In recent months, we have heard developers and local government officials tout new home development as workforce housing. They continually say the words but they don’t really know what they mean.
Affordable workforce housing refers to residential units that are affordable to workers and middle-income earners who do not qualify for subsidized housing but still struggle with high housing costs relative to their income. These individuals often include teachers, police officers, firefighters, nurses, hospitality, retail workers, and other essential service providers who play a critical role in the community.
Workforce housing is typically aimed at households earning between 60% and 120% of the Area Median Income (AMI). The exact percentage can vary based on local housing market conditions and cost of living. The focus is on middle-income earners who do not qualify for low-income housing subsidies but cannot afford market-rate housing.
Housing costs (including rent or mortgage payments, utilities, and insurance) should not exceed 30% to 40% of the household’s gross monthly income. For ownership units, this includes the ability to afford a down payment, mortgage, property taxes, and maintenance within the same affordability range. Here on the Shore, a home needs to be in the $125 to $160 range. Rent should not exceed $800.
The key drive is to maintain or create a diverse housing stock Including a range of housing types such as apartments, townhomes, duplexes, and single-family homes.
What is being passed off now as workforce housing is a shell game, getting favored zoning to create incentives for more second vacation homes, which will also serve as short-term rentals during the tourist season.
Zoning and Land Use Regulations that allow for higher density developments and mixed-use projects. These projects should also be focused on areas that are already developed and have water and sewer systems. Avoiding sprawl and denigrating rural areas with more septic systems is less than optimal.
By ensuring that housing remains affordable for middle-income earners, communities can maintain a stable, diverse, and economically vibrant population, supporting essential services and local economies.
According to the Urban Land Institute (ULI), Workforce Housing is defined as housing affordable to households earning between 60 and 120 percent of AREA MEDIAN INCOME (AMI).
Workforce housing targets middle-income workers which includes professions such as police officers, firefighters, teachers, health care workers, retail clerks, and the like (Parlow, 2015).
Households who need workforce housing may not always qualify for housing subsidized by the Low-Income Housing Tax Credit (LIHTC) program or the Housing Choice Vouchers program (formerly known as Section 8), which are two major programs in place for addressing affordable housing needs.
Origins
Workforce Housing finds its origins within the backdrop of affordable housing; therefore, to best understand Workforce Housing, it is important to understand how affordable housing has evolved in the U.S. over the past several years.
Starting with the Housing Act of 1949, and up to the Housing and Community Development Act of 1974, affordable housing was largely driven by supply-side measures from the government.
In this supply-side approach, local governments built, maintained, rehabilitated and owned public housing for low-income individuals (Parlow, 2015).
However, due to the immense demand for affordable housing and limited public resources to keep up with the demand, governments began moving away from this approach.
Instead, governments began to focus their efforts on engaging the private sector in affordable housing development.
The Housing and Community Development Act of 1974 launched two initiatives, the Section 8 program and the Community Development Block Grant (CDBG) program, highlighting a shift in policy from government led affordable housing development to private sector affordable housing efforts (Parlow 2015).
Instead of operating as affordable housing developers, the government would instead support the demand-side of affordable housing by providing vouchers and subsidies to low-income households, who could then use these subsidies in the private market.
Additional legislation was later enacted to further build the supply-side of affordable housing, including the creation of the Low-Income Housing Tax Credit (LIHTC) program in 1986, the HOME program, and the Homeownership and Opportunity for People Everywhere (HOPE) program.
Workforce Housing
It was within this affordable housing landscape that the need for Workforce Housing emerged.
From the 1940’s to the 1990’s, housing was affordable to many middle-income workers due to wages remaining relatively correlated with costs of living, and homeownership becoming more affordable through the introduction of the 30-year amortizing mortgage loan.
However, during the late 1990’s and early 2000’s, incomes began to lag behind rising costs of living, and housing supply for middle-income workers grew stagnant, causing an acute need for Workforce Housing especially in larger metropolitan areas (Parlow, 2015).
The Great Recession of 2007 to 2009 further exacerbated the issue of housing affordability for middle-income workers by significantly reducing the production of new housing units across the nation.
Because affordable housing programs focused on serving households making 60 percent or lower of AMI, middle-income workers were left with fewer housing options available to them in the cities where they worked.