How Forum is helping to meet demand and serve investors.

The ‘Missing Middle’

As of the third quarter of 2019, average wage earners across almost three-quarters of the nation’s counties could not afford to buy a median-priced home, according to a recent report by property-data firm Attom Data Solutions. Unfortunately, at the same time that homes have become too expensive for many American workers to buy, the cost of renting also has increased as the availability of affordable rental apartments has declined. Supply at the higher end of the rental market appears to be sufficient, as the number of apartments renting for $1,000 a month or more, for example, has increased from about 12 million units in 2011 to about 18 million in 2017. But over the same period, the number of units renting for $600 and below has fallen from about 14 million to 11 million units.

Long-standing, federally-sponsored programs like Section 8 and the Low-Income Housing Tax Credit (LIHTC) are crucial and more needed than ever for the lowest-income segments of our population, but they don’t serve an increasingly large percentage of our population that don’t income qualify for federal subsidy but can’t afford market rents.

This has created a gap or ‘missing middle’ in the housing market, which has come to be known as ‘workforce housing’ — a home that is affordable for average Americans and located near enough to work so that excessively long commutes are avoided. By that definition, much of workforce housing tends to be multifamily residential properties that offer reasonable rents.

Driving the need for solutions

In addition to median family income that has not kept pace with rising home prices or rising rental rates, there are additional factors driving demand for rentals in affordable, multifamily dwellings. Chief among these are demographics. Over the past two decades, for instance, the median age of first marriages has increased from about 25 to 28 for women and from about 26 to almost 30 for men. The greater number of older singles as well as the rising age of first-time motherhood — from about 24.5 two decades ago to about 27 — have increased the number individuals in the approximately 87-million-member 22-44 year-old age group that are prime rental candidates.

Even among today’s 46-64 year-old age cohort, which numbers over 80 million and which traditionally has not been a prime renting group, the rising level of divorce is driving demand for additional housing. Downsizing and a shift in lifestyle tastes is propelling demand in another traditional non-renting segment, 65-79 year-olds, an age cohort expected to grow 29% to about 55 million by 2030.

With demand likely to be strong well into the future for reasonably priced rental apartments — which spells opportunity for investors in well-managed multifamily real estate investment vehicles — the challenge will be for developers and operators to assemble attractive properties with the right economics. Given the combined of cost of land, labor, materials and local regulations in many fast-growing markets, delivering truly attainable workforce housing increasingly depends on creative state and local governments working within the private market to incentivize and support the creation and preservation of high-quality, lower cost housing.

“With demand likely to be strong well into the future for reasonably priced rental apartments — which spells opportunity for investors in well-managed multifamily real estate investment vehicles — the challenge will be for developers and operators to assemble attractive properties with the right economics.”

Meeting the Demand: Forum Investment Group

To be sure, the current stresses from the COVID-19 pandemic on public health resources, our economy and our emotions are being felt by everyone. But the demand for workforce housing is not going away, and may even become stronger as the nation recovers from its battle against the pandemic. Now and during the recovery period, Forum Investment Group — a long-term, financially solid real estate investor and operator with extensive multifamily housing experience — will continue to meet the needs of the renting public and investors by working in partnership with state and local governments and capital partners to ensure long-lasting, high quality housing opportunities are available the very “front line” workers who are finally recognized, as a result of the pandemic, as crucial members of our community.

Brad Weinig, Senior Director – Workforce Housing


Forum Investment Group, a Glendale, Colorado-based real estate investment firm with a focus on multifamily living – develops owns, operates and manages properties across the United States.


Learn More About Our Investments

The materials to which this disclosure is attached as well as any electronic or verbal communication related to the subject matter of these materials are intended for informational purposes only, are subject to change, and do not constitute investment advice or a recommendation to you. Such an offer to sell or solicitation to buy an interest in the Fund may be made only by the delivery of the Fund’s Confidential Private Placement Memorandum (the “Memorandum”) specifically addressed to the recipient thereof. In the event that these materials and the Memorandum are conflicting, the Memorandum’s terms shall control. Please review the Memorandum fully and consult with your legal and tax counsel, as appropriate. All documents should be reviewed carefully by you and your financial, legal, and tax advisors. Any product or service referred to herein may not be suitable for all persons. This information is intended solely for institutional investors/consultants, foundations and endowments as well as for “accredited investors” (as defined by the Securities and Exchange Commission (“SEC”) under the U.S. Securities Act of 1933, as amended). Any reproduction of these materials, in whole or in part, or the divulgence of any of the contents, is strictly prohibited (excepting that the tax treatment and tax structure of any Fund may be disclosed as necessary), except to the extent necessary to comply with any applicable federal or state securities laws. These materials are intended for the exclusive use of the designated recipients and may not be reproduced or redistributed in any form or used to conduct any general solicitation or advertising with respect to any Fund or investment discussed in the information provided. The Fund has not been registered or qualified with, nor approved or disapproved by, the SEC or any other regulatory agency nor has any regulatory authority passed upon the accuracy or adequacy of any information that has been or will be provided. In addition to restrictions on the transference of an investor’s interest in the Fund, there is no secondary market for the Fund, and none is expected to develop. Fees and expenses may offset the Fund’s portfolio’s trading profits. Although the Fund or investment professionals managing it may have a significant track record, this type of investment should be considered speculative and involves a high degree of risk. All materials are meant to be reviewed in their entirety, including footnotes, legal disclaimers, and any restrictions or disclosures. Past performance is no guarantee of future returns. The Fund’s performance may be volatile, and the investment may involve a high degree of risk. The Fund is intended only for sophisticated investors who meet the investor suitability requirements described in the relevant Memorandum and who can bear the risk of investment losses, including the potential loss of their entire investment.

Topics: Real Estate Investing, Middle Market Housing

Leave Comment