GHC Thematic Report: These 3 Trends Will Shape Workforce Housing in Northeast Ohio
Workforce housing is a term gaining cachet with property lenders and developers as housing needs across the U.S. continue to evolve. The term is defined as homeownership, as well as rental housing, that can be afforded by a moderate to middle income and is located in close proximity to workforce centers.
Perhaps the most common definition of workforce housing comes from the Urban Land Institute, which defines it as: “housing that is affordable to households earning 60 to 120 percent of the area median income.” In other words, the classification includes properties where housing costs are no more than 30-40 percent of a person’s income.
In high-cost markets such as Washington D.C., Los Angeles, and San Jose, affordability has become a major concern not only for low-income households, but for public employees, young professionals, and service workers.
At present, there is no county in the country where a worker clocking in 40 hours a week at minimum wage can afford a two-bedroom apartment, reports the National Low-Income Housing Coalition.
Since price recovery has so far outstripped household incomes, affordability has reached its breaking point even in Ohio markets like Cleveland and Cincinnati, which previously boasted of the low cost of housing.
According to The Urban Land Institute and PwC’s industry report, Emerging Trends in Real Estate 2020, there is a “missing middle — medium-density housing filling a key market niche as well as the affordability gap,” which is an issue in high-cost markets like Boston and Jacksonville, as well as for Cleveland and Detroit.
With barriers to homeownership and steep rental markets continuing to pervade, workforce housing will come to the fore and be highly favored among single and multi-family tenants looking for an affordable solution.
In Northeast Ohio in particular, the following three trends will be staples of the workforce housing market for years to come.
1. Climate migration will spark workforce housing demand
Relocation is no longer a distant prospect for people living in places where the effects of climate change are felt for a season—or sometimes longer. With many states facing climate extremities like disastrous floods, wildfires, and droughts, the hopeless cycle is causing many to consider whether migrating to a different, safer part of the U.S. might be a better option for long-term stability.
Experts have already predicted that one tenth of all people who live in the South and the Southwest will move north in search of temperate climates and better economies in a few years. According to one model, millions will move to cities in the northern Midwest like Cleveland or Akron, which could see population growth of roughly 10 percent.
If climate migration indeed leads to population surges in Northeast Ohio, workforce housing will be more in demand than ever before. Already, Cleveland’s “Big Three” hospital system (consisting of the Cleveland Clinic, Metrohealth, and University Hospitals) and Akron’s hospitals (consisting of Summa Health, Akron Children’s, and Cleveland Clinic/Akron General) draw many young professionals and medical residents to the region. This subset is one of the prime groups that require workforce housing options nearby their places of work.
With the available infrastructure in cities across Northeast Ohio, climate migrants who head to this area of the Midwest will not only gain access to a high quality of life in temperate climates, but to lower costs of living made possible by workforce housing.
2. Workforce housing will see sustained occupancy
The current pandemic has taken hold of the global economy, which has led to wide-ranging effects for the real estate sector.
Beyond the short-term challenges for real estate operations such as touring units or hosting open houses, there are also concerns over the long-term effects the pandemic may have on the housing market: new listing volume is down, mortgage credit standards have tightened, and sustained unemployment may impair demand throughout 2020.
With unemployment claims in the U.S. topping 30 million at the height of shutdowns in May, economic stagnation will mean sustained occupancy among workforce housing renters as Americans prioritize job and residential security.
Since the parameters of the second stimulus plan in the U.S. are still being finalized, it is difficult to ascertain how the first and second quarters of 2021 will unfold for residents in Northeast Ohio. No matter what happens, however, there will continue to be a need for affordable housing, especially as the rental market for larger, Grade A properties faces compression and widespread vacancies.
This is where properties—such as Twin Oaks Crossing in Akron and Shaker Crossing in Shaker Heights— can step forward as innovative options for tenants while many await the second economic stimulus. In both workforce housing properties, residents are likely to sustain their tenancy in lieu of the current turbulent times. This is because workforce housing they offer residents stabilized rents, affordable pricing, and high-value living.
3. Connectivity will be a staple of modern living
The third trend that will define workforce housing in Northeast Ohio in future years is connectivity. Connectivity can be understood not just from a technology standpoint, but from an outlook of community integration as well, where tenants can easily access local amenities.
In Northeast Ohio, the live-work-play districts that spurred 24-hour or even 18-hour downtowns in the 1990s have spread to many suburban communities, which are seeking to become hip destinations in their own right, reports Forbes. The key to success in these areas? Transit access, walkability, abundant retail, restaurant and recreation options, and connectivity.
Offering tenants the option to live, work, and connect with the communities they live in will define workforce housing options, especially for Millennial groups. Moreover, tenants will expect ease of access and convenience when it comes to property technology in an increasingly digital, integrated world.
The most desirable workforce housing properties will embody this awareness that modern professionals expect new technology in rental properties. Amenities that prioritize connectivity—such as keyless locks and smart outlets and switches—will grow to be accepted as the standard in these live-work-play districts, and are already common features of properties in Northeast Ohio.
In Cleveland for instance, Shaker Crossing will establish a full-scale “mesh” network, which means each unit will be fully connected with internet and cable as part of the lease. Other IoT functionalities will also be installed for tenants, including smart locks that give residents remote access to their units and smart thermostats that cut down on residents’ energy costs.
These mesh networks and the advent of IoT solutions is also beneficial for investors and owners of workforce housing properties, who are recognizing the improved operational efficiencies that stem from enhanced connectivity. In some cases, returns on retrofitted smart home technology can be as high as 30%, meaning owners can triple the typical 10% returns that come from most capital improvements.
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Simply put, workforce housing gives working families more choice as to what neighborhood they can live in. By addressing affordability and offering technology-enabled amenities to moderate- and middle-income families, Northeast Ohio will see workforce housing broaden in demand in the years to come.