Investing to House the Workforce

Date

2020-05

Authors

Fitzpatrick, Robert Vale

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Abstract

The United States has a dramatic disparity between the supply and demand for affordable housing. Specifically, there is not enough housing for middle-income workers, such as fire fighters, teachers, and police officers. Among other things, the shortage is causing local economies to be weakened and people to live less happy lives.

The United States is also home to a thriving commercial real estate industry worth trillions of dollars. Investors in this industry have access to seemingly infinite capital to utilize in investments across a variety of property types. It would seem logical for these investors to also invest in the workforce housing industry; however, real estate investors are not doing so. The goal of this thesis is to understand why they are not solving the housing problem and, in doing so, recommend a way for investors to achieve attractive returns while investing in workforce housing.

The findings of this report suggest that workforce housing does not attract investors on a macro scale due to inferior investment returns that are caused, in part, by local government regulations and a lack of subsidies. Investors will not meaningfully contribute to solving the need for workforce housing until investments become more profitable on a national scale. Thus, this thesis recommends a nationwide federal program similar to programs for low-income housing that is dedicated to workforce housing. Until such a program is created, this thesis recommends that investors only enter into a specific group of major US cities where workforce housing investments are feasible; furthermore, this thesis has compiled a list of the best markets for an investor to enter. Through an analysis of demographic statistics and real estate trends in major cities across America, this thesis recommends a list of 22 cities that investors should invest in if they are interested in workforce housing.

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