A Bright Spot In The Housing Shortage
By Nate Trunfio
The urgent need for more housing seems to be on the minds of every business, community, and real estate leader in the Upstate right about now.
And the need for residential solutions doesn’t appear to be stopping anytime soon. There is a demand for more doors in the downtowns; large housing development requests dominate county council and planning agendas across the region; community leaders remain concerned over the lack of affordable housing; and home construction companies are working to meet the need and catch up from delays caused by the Covid pandemic.
While the need for affordable places to live is strong, there are solutions to create or recapture housing stock. And real estate investors who can pivot their strategies to meet this need can find tidy profits that also benefit communities across the upstate.
One of the best places to do this is with workforce housing.
Workforce housing is becoming one of the brightest prospects in the housing market, and it is a market segment that has long been overlooked. It is proving to be immune to pandemics and recession. Workforce housing is designed for people in middle-income professions such as police officers, firefighters, teachers, health care workers, retail clerks, etc. Think 2020’s essential workers, and the type of housing they need, and you get the right idea.
As long as essential work is needed, there will also be a housing demand for those workers. Because of the demand it creates, workforce housing is considered by many to be a smart area for multifamily investors to consider in the long term. While Class A multifamily investments saw some uncertainty during the pandemic, Class B and Class C properties retained their solid performance.
By 2018, the inventory of Class B and C workforce housing units declined to about 52% of the total multifamily housing stock, down from 59% at the end of 2009. On average, about 120,000 Class B and C units are lost each year due to obsolescence, gentrification, or conversion into Class A units.
Yet demand for these asset classes is strong, which means real estate investors can profit. For example, investors across the country are buying Class C properties that have been neglected, capital starved, or poorly managed, and renovating them to the level of Class B communities that are nice places for much of America’s workforce to live. Many of the multifamily bridge loans Lima One Capital handles are for properties like this. We exist to create opportunities for our customers and employees by financing real estate investors who are building, improving and stabilizing neighborhoods, and helping investors recapture housing units to provide quality workforce housing is a key way that we do this.
We recently closed a loan for an investor to purchase a multifamily property on Poinsett Highway just past Cherrydale. As of the end of 2020, less than a quarter of 112 units on this property were available for rent. After repairing this single project, 75+ units of affordable housing stock will return to the market within five miles of downtown. This dovetails well into both the city and county’s 2040 comprehensive plans and fills a housing need for a key part of Greenville’s population.
In addition to recapturing housing stock through multifamily and FixNFlip projects, the other prime way to create quality housing is through construction. Build-to-rent trends can provide some of this by creating new homes that people can live in without the upfront investment of a home purchase. For many in the workforce, new rental housing provides a perfect option -- especially in a markedly seller’s market where home sale prices are spiking like they are now and it’s hard to purchase a home even when making multiple offers.
It is time for everyone to start finding new and better solutions to the housing crunch, especially when it comes to workforce housing. It can’t be fixed overnight, but it can be fixed if we think and work together.
Nate Trunfio is the senior director of sales and marketing for Lima One Capital. For more information, visit limaone.com.