As the housing affordability crisis continues and multifamily construction cranks up, one of the hottest debates in the industry is whether workforce housing will be built at all.
Photo by Dhruv Mehra on Unsplash
The high-priced nature of this sector has made it very difficult for developers to build projects at a specific price point. This blog post explores what investors should know when looking into workforce housing as an investment opportunity.
Maxwell Drever formulated the basic idea of affordable workforce housing reconstructed from a broken hotel. From the construction process to financing these developments, there are different steps involved in this process.
Challenges Faced By Affordable Workforce Housing
The idea of reconstructing broken hotels into affordable workforce housing is a good cause for society. However, the entire process is not that simple as few complications are seen from time to time. Maxwell Drever, who has mastered the construction process of affordable workforce housing, has understood the challenges faced by the affordable workforce housing community. Few of these challenges are detailed here.
Availability of Broken Hotels
First, the availability of affordable workforce housing is very restricted in the current market, and very few such assets are available. Second, availability is a challenge because real estate is under development but still open for consumption. Third, the long time required for construction, delays, and frequent plan change cause the project to be abandoned or delayed over time.
Construction Process Of Affordable Workforce Housing
Affordable workforce housing has a unique construction process that includes hotel reconstruction. Therefore, the project construction does not follow any regular procedure. Maxwell Drever states that there are still new challenges in every new project, even after mastering the conversion process. You will have to grasp the unique processes involved before moving forward with this type of asset.
Financing & Equity Structure
Affordable workforce housing is a complex asset that has special financing requirements. While the investment is affordable, it can be very challenging to understand how the financing works and which stakeholder you should approach for this kind of deal. Numerous organizations provide different mortgages and other types of funding, but they generally do not have the same terms as conventional properties. Therefore, it is important to understand how everything works before starting an investment.
For the development of affordable workforce housing, property acquisition is one of the most complicated parts that need a professional team to handle. In most cases, the property is a hotel or vacant land and has a limited price point than conventional land. Therefore, finding someone who can realistically purchase this asset is quite difficult. The land acquisition team has a lot of challenges when dealing with limited resources, and it requires a lot of patience and skill.
These are a few challenges commonly seen with affordable workforce housing projects. However, affordable workforce housing is a community just like any other community in society. To maintain your asset, you will have to ensure that property management takes care of all activities, including managing the tenant base and revenue collection.