Cap Rate Compression: What It Means for Workforce Housing

Cap rates across Texas multifamily have compressed by approximately 50 basis points since mid-2025, reflecting renewed institutional appetite for stable cash-flowing assets. For workforce housing specifically, this compression is even more pronounced as investors rotate out of new-construction Class A and into value-add opportunities.

This trend benefits existing operators with stabilized portfolios. As cap rate compression drives appreciation, equity multiples on current holds improve even without additional NOI growth. For new acquisitions, it means underwriting discipline is paramount.

We continue to target deals where the primary value creation comes from operational improvement and renovation, not from betting on further cap rate compression. This conservative approach has allowed us to exceed proforma 85%+ of the time across 18 communities.