Multifamily Workforce Housing Investments in Texas

More individuals and families are renting today by necessity, not by choice. $1.6T in student loan debt, an aging generation looking to downsize, inadequate household savings, rising home prices and lagging incomes. It all has fed an economic trend toward renting.

Yet, the multifamily industry struggles to supply new apartment units at an affordable cost to those most in need. This has left an existing inventory of investment opportunities where added value can be created and risk-adjusted returns can be maximized.

Why Texas

Texas: 10th Largest Economy in the World

Texas has the 10th largest economy in the world boasting a $1.89 Trillion GDP! That financial engine is driven by 50 Fortune 500 global headquarters and 14 Global 500 companies that are attracted to a Texas’ pro-business environment. Texas is a Right to Work state with NO corporate income tax, NO personal income tax, a diverse workforce, and an attractive Cost of Living that states such as California, New York, and Illinois cannot compete with. As an exclamation point, Dallas-Fort Worth (DFW), the heart of Texas, is the only region in the U.S. to host three Fortune 10 company headquarters. Below, you can discover some more fast facts about Texas, DFW, and how people continue to migrate to Texas from other areas of the country and the world.

Over 342,000

Jobs created in Texas during 2019

Texas created 1 out of every 6 jobs in the U.S. in 2019

50 Fortune 500 Global HQs

Explore the full list of Fortune 500 companies headquartered in Texas

Exxon Mobile
McKesson
AT&T
American Airlines
Southwest Airlines
Texas Instruments
Kimberly-Clark
Tenet Healthcare
D.R. Horton
J.C. Penney
GameStop Corp.
Dean Foods
Alliance Data Systems
Yum China Holdings
Fluor

Source: 2020 Fortune 500

Texas GDP Comparison (2019)

Texas -- $1.89 Trillion

Russia -- $1.70 Trillion

Spain -- $1.39 Trillion

Mexico -- $1.26 Trillion

Saudi Arabia -- $793 Billion

Dallas-Fort Worth -- $524 Billion

Austria -- $446 Billion

UAE -- $421 Billion

South Africa -- $351 Billion

Portugal -- $238 Billion

Source: World Bank, IMF GDP data, BEA, 2019

DFW Population Growth

Over 400

People added per day in 2017

Over 973,000

People added 2010-2017

51 %

Population increase by 2045

There are more people in DFW than the combined populations of Maine, Vermont, North Dakota, South Dakota, Wyoming, Montana, Alaska and Hawaii.

Why Multifamily

Generations of Renters

More individuals and families are renting today by necessity, not by choice. 65% of young adults are renters and 48% of an aging Baby Boomer generation have no money saved. Whether it’s the $1.5T in student loan debt, an aging generation looking to down size, lagging incomes or rising home prices, it has fed an economic trend toward renting.

Inconvenient Truths

Data depicts affordability as the #1 housing issue
Health insurance up 131% in last 10 yrs
A growing $1.6T in student loan debt
204% increase in senior bankruptcy (‘91-’16)
Almost half of Baby Boomers have NO savings
29% of Americans have less than $1,000 in savings

65 %

of young adults rent

36 %

U.S. Households Rent vs Own

20.6M

apartment units in the U.S. (~$3.0T)

2.0M

apartment units in Texas (~$240.7B)

4.6M

more U.S. apartment units needed by 2030

Why Workforce Housing

29 %

of U.S. households have under $1,000 in savings

48 %

of “Baby Boomers” have NO savings

25 %

of U.S. renters spend ≥ 50% of their income on rent

Resilient, Value Added Investment Opportunties

The multifamily industry struggles to supply new apartment units at an affordable cost to those most in need. The vast majority of new supply is made up of higher-end properties geared toward those who must be able to afford higher rents. This leaves an existing inventory of investment opportunities where added value can be created and risk-adjusted returns can be maximized.

Features of Workforce Housing

Existing properties typically built between 1970‘s-1980’s
Affordable Housing with no government subsidy
Renting by necessity, not choice
Outperforms newer properties in occupancy and rent growth
Generally shielded during downturn – Counter cyclical
Negative supply

Workforce Housing Profile

Workforce housing tends to fall within a certain rent range for any given market. The distribution (bell) curve below represents a Metropolitan Statistical Area (MSA). The top 20% of rents in an MSA can be considered “Class A” properties. Workforce housing typically falls between the 10-60% thresholds though Area Median Income (AMI) and other factors can make an impact on the exact percentages.