A Workforce Housing Primer: What is it, who is producing it, and why does it matter?
Providing housing for the average worker in an area is becoming more of a challenge as housing prices continue to rise and wages stagnate. But Housing Virginia is here to give you the tools to rise to the challenge.
What is workforce housing?
In the past, workforce housing has been based on a relatively simple set of definitions:
Workforce Housing (n) [werk-fors how-zing]: Housing options that are affordable to a region’s essential workforce.
Essential Workforce (n) [es-en-shul werk-fors]: The workers that staff a region’s essential institutions and amenities, e.g. teachers, emergency personnel, nurses, utility workers, sanitation workers, service/retail workers.
Often, this refers housing that is affordable to workers in “bread and butter” industries such as those listed above. Often, these are the industries and jobs that fall within the 60%-80% AMI range. However, the people that keep the lights on shouldn’t be the only people living in a community. Regions have other industries that need workers, and those workers shouldn’t be saddled with a 90 minute commute every day. Here’s a definition that’s more inclusive of a broader workforce:
Workforce Housing (n) [werk-fors how-zing]: Housing options that are affordable to a region’s essential workforce and workers in the region’s large and growing industries.
This definition expands workforce housing to include the majority of a region’s workforce, usually making 60%-110% AMI. As populations change, there has to be room for the largest industries to change. For example, in places with aging populations, more and more home health aids are needed. Why not build housing for that workforce, too?
In places like the Washington, D.C. area, housing in or close to the city is becoming unaffordable for federal government workers, pushing them out to far-flung suburbs. Once there, their relatively high buying power creates an incentive to build more expensive homes, which prices out the workers of those suburbs even further. It’s a vicious cycle, but workforce housing could be the solution.
Understanding Virginia’s Housing Gap
Strategies, Solutions, and Best Practices
In 2017, James City County, Virginia created a task force whose focus was the production and improvement of housing available to the county’s workers. The task force distilled their findings into four specific recommendations to improve the county’s stock of targeted workforce housing:
- Housing Preservation
- Housing Production
- Housing Access
Scroll on to see how Housing Virginia expanded these categories to include examples of state-and-region-wide strategies and best practices:
Local/Regional Naturally Occurring Affordable Housing (NOAH) Preservation Program
This strategy ensures that NOAH is maintained in good condition while also maintaining affordable monthly costs.
- Offer both incentives and penalties to owners of NOAH. Implement code enforcement measures to ensure continuing affordability.
- Local housing officials: monitor and track NOAH.
- NOAH owners: partner with public and non-profit entities to ensure continuing affordability.
- Local governments: offer a range of incentives (tax “rebates,” performance grants, special financing, etc.) to encourage owners to preserve affordability while maintaining building conditions and financial profitability
- Community development organizations: explore acquisition of NOAH to preserve affordability through special loan and equity funds.
- Financing agencies and other funders: create and promote financing schemes to encourage preservation or enable acquisition by CDCs.
- Community advocates and residents: raise awareness and guide preservation implementation.
Encourage rehabilitation and extension of affordable use agreements
This strategy prevents the loss of affordable housing to market rate conversion by entering into MOUs with new owners.
- Jurisdictions and localities more closely track affordability periods for properties using LIHTC or similar financing, and incentivize owners in various ways to maintain the affordability of the given housing options.
- Local and state housing officials: monitor and track housing with expiring subsidies
- Affordable housing owners: partner with public and nonprofit entities to ensure continuing affordability
- Community development organizations: explore acquisition of expiring affordable housing
- Financing agencies and other funders: create and promote financing schemes to encourage preservation
- Community advocates and residents: raise awareness and guide preservation implementation
Best Practice: Longtime Owner Occupants Program (LOOP)
Location: Philadelphia, PA
The LOOP provides tax relief for eligible homeowners whose property has experienced a 50% or higher increase in assessed value due to redevelopment in the surrounding areas. Once eligibility has been determined based on location and duration of ownership, the program works by locking in a limited assessment increase to 50%. While not expressly targeted towards workforce, this program and those like it promote the preservation of affordable homeownership and long-term occupancy by protecting against sudden spikes in real estate taxes. The program is administered by the city’s Department of Revenue.
Create a Community Land Trust that is targeted to households making 80-115% AMI
A shared equity homeownership model allows income-qualified homebuyers to buy quality homes at below market value. The CLT retains ownership of the land while the buyer owns the improvements, thus reducing the cost of the home. The home’s future value is restricted by the ground lease, which establishes a model for permanently affordable homes.
- At sale, the homeowner takes possession of the improvements only, and signs a 99-year ground lease. This document ensures that the homeowner will have full rights to use their land, restricts the resale price, and sets the expectation that the future buyer will also be income qualified.
- CLT staff: Oversee renovation and building projects, community outreach to educate about program.
- Financing Agencies: Create a loan product for improvements only, factoring in a ground lease agreement that survives foreclosure.
- Private and public sector funders: Provide funding opportunities used for real estate development and gap financing.
Best Practice: Workforce Housing Program
Location: Montgomery County, MD
Montgomery County’s workforce housing program promotes construction and increases availability of housing for would-be commuters who cannot afford the higher costs of housing near their workplaces, but are not income qualified for other LMI housing programs. For-sale homes through the program have a 20 year control period, enforced through covenants that ensure the property will be occupied as a primary residence, and that set a resale price and maximum amount for refinancing. Half of the proceeds from the sale of homes outside the control period go into the County’s Housing Initiative Fund. Rental units through the program are made available through a number of rental providers that designate a portion of their units to be affordable to households with incomes at or below 120% AMI. The program is administered by Montgomery County’s Department of Housing and Community Affairs and private multi-family developers.
Best Practice: Residences at Government Center
Location: Fairfax, VA
The Residences at Government Center is a 270-unit complex intended for households making between 50-60% AMI. It is adjacent to the Fairfax County Government Center which employs 3000 people, some of which are likely to be residents. County-owned land is leased for $1/year. Project is split into 2 transactions — 1 funded with 9% LIHTC from VHDA, the other funded with 4% LIHTC combined with tax-exempt bonds from Fairfax RHA. The Residences are a result of a Public-Private Partnership between Jefferson Apartment Group (co-developer), Stratford Capital Group (co-developer and LIHTC syndicator), TD Bank (LIHTC investor), Wells Fargo (lender), and Fairfax County.
Expand Homebuying Assistance
This strategy creates a “one-stop-shop” for workers and residents looking to buy a home in the locality and expands down payment and closing cost assistance.
- Local government: Increases staff of homebuyer assistance programs & focuses them on creating partnerships with entities involved in the homebuying process in the locality. Partnerships should be formalized with clear responsibilities and goals.
Local Housing Voucher program
This strategy assists households who hold jobs in the locality with entering the private rental market.
- Establishes a local housing choice voucher, similar to the federal vouchers, that prioritizes families who hold jobs in the locality using local resources
- Local housing staff: Conduct outreach with eligible families and landlords, reach out to other localities who have this program.
- Local administration: Use dedicated HTF resources, set clear rules and priorities for the program, and set a reasonable annual goal for the number of households you want to help
Best Practice: Affordable Dwelling Unit/Workforce Dwelling Unit Program
Location: Fairfax County, VA
The ADU/WDU program creates mandatory set-aside Affordable Dwelling Units in smaller multifamily developments; offers density bonuses up to 20% for large projects that set aside at least 12.5% of units as ADUs; 10% bonus available to smaller developments with at least 6.25% ADUs. There is an affordability period of 30 years, renewable for for-sale ADUs and nonrenewable for rentals. ADUs must be distributed among non-ADUs and outsiders should not be able to distinguish them based on unit quality. One-third of a development’s ADUs are restricted to <50% AMI, the other two thirds restricted to <70% AMI. A similar voluntary Workforce Dwelling Unit program is available for high-rises and targets the 80%-120% AMI range.
Local Housing Trust Fund
This is a flexible pool of capital that can be used to fill in funding “gaps” for projects and increase subsidies. It creates a dedicated funding source for local workforce housing that can be used to leverage state and federal funds as well. It allows more flexibility in supporting development of Workforce Housing.
- Local legislature: funds HTF with consistent appropriation from budget
- Local government staff: create policy documents with clear priorities so that all stakeholders understand; solicits support from private sector
Voluntary proffer/commercial linkage fee
Payments are made by developers of residential and commercial properties as part of a rezoning to increase the density of a site. Frequently made on a square-footage basis. For example, in Tysons Corner, developers pay $3 for every square foot of commercial development that goes toward workforce housing in the area.
- Local legislature: pass a proffer or linkage fee into law
- Local planning staff: administers program, collects proffers and fees from developers
Best Practice: Over $100 million in public bonds and private funds
Location: Charlotte, NC
A long series of community meetings helped create large-scale public support for affordable housing, which led to 69% of voters approving $50 million in dedicated public bonds for the regional Housing Trust Fund. An additional $50 million was raised from corporate and private support, and is being administered by LISC.
WORKFORCE HOUSING DIRECTORY
Browse our directory to find developers and partners committed to workforce housing in your region:
If you want to add your firm to this directory, please contact us!