The phrase “workforce housing” might sound like another bit of doubletalk invented in Washington to sell a pol-icy. After all, many so-called workforce housing projects look a lot like the affordable housing developments the industry has been producing for years.
But a surprising number of these workforce housing projects do represent something new: They sell at below average market prices, but they are built with little or no subsidy and may not even include income restrictions.
For example, the 107 townhouses at Peachtree Villages in Atlanta look almost like a conventional housing development – even in its sources of funding. The project received no soft financing and no grants. So the project carries no income restrictions. But Peachtree Villages provides for-sale housing for people who don’t earn enough to pay for a new home at market prices but who earn too much to qualify at most traditional affordable housing projects.
These townhouses at Peachtree Villages sold in 2005 at prices starting at $110,000, significantly less than the price of other new construction in the area.
“The under $130,000 price point here in Atlanta is disappearing,” said Whitney Aguilera, marketing coordinator for Peachtree Homes, Inc., the project developer.
In January, Peachtree Villages won a 2005 National Workforce Housing Award from the National Association of Home Builders (NAHB). But the developer’s plan to sell new homes for dramatically less than the average market price is far from unique.
For example, CityView, based in Santa Monica, Calif., is partnering with homebuilders across the country to build large workforce housing projects. CityView was started in 2001. But by the end of 2006, the company plans to have financed 3,500 units of workforce housing totaling $1.1 billion, according to Henry Cisneros, who started the company in 2001. Cisneros is a former secretary of the Department of Housing and Urban Development.
Like most workforce housing companies contacted for this story, CityView focuses on providing for-sale housing to families earning up to 120% of the area median income (AMI). Most of what CityView has built sold at prices affordable to a family earning the median income, Cisneros said.
Since many workforce housing properties receive very little subsidy, their builders have to find other ways to reach an affordable price point. Tax exemptions and local grant programs can help, but are often not enough to create single-family homes cheaply enough.
“We are unable to do it in the detached market,” Aguilera said of Peachtree Villages. “That’s the reason we have moved to the townhomes.”
By building more units per acre, many homebuilders are able to lower their prices. Peachtree Homes built about 10 townhouses per acre on the 11 acres of buildable land at Peachtree Villages.
“It’s what you might call natural affordability,” said Cisneros. “Because the units are smaller and denser they cost less.” Most of CityView’s projects also include townhouses and condominiums.
Finding inexpensive land is another key strategy. The city of Lansing, Mich., gave Abbey Homes, LLC, the site for its 177-unit East Village project. A boys’ school had once stood on the site, but no one had used the land for 30 years.
The free land combined with a little extra density was enough to build the project affordably. “There is no special financing,” said Steve Calverley, vice president for Abbey Homes, based in Bingham Farms, Mich. “It’s a market-rate deal.”
But the prices at East Village are about 20% less than the cost of comparable new housing in the suburbs around Lansing.
The prices at East Village start at $120,000 for the project’s 12 condominiums and rise as high as $220,000 for one of the project’s 33 single-family homes, measuring 2,050 square feet.
East Village is the first new neighborhood built inside Lansing’s city limits in decades, Calverley said. “This is giving them an option for housing they haven’t had in 40 years.”
The 40-year-old bungalows and ranch houses next door to East Village sell for just $80,000 to $150,000 per unit, although some could use some renovation.
So far, workforce housing developers have managed to make a profit without making a killing. CityView’s projects have done well enough so that the company, which started with a $40 million equity investment from the California Public Employees’ Retirement System (CalPERS), now has $350 million in equity and $450 million in debt invested in it from CalPERS and Washington Mutual, Inc.
CityView has partnered with a growing list of for-profit builders like Los Angeles-based KB Home and Santa Monica, Calif.-based Watt Commercial Properties.
Workforce housing programs emerge
In a growing number of places, an average household cannot afford to pay for a rental apartment, much less the cost of owning an average home. For the most part, workforce housing is aimed at these residents.
“The average working family spending 30% of their income on housing – that would be workforce housing,” said Richard Fritz, chief economist for the Federal Home Loan Bank of Atlanta.
Not all workforce housing is built without an official program. In a few, very expensive markets, local officials have created programs to provide rental housing for these families. For example, New York City’s New Housing Opportunities Program provides moderate-income rental housing.
The Community Preservation Corp. (CPC) has been financing housing for low- and moderate-income renters and homeowners in New York City for decades. Like many workforce housing companies, CPC’s work doesn’t rely on deep subsidy programs.
This December, Century Housing, one of California’s biggest affordable housing lenders, established a new company modeled after CPC. The Century Community Lending Co. will eventually provide $100 million in loans to workforce housing projects in Los Angeles.
But in many parts of the country, market-rate rents and the rents at tax credit projects are too close together to leave much room for a new program. There is more space between the median price of for-sale housing and the cost of subsidized housing.
What’s in a name?
Housing experts use the phrase “workforce housing” to describe a tremendous range of projects – not just for-sale projects like Peachtree Villages. The broadest definition includes any housing, for-sale or rental, that is affordable to people ranging from a household with one member working full time for minimum wage to tenants earning up to 120% of AMI, according to the National Housing Conference (NHC).
That definition would include most projects subsidized by the low-income housing tax credit – it would even include projects housing very low income tenants in markets where the average income is very high.
For example, Jamboree Housing Corp. won a 2005 National Work-force Housing Award from NAHB for Montecito Vista, a 162-unit project in Irvine, Calif. Montecito Vista rents its apartments to very low and low-income tenants earning between 30% and 50% of AMI and was built with low-income housing tax credit subsidy.
Certainly this project deserves praise for helping very low income tenants find housing in an expensive market. However, Montecito Vista is hardly a new species of affordable housing. Instead, by calling the project “workforce housing,” the developers make a rhetorical point. In an area like Irvine, where the average income is high, someone earning minimum wage would still have to work full-time just to earn 30% of AMI.
“It’s an attempt to convey that this housing is for working families,” said Conrad Egan, president and CEO of NHC.