Connecticut-based OneWall Partners is launching a $50 million preferred equity fund to attract investors to the workforce housing sector in the Northeast.
The Nova Appian Preferred Income Fund I will be focused on New York, New Jersey, Pennsylvania and Connecticut. It will target areas that are close to transit for commuters, who are overwhelmingly opting to rent homes instead of buying them.
The workforce sector has attracted $375 billion of investment in the last five years, which accounts for 51.3 percent of multifamily assets nationally, according to a report by CBRE.
Last year, affordable housing developer L+M Development Partners started raising $500 million in private equity for an affordable housing development fund.
The workforce housing sector attempts to fill the gap between government-subsidized low income housing and affordable housing programs. It targets renters who have stable jobs, but lagging incomes, who won’t be on the market for buying a house anytime soon.
According to census data, renters make up 35 percent of the national population — up from 27 percent in 2000. Nearly 40 million households spend more than 30 percent of their income on rent, according to a 2018 report. And since more workers are renting instead of buying homes, the workforce housing segment has seen more interest.
Affordable housing, close to transit and within commuting distance of the city is turning places like New Rochelle and the Hudson Valley into the new outer boroughs.
That dynamic, according to OneWall Partners CEO Nate Kline, makes for a reliable investment, especially in a potential economic downturn.
“For where we are in the cycle, this is an asset class with a focus on middle class housing, the price plan and location is such that you have pretty stable employment, and households start to look for opportunities to save money on housing costs. We fill that void with this product,” said Kline.
Brian Whitmer, director of Cushman & Wakefield New Jersey, predicted in August that there would be more investor interest in upstate New York from downstate firms, who may be looking to put their capital in areas that are not hindered by rent regulation. Now, according to Whitmer, that investor interest is beginning to “snowball.”
“As we’ve covered that market for multiple decades, we’re seeing more and larger transactional activity,” Whitmer said. “But this is something that will take some time, and it took rent control to get it going.”
In New York, the fund will focus especially on the Albany region and Syracuse. The firm says it will be looking to invest in areas with workers in education, medicine and government.