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Filling The Missing Middle: DFW Developers Aim To Build More Housing Closer To Where People Work

Ryan Combs has a story about a town on the north side of the Metroplex that hoped to become the next Highland Park, an affluent suburb at the heart of DFW. But it also wanted an H-E-B supermarket. To the town’s dismay, H-E-B declined the request, citing the lack of potential employees living in the area.

Nearly 63% of Dallas city employees don’t live there, according to a city census. One reason is likely a lack of workforce housing.

“H-E-B said, ‘Day one, we’ve got to hire 200 workers. We can’t find enough workers within 45 minutes of this town to come live here, so you don’t get your grocery store,’” said Combs, senior vice president of affordable housing at JPI, a market-rate multifamily developer that recently forayed into workforce housing. “You only want millionaires, and millionaires don’t want to work in grocery stores.”

In many areas of DFW, people can’t afford to live where they work. The latest city of Dallas employee census showed close to 63% of people who work in the city don’t live there. For firefighters and police, it is closer to 80%. Combs stopped short of naming the town in his anecdote, but said it eventually realized the flaw in its logic.

“A lot of communities — that community as well — have figured out that to be a healthy community, you’ve got to have good housing for everybody — from the bottom of the totem pole to the top,” he said.

The Metroplex is bursting at the seams with job opportunities as companies flock to North Texas. At the same time, the cost of housing is going up. According to the Bureau of Labor Statistics, housing was the largest expenditure for Dallas-area residents in fiscal year 2019-20, accounting for 37.4% of the area’s household budget, which is higher than the 33.8% national average.

“Housing tax credits have served a very specific demographic, and it continues to do that well. Market rate has served another demographic,” Combs said. “But there’s this missing middle — the people who make too much to live in tax-credit funded housing, but really squeeze to be able to live in market-rate housing … Teachers, firemen, policemen, public servants and childcare workers … they’re getting priced out.”

According to the Urban Land Institute, workforce housing is affordable for households earning between 60% and 120% of the area median income. In DFW, AMI is $93K a year, which would put households on the lower end of that salary spectrum at about $56K. The lack of workforce housing has grown so severe that businesses like Granite Properties, which owns the Hilton Hotel at Granite Park in Plano, are paying employees more to drive to work from out of town.

“We’ve just had to increase their pay to subsidize that commute, because they come from 30 miles away — they don’t live in West Plano, unfortunately,” Greg Fuller, Granite’s president and chief operating officer said at a Feb. 25 Bisnow event. 

Among the many factors developers consider when choosing where to build is access to labor. Denton Walker, regional partner with Transwestern Development Co., said this was one of the top two reasons his company chose Fort Worth for its latest industrial project, Cowtown Crossing.

Cowtown Crossing

“It has become really strategic to build industrial where a lot of the rooftops are because that’s where the demand is and that’s where the labor is,” he said. “You’ve got to have great access to infrastructure — that’s No. 1 — but you also have to have good proximity to labor.”

JPI’s strategy for bringing workforce housing to a community is by forming public-private partnerships that allow the developer to build properties where 50% of the units are offered at fixed rents. Combs said this removes the cost burden on cities, especially smaller cities where there is not as much money to fund development.

“A lot of these communities don’t have the ability to write a big check to close gaps to be able to serve those people,” he said. “This allows us to be able to fill the gap.”

So far, JPI has partnered with the cities of Rowlett and Anna on two projects, but another half dozen are in the pipeline. For its project in Rowlett, JPI partnered with the city’s Housing Finance Corp., which exempts the development from property taxes due to the corporation’s status as a nonprofit. This, in turn, lowers JPI’s operating expenses, Combs said. 

“In exchange for the Housing Finance Corp. becoming a partner, we agreed to limit and cap rents on half of our units to 80% AMI,” he said. “It’s a way for that community to provide an economic development benefit without writing a check.”

JPI is just one example of a company that is working to address this issue. Hope Housing Foundation, a McKinney-based nonprofit, recently announced that it will bring a 400-unit workforce housing development to the rapidly growing city of Princeton, according to reporting by the Dallas Business Journal. Using a financing mechanism similar to what is employed by JPI, the city of Dallas partnered with Mintwood Real Estate to bring 215 workforce units to Oak Cliff, according to the Dallas Morning News.

Large municipalities like Dallas may have better access to funds, but delays in the permitting process have created an equally large barrier to housing development. Cyndy Lutz, a Dallas-based housing advocate and former executive vice president of neighborhood investment for Dallas Area Habitat for Humanity, said proactively seeking out companies willing to build these projects and ensuring their process is minimally impacted by bureaucratic red tape is critical to the city’s ability to provide housing for its workforce.

“We need to know who are the developers who are willing and able, and we need to make their lives easier,” she said. 

Latosha Herron Bruff, senior vice president of community engagement for the Dallas Regional Chamber, said the lack of workforce and affordable housing in North Texas threatens the quality of life for many residents, which in turn damages the economy. The region’s ability to attract business hinges on its ability to house workers, she said.

“When we look at the DFW region, we know that there is a north and south divide, where you have 60% of the population living in southern Dallas County; however, they only represent 19% of the tax base,” she said. “You have workers and a talent pool that exists in southern Dallas County, but they are actually leaving the places where they live to go work further north.”

Despite obstacles to development, the lending appetite for workforce housing has grown in recent years, according to Amber A. Rao, vice president and senior multifamily mortgage banker with KeyBank. Record transaction volumes in 2021 for multifamily projects generated more demand for loans, which increased the lending volume for workforce housing as well.

“Lenders are leaning in on workforce housing projects in North Texas, which is one of the most vibrant markets in the country,” Rao said in an email. “When rents are more attainable, there’s a larger pool of potential renters who can afford to live at the property, which makes these projects very resilient.”

JPI is taking its model to municipalities across the Metroplex and pitching it as an economic tool. Cities large and small are struggling to meet the housing demands of the region, and he said a partnership between the public and private sectors is what is needed to rise to the occasion.

“Most communities in North Texas are now realizing that there’s a strain on the people they want living in their communities,” Combs said. “When I go in, and we’re talking with the city of Anna, Rowlett, Fort Worth or Dallas — any community in North Texas — we’re saying, ‘Do you want your teachers, your public servants, living in your community?’ This is a tool for us to work together for that to happen.”