Workforce Lodging focuses on providing shelter for people who make less than the median income in a community. This group often includes teachers, police officers, and other essential workers.
Temporary workforce housing can range from basic dormitory-style lodging to fully-furnished apartment buildings or man camps. Typically, these housing options are located near the project sites that require workers.
Workforce housing is a type of affordable housing that provides rental options for middle-income households. It bridges the gap between subsidized low-income housing and higher market-rate rentals in high-cost areas. This type of housing helps people with essential jobs in the community, such as teachers, police officers, and construction trade workers. The income guidelines for workforce housing vary by location, but most are based on the local area median income (AMI). In some cases, developers can receive tax credits to help offset development costs and make the rentals more affordable.
Workforce rental properties are a great investment opportunity for real estate investors who want to provide quality housing to middle-income tenants in their communities. These tenants tend to stay longer than other tenants, which can reduce vacancy and marketing costs. They also value community stability and may be more invested in the property, which can lead to better tenant maintenance and lower repair costs. These characteristics can improve the profitability of workforce rental properties, especially during economic downturns.
The term workforce housing is often used interchangeably with affordable housing, but there are important differences between the two. True affordable housing is aimed at households below 60 percent of the area median income. This category includes the working class, returning veterans, and other people who aren’t able to afford traditional housing in their communities. Workforce housing is aimed at households between 60 and 120 percent of the area median income.
There are a few different types of workforce housing, including LIHTC Housing and RAD Housing. LIHTC Housing is a type of workforce housing that is developed with low-income tax credit incentives. These incentives can include zoning allowances, density bonuses, or direct financing from the city or county. RAD Housing is another form of workforce housing that is developed with public-private partnerships. These partnerships can include private developers, government agencies, or nonprofits. The government agencies that develop these projects are responsible for constructing and operating the workforce housing.
A growing number of employers are offering workforce housing as a part of their benefit packages. These programs allow employees to live in communities near their place of employment, and they can also save money on transportation expenses. While employer-involved housing has its benefits, it is not without controversy. Some people believe that this type of housing is insecure and can affect employment opportunities.
Tax Credits
Workforce Lodging programs offer a number of state and federal tax credits to encourage private investment in workforce housing projects. These credits are available for both residential and commercial properties. They are available to property owners who meet certain requirements, including having a designated local agency certify that the project serves targeted groups of individuals. For a residential property to receive the credit, the rental units must be rented at below market rates to qualified working families.
The credits can reduce the cost of construction and rehabilitation by providing a federal tax credit worth up to 35% of the cost of the project. In addition, states may also provide a tax credit of up to 10% of the cost of the project. State tax credits are generally claimed by the property owner and can be used against taxes such as personal income, corporate income, financial institution excise, insurance premium, and real estate sales.
A recent example of a local program is the Alabama Workforce Housing Tax Credit (AWTC). In Alabama, the credit is designed to provide an incentive for private developers to construct affordable workforce housing in communities with high concentrations of public service workers. Currently, public service workers in Alabama must live far from their jobs, which causes them to spend up to 40% of their income on transportation costs and limits the number of hours they can work each week.
AWTC provides up to $15 million in tax credits for each new development, with up to 10 years of credit availability. The state credits can be applied against sales and use taxes, personal income taxes, financial institutions’ excise taxes, and insurance premium taxes.
NMHC and NAA support the recent introduction of bipartisan legislation in both the House and Senate by Senators Ron Wyden and Dan Sullivan, along with Representatives Jimmy Panetta and Mike Carey, to create a new Workforce Housing Tax Credit, or WHTC. This credit would provide additional resources to produce affordable housing for middle income households – those who earn too much to qualify for the successful Low-Income Housing Tax Credit, but not enough to afford the skyrocketing cost of housing in their communities.
Vouchers
In addition to providing housing assistance, vouchers support work by allowing households to rent stable homes and freeing up income for other costs like transportation. Three-quarters of voucher households are working families, compared to just under half of non-voucher tenants.
The City’s voucher program, called CityFHEPS, provides assistance to New Yorkers who have lived in homeless shelters or face eviction. The program is aimed at families with children and those earning less than 200% of the federal poverty level. But it has been plagued with delays and bureaucratic hiccups, according to a recent state comptroller audit. Renters have complained about delays in getting the right paperwork filed with different city agencies, and landlords say that they aren’t being paid on time.
HPD offers a variety of voucher programs, including enhanced vouchers (EHV), to preserve affordability for eligible households residing in buildings that are converting to market-rate housing. Unlike regular vouchers, a EHV allows for income limits up to 95% of AMI. HPD works with building management to notify icome eligible residents of their eligibility shortly after a building is converted, and invites them to attend an informational meeting on the EHV process.
For families using EHV, the tenant pays 30% of their income toward rent, and NYSHCR pays the rest. Tenants must lease a unit that has been approved for EHV use, and submit the required leasing packet before their voucher expiration date.
Tax-Free Income
The value of meals and lodging provided to employees by their employer may be excluded from an employee’s gross income under certain conditions. This excludes the cost from the payroll taxes withheld by federal and state governments.
Section 119 of the Internal Revenue Code outlines specific circumstances when meal and lodging allowances are tax-free to employees. The law requires that the benefits be offered in addition to other compensation, such as cash, and that they be provided for the convenience of the employer.
To be exempt from taxes, the lodging must also satisfy the requirement that it be on the business premises of the employer. This includes not only housing that the company owns, but property leased for the purpose of employment as well. A case involving a hotel manager who lived in a house on the grounds of a hotel satisfied this condition. The employee lived in the house for a substantial portion of his time while performing his job, and the house was a key part of the company’s operations.
In general, the value of the lodging must be significant to qualify as a working condition fringe benefit. This means that it must be necessary for an employee to accept it as a condition of his employment and that the accommodation is required to perform her duties. The facts and circumstances are critical to determining this. The case of Lindeman, 60 T.C. 609 (1973), is an example of a situation in which the court held that the expense of staying in a hotel for the convenience of the employer was not tax-free to the employee.
For nonresident aliens who work in the United States, the tax rules are different. In those cases, the tax-free meal and lodging allowance is equal to two-thirds of the fair market rental value of a dwelling located in the city where the employee works and reports this amount on her W-2 form as a housing allowance.
Some states, including California, offer similar state tax-free meal and lodging benefits for workers. Typically, the amount of the state tax is calculated based on the fair market rental value of the accommodation and the rate at which it is furnished to the employee.