Don’t Let Class A Product Obscure Need for Affordable Housing
- Jul 21, 2016
Class A communities are sprouting up at a record pace, competing with one another to provide the most swanky, upmarket amenities. The competition for our country’s highest earners, however, has left many without opportunities to secure clean, safe and affordable housing for their families. Most egregious is that our nation’s protectors and caregivers—our firefighters, police officers, nurses and teachers—are unable to find rental housing in the locales in which they provide their care. For these folks, there is a dearth of workforce housing.
We’re well aware of this void at CAPREIT and have systematically acquired a bevy of Class B and C communities, refurbishing them to help address the need for quality affordable housing. This is not to imply that we do not have any Class A communities in our portfolio—we clearly do—but with ritzy communities being developed in breathtaking fashion, my company is acutely aware that middle-class families still need a quality place to call home.
Yet, we can’t solve the problem alone. The demand for workforce housing is too great for any one company to resolve. Here are three reasons why owner/operators should care:
- Big financial opportunity: Where there’s demand, there’s financial opportunity. Sure, the idea for many owner/operators is to hit it out of the park with an A++ community, but that doesn’t mean money isn’t on the table elsewhere. Just because you’re not charging renters an amount that only those with hefty salaries can comfortably handle, it doesn’t mean that the affordable housing concept can’t be lucrative. The overhead of operating workforce housing is significantly less than that of a luxury community, and passing along the savings to the renter is a win-win for everyone. Renters can enjoy living at a reasonable rate, while decent profit margins continue to exist for the owner/operator.
- Industry PR: The longer the luxury community trend goes on, the higher the risk of negative PR about rising rents and the middle class being unable to afford housing. The explosive market of the past few years has caused rent to skyrocket in nearly every locale across the country. That boom increases the risk of negative publicity about the industry. Stories like this can encourage legislators and interest groups to act. Their actions could cool the market nearly as rapidly as another economic downturn. But with an increase of affordable, workforce options, the threat of rent control could be tapered. That would allow the high-end communities to continue charging market rate, while enough options existed for those who can’t afford to—or don’t want to—pay it.
- Need for firefighters and police officers: First responders are important friends of ours. Simply put, we need them. The more difficult it is for them to find housing, the fewer people will go into those professions. That will make it more difficult to get service when we need it most. While most major cities have no shortage of police officers and firefighters in a competitive market, you’ve undoubtedly heard horror stories of midsize towns that were unable to deploy quality law enforcement and emergency teams. If any catastrophe occurs, the limited department struggles to handle it.
These are some of the reasons why CAPREIT focuses its primary acquisition efforts upon secondary and tertiary markets that do not experience the rate extremes of core markets. Our protectors and caregivers, after all, need access to safe and welcoming homes to raise their families.
Opportunities are there to reshape the multifamily landscape and give it some balance. Sure, workforce housing isn’t as sexy. But the benefits are wide-ranging, both for the workforce consumer and for the owner/operators.
Andrew Kadish is the president of CAPREIT and is responsible for the day-to-day administration of all company matters. Kadish is a member of the Bars of New Jersey and Pennsylvania as well as a member of Young Presidents’ Organization (YPO). Prior to joining CAPREIT in 2005, Kadish served as a law clerk to the Honorable Diane Pincus of the New Jersey Superior Court. Kadish holds a Juris Doctorate degree from the Villanova University School of Law. He received his Bachelor of Arts degree from the University of Pennsylvania. Kadish is a member of the Bars of New Jersey and Pennsylvania.