Large Employers Building Affordable Housing For Workers: Wave Of The Future?

It is widely believed that the U.S. has a housing shortage, although the extent varies by location. Zillow.com says the U.S. has a shortage of 4.5 million homes, which has grown by 6% over the last year.

Orphe Divounguy, senior economist at Zillow, noted that the lack of affordable private homes pushes up rental prices as demand for renting grows. The basic problem is that more families are created annually than housing units.

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The Biden Administration has proposed tax incentives for homebuilders to build over two million new homes. In his State of the Union address, Joe Biden also proposed a new tax credit providing $10,000 to first-time homebuyers.

However, the fine print indicates the tax credit isn't as significant as it sounds. The credit is only $5,000 per year for two years. For someone in the 22% tax bracket, the savings would only be $1,100 each year. Another problem is the credit given in the year after the home closes. So, the credit does not help prospective buyers with a down payment, closing costs, moving expenses, or commission after the NAR lawsuit.

One new solution for the housing shortage has emerged from large employers building affordable "workforce housing" for their employees. Several large tech companies, such as Alphabet Inc. GOOGL, Tesla Inc. TSLA and Meta Platforms Inc. META, are building towns with rental homes to attract employees. Google also offers a housing stipend and relocation bonus to help with relocation and housing expenses. Meta has a similar housing assistance program for some employees. 

Tesla has built a town called Snailbrook near Austin, TX, with over 100 rental homes. Rents start as low as $800 per month. The town includes a pool, gym, outdoor sports area and a Montessori school for a small number of students. 

Some of Florida's largest employers are also getting on board with workforce building. In Tampa, General Hospital has proposed a $60 million apartment complex that will eventually offer below-market rents to its employees. The 160-unit apartment complex has already received $2 million from the county and $10 million from the state. Workers who earn between 80% and 120% of the area's median income (AMI) will qualify to live in the units.

The concept is a win-win for both employers and employees. Workers benefit from having low-cost housing available in areas where rents are normally much higher, and employers benefit by being able to recruit and retain employees who otherwise might decide to move to less expensive cities or states.

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Miami's Jackson Health System and the Miami-Dade County Public Schools are also discussing workforce housing development. The Public Schools are working with Miami-Dade's Public Housing and Community Development Department to build affordable apartments for teachers and other school district employees who earn less than 80% of the median income in that area.

Jackson Health System wants to replace an old office building on the Jackson Memorial Medical Center campus with new apartments conveniently located next to the Metrorail. The project would also include a child care center and improve the Metrorail station to encourage the use of mass transit. At least 50% of the units would be reserved for workers who earn between 60% and 120% of the median income for that area. 

Walt Disney Co. DIS is another large Florida employer that has decided to provide its workers with affordable housing. It's developing an 80-acre housing project near its Walt Disney World park in Orlando. Disney wants to build up to 1,400 apartment units, with over 1,000 reserved as affordable units. Most units will be for families in the 80% AMI range or approximately $50,000 to $90,000. The expected completion date is 2026.

However, as is often the case, Disney has received pushback from area residents who felt the housing development would increase traffic and affect their quality of life. In a meeting in September 2023, Orange County officials received 104 responses against the project and only 17 in favor of it. Yet, the Orange County commissioners approved the housing project by a 4-2 vote this past March.

While that worked out for Disney, affordable housing projects have been rejected in other areas of the state, such as St. Johns County, due to increased concerns about being able to handle traffic. 

So, private industry has succeeded in developing one possible solution to the affordable housing problem. This certainly could be the wave of the future, as these workforce communities help alleviate some of the difficulties that companies face in recruiting and retaining employees while giving workers an affordable yet quality place to live. The most difficult part will be finding locations that don't bring about extra problems for residents of the surrounding communities.

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