Class B and C multifamily units belong to workforce housing, which targets middle-income groups consisting of teachers, firefighters, and others. These people with 60 to 120% of area median income (AMI) cannot buy homes in prime city locations due to steep prices despite being highly employable. As an alternative, they search for affordable housing, which comes with basic amenities and lower monthly rent for their budget. Since construction, material, and other costs tend to be higher for various reasons, developers and investors were hesitant about testing the waters in this niche explains Maxwell Drever. But things are quite different today.
Hotels transformed into affordable housing units for the workforce promise to be a good bargain for everyone involved in the process on multiple grounds. The pioneers of hotel and motel conversions have convinced hotel owners to take this route to overcome all the challenges in their way to progress. Maxwell Drever presents a brief insight into this.
Benefits of hotel conversions into workforce housing
Low vacancy rates
The movement in the class A housing market tends to be higher because of the new options. But class B and class C developments are pretty safe in that sense. The limited inventory and other restrictions don’t allow people to explore much.
Workforce housing inventory has only diminished in the last few years, coming down to 52% from 59%. Due to this, the gap between demand and supply has vastly increased. Hence, it is an opportunity for old hotels and motels to convert into something that can potentially offer a steady income for at least 20 to 40 years, even if not more. At the same time, with other properties becoming out of reach with higher monthly rents, the workforce group will always lean on an affordable choice to save money. Since many hotels and motels occupy strategic locations, these become the right places to seek shelter. It can take care of their travel and provide better connectivity within the community they serve.
The repurposed workforce houses for median income families are free from the tension of the competitive development scene, says Maxwell Drever. Due to the low competition and undersupply, hotel owners can expect their renters to spend extended time on their property against regular new construction housing. Since hotels and motels develop faster than new construction, no one has to play the waiting game. There are thousands of takers for decent accommodation at affordable rents. Hence, it can be another massive advantage for all the parties.
The real estate experts opine that workforce housing will face the problem of undersupply even in the future. It is unlikely to resolve within the next 20 to 50 years. That’s why some hotel owners and investors have become curious about the possibilities in this domain. They understand that it can be the next avenue for them to secure a stable rental income for a long time. Besides, many hotels are already suffering. So trying something new and promising can only be more meaningful than waiting for the business to revive.