Why we focus on workforce housing in growth markets
The case for Class B and C apartments as the most durable and underserved segment of the rental market.
If you want to understand where multifamily investing is headed, ignore the headlines about luxury towers and focus on the renters nobody is talking about: teachers, nurses, warehouse workers, and first responders. These are the people who fill the 50- to 150-unit garden-style communities we target at Palm Kaizen Group, and they represent what we believe is the most stable, most undersupplied, and most overlooked segment of the apartment market.
What is workforce housing? By our definition, it is any apartment renting for between 60% and 120% of Area Median Income — units that working-class and middle-income households can realistically afford. This segment has been structurally underfunded since the 2010s, because new construction economics don't pencil without pushing rents into luxury territory. Land costs, labor, materials, and impact fees make it nearly impossible to build a Class B apartment in most Sunbelt markets without charging Class A rents. That gap between what workers can pay and what it costs to build is the fundamental market failure that creates our investment opportunity.
Why growth markets matter. Workforce housing works best in markets where population is growing faster than housing supply. Florida is the clearest example. The state added over 350,000 residents last year alone, and the vast majority are not moving into new luxury towers — they are competing for existing Class B and C units. That competition puts sustained upward pressure on rents in the exact product type we own. Orlando, Tampa, Jacksonville, and the Space Coast are all experiencing this dynamic right now. According to the U.S. Census Bureau, Florida has consistently ranked among the fastest-growing states in the nation, driven by domestic migration, job creation, and business expansion. While housing construction has increased, supply in many workforce housing segments continues to lag behind demand, particularly in high-growth metropolitan areas.
The durability argument. Workforce housing is also the most recession-resilient segment. During economic downturns, renters trade down — from luxury apartments into Class B, and from Class B into Class C. This "filtering down" dynamic acts as a natural occupancy cushion. Tenants do not leave because they want to — they leave because they find something better. When "better" becomes unaffordable, they stay.
The PKG thesis in one sentence. We buy well-located, structurally sound workforce housing communities in high-growth markets, improve operations and physical condition, and hold long enough to capture the rent growth driven by demographics and undersupply. The returns come from multiple sources — income, appreciation, and debt paydown — and the risk profile is significantly lower than the higher-profile deals that attract institutional capital.
At Palm Kaizen Group, we believe the strongest multifamily investments are often found in the communities that serve the everyday workforce. While headlines tend to focus on luxury developments, our focus remains on well-located workforce housing in growing markets where long-term demand, operational improvements, and disciplined ownership can create lasting value for residents and investors alike.