Attractive Options Fill the Affordable Housing Void.

A growing cadre of real estate professionals are delivering quality, low-cost properties to an underserved market. Their products are quickly being purchased, rented, and even waitlisted.

Since the housing industry began to recover from the Great Recession, most developers, builders, and architects have focused on market-rate and luxury properties. These segments helped them reap healthy profits by charging what a market would bear. Now, many regions have peaked and are starting to see increasing inventory, softening prices, and squeezing profits due to higher costs for land, labor, materials, and government compliance fees. But at the opposite end of the spectrum, affordable and workforce housing sales have climbed, and more industry professionals are noticing the huge lack of inventory and the pent-up demand.

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“About 80 percent of all new multifamily construction in the urban core has been luxury, which doesn’t help those who earn 60 percent to 120 percent of the area median income,” says Elie Rieder, founder and CEO of Castle Lanterra Properties in Suffern, N.Y., an investment firm focused on the multifamily workforce market. “These people are our police officers, firefighters, teachers, nurses, and other middle-income professionals who serve our community and deserve quality rental housing at an affordable price point.”

Until recently, many developers shied from affordable housing because margins associated with these properties were slimmer due to escalating building costs. Income or government regulations also restricted what prices could be charged, and the category of affordable housing had a negative connotation due to the stereotype of crime-ridden, dilapidated public housing, such as Pruitt-Igoe in St. Louis and Cabrini-Green in Chicago, which have both been demolished.

Despite the challenges, more developers now are jumping in to help—at a much-needed time, too. The overall affordable supply continues to diminish as more than 100,000 units are lost annually due to obsolescence, substandard conditions, or conversion to market-rate apartments, according to Multi-Housing News.