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The challenges investors face in the affordable workforce housing segment as outlined by Maxwell Drever

Maxwell Drever

Investors who invest their money in real estate face many challenges when investing in the workforce housing segment, which belies the promise of a lucrative business without good institutional and governmental support, believes Maxwell Drever.  The financial cost is just one of the many challenges that investors face when investing in affordable housing. It requires adequate support from public funds for major investments to ensure that a part of the housing near transit reaches low- and moderate-income families.

Moreover, the lack of information about the updated inventory of public land, local zoning regulations, and extreme variations in housing costs across regions restrict investment options in affordable housing.

Here are some of the challenges faced by investors when they think about investing in workforce housing.

Ensuring affordability in the long run – suggestions from Maxwell Drever

The interest shown by real estate investors alone is not enough. To sustain the market of workforce housing in the long run. Unless backed by major investments of public funds to ensure long-term affordability. Housing for the low and medium-income groups. In addition, there is the need to protect the public investment by taking suitable measures. To ensure that families enjoy continued access to affordable housing for many years.

 However, the major programs that aim at encouraging investments in affordable housing belie expectations of long-term affordability. For example, the most extensive federal program HOME program. Earmarked for affordable housing stipulates minimum 15-year affordability for ownership of workforce housing. And a minimum of 20 years affordability for new construction of rental housing. Moreover, other tools like FHA insurance for low-income families are not in sync. With programs like community land trust programs that seek to provide long-term affordability.

Catering to very low-income residents around transits

According to Maxwell Drever, the financial feasibility of developing and preserving housing in attractive high-density locations mainly for low-income families who earn less than 50% of the median income depends primarily on dedicated rental assistance from federal subsidies. Unless communities adopt policies to preserve. And expand housing for the low-income group within or close to the transit areas. It won’t be easy to sustain the initiative in the future in the face of the rising home prices in these areas.  There is a need to keep extending the subsidies of the units. That is about to expire to support the cause. In addition, the lack of project-based incentives offered by public housing authorities is also a concern for long-term affordability.

Greater participation of workforce deeply impacts rent

There is a need to encourage developers to supply affordable housing for the low-income group. Despite building such units as part of the market-rate projects. It might be available in the form of waivers that allow the construction of taller buildings. Then what local regulations would usually permit or offer density bonuses to developers. The other option is to reserve some units for the low-income households by making the rents more affordable.

Bringing the properties within the ambit of inclusionary zoning can help increase affordable housing production. Without any adverse impact on the market rate.

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