Why Workforce Housing Works for Institutional Investors
This undersupplied segment satisfies multiple portfolio objectives, according to Antonio Marquez of Comunidad Partners.
Workforce housing is garnering more attention as an institutional asset class because it offers these investors multifamily specialization and the opportunity to generate better relative returns on a risk-adjusted basis against other real estate asset classes. Supply-demand imbalances and a lower cost of capital with more favorable terms supported by the missions of agency lenders are features that are unique to this market segment.
In addition, workforce housing benefits from subsidies and other incentives without the heavy regulatory burden, providing a scalable investment strategy, given there are 7 million workforce housing units throughout the country.
A value-add supplement to portfolios
Workforce housing, generally defined as moderate-income communities at 60 to 120 percent of area median income, can add value to investors’ portfolios in ways that other multifamily segments may not.
Luxury multifamily, generally defined as high-income communities over 120 percent of AMI, is more susceptible to supply-side risks, and this segment has been in a heavily concessionary environment that has eroded rents and revenue.
Long-term secular supply and demand dynamics fare well for workforce housing, along with attractive debt financing and an asset segment that is scalable yet not broadly institutionally owned. In addition, there are operational levers to drive value creation that are more expansive than other asset classes.
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Revenue enhancement tools that help optimize occupancy, increase resident retention and improve other income are utilized more effectively given the asset segment is fragmented from an ownership landscape perspective and creates operational arbitrage opportunities that are value accretive. Expense savings initiatives commonly implemented at workforce communities like water- and energy-saving systems can help reduce utility bills while boosting property performance. In addition, these communities often provide programming that can help residents achieve a better financial profile while fostering steadier rental income.
For example, at all Comunidad properties, we have partnered with Esusu to offer a free credit-building tool for residents, reporting only on-time rent payments to three major credit bureaus. This has helped more than 74 percent of renters build their credit histories and helped establish 1,251 new credit scores for previously credit-invisible residents. This impact investment strategy helps them maintain strong credit reports and doubles as an incentive to keep a positive rent payment streak over time.
Flexing to market changes
As markets continue to grow, the need for workforce and attainable housing for middle-class workers also grows. A recent report on the 25 fastest-growing U.S. markets in 2024 and 2025 found nine of the top 15 markets were in the Sun Belt, demonstrating the strength of demand for workforce housing in the region.
Many cities are also currently experiencing housing shortages as mortgage rates and housing prices remain at an all-time high, putting homeownership just out of reach for workers earning between 60 percent and 120 percent of the market’s AMI. The need for attainable workforce housing aligns with a readily available tenant base seeking quality residential communities in desirable locations. Investors, owners and operators can benefit from these opportunities by entering or expanding their footprints in Sun Belt markets that are experiencing growth and improving properties, specifically for workforce residents, in neighborhoods where housing costs have risen significantly.
Many markets across the U.S.—particularly in Sun Belt regions—are seeing a continued growth in population fueled by abundant job opportunities, social and cultural amenities, lower cost of living and a favorable tax environment. Yet, despite the positive long-term trajectory of this region, workforce residents in these markets are struggling to find attractive, attainable apartment units near jobs, quality schools and other amenities. This creates investment opportunities for the preservation of workforce housing.
Impact as an investment strategy
For many renters in Sun Belt states, on-site services and social programs at the communities where they live can be just as impactful as affordable rents. Dedicated programs such as job training, after-school tutoring and financial literacy workshops support residents’ economic well-being, personal growth and community engagement. In turn, these can help cultivate resident loyalty and reduce turnover and vacancies, resulting in stable, more resilient communities.
Many workforce housing residents are families with young children who can benefit from after-school tutoring and homework help. For example, we partnered with Learn To Be, a nonprofit organization providing more than 700 tutoring sessions at our afterschool program, both in-person and virtually. This provides a safe environment for children while they access the educational resources needed to succeed.
Multifamily investment in workforce housing can be a catalyst for positive change and a vehicle of opportunity for a spectrum of stakeholders, including investors, residents and the community at large. This asset class can be a strong, resilient addition to investors’ portfolios, offering opportunities for steady returns while making a positive impact on working-class residents in underserved markets.
Antonio Marquez serves as principal & managing partner at Comunidad Partners, a diverse investment management firm that is vertically integrated and exclusively focused on workforce and attainable housing.
