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Priced Out, Rented In: The Rise of Workforce Multifamily

Why Workforce Multifamily Housing Should Gain Investor Attention

Housing affordability in the U.S. has reached its lowest point since 1984. Restoring affordability
today would require either a 28% drop in home prices, a 400-basis-point decrease in mortgage
rates, or a staggering 60% increase in household incomes—none of which appear likely in the near
term. As homeownership becomes increasingly out of reach for many, rental demand continues
to rise, particularly in the workforce housing segment.

Current Market Pressures:

• Affordability crisis: Income growth isn’t keeping up with home prices and mortgage rates.
• Supply squeeze: Construction starts are down nearly 44% year over year, with continued delays.
• Luxury oversaturation: Most new multifamily units serve the top end of the market, not the middle.

Supply and Demand Mismatch

Despite strong underlying demand, the market has failed to deliver the right kind of housing. Most new multifamily developments have skewed toward luxury units, leaving workforce housing—rental properties designed for middle-income tenants—woefully underserved. At the same time, overall multifamily construction is slowing: starts declined 43.7% year over year through Q1 2024, and with 88% of developers reporting delays due to limited construction financing, the pipeline is expected to shrink even further.

A shrinking supply pipeline and persistent affordability issues are driving long-term potential to an overlooked segment. Workforce housing is emerging as a more stable and resilient corner of the multifamily market. It appeals to a growing tenant base priced out of both homeownership and luxury rentals, yet still in need of quality, reasonably priced living options. Moreover, this segment often benefits from higher occupancy rates, consistent cash flow, and the potential for inflation protection—all while avoiding the oversupply risks associated with higher-end developments.

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Disclosure: Information presented is for educational purposes only, is subject to change from time to time, and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.