Workforce housing: serfdom or practicality?

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Published Date 1/8/2024

What good does it do to live in an upscale area when the people who serve you can’t afford to live anywhere near you? Do you raise the salaries of teachers, police, domestics, etc. just to make up for their commutes and survival, or do you provide a way to “help them help you?”

According to HousingWire’s Will Robinson, a secondary school teacher in Colorado makes on average just under $63,000, according to the Bureau of Labor Statistics. “If a Colorado teacher making the average salary had $20,000 to put towards a down payment and were willing to spend 30% of their pre-tax salary on their mortgage payment, she could afford a house that costs about $225,000,” he says.

The only problem? The typical Colorado home there runs more than $528,000. Together with homebuilders and landlords, districts across the country concluding Colorado and Austin TX, are coming up with a solution: workforce housing.

“With forecasters not expecting home prices to crash anytime soon and essential jobs across the country needing to be filled, will this become a model for the future? Scenes of Steinbeck’s Grapes of Wrath come to mind, but on a much more sophisticated scale.

Aspen, CO is famous for ski slopes and luxury housing. In 2022, the median home was worth about $843,000, and the median renter paid $1,738 per month, according to American Community Survey five-year estimates. And as in elsewhere in the country, affordability worsened during the pandemic.

Aspen had already provided some housing for teachers for decades. It doubled down on this effort in the last two years, however, spending $40.8 million over that period to acquire 52 units and renovate several of its 50 existing units, according to Robinson.

“All in, the district now has more than $50 million in housing assets, the bulk being apartments and condominiums, although it also has single-family homes. It has shown a willingness to absorb operational losses as a landlord, losing almost $2 million last year and almost $5 million since 2015,” he says.

“For those teachers who get a unit – there is a wait list – the benefit is substantial. Last year, the average rent in a district-owned unit was about $900, roughly 15% of the district’s average teacher salary.”

Big Sky country is getting in on the action as well. West Texas' Pecos-Barstow-Toyah has spent $16.6 million in 2021 to add an apartment complex to its stock of housing units, trailer homes, duplexes and triplexes, and Pflugerville, near Austin, will use proceeds from a $43.9 million bond to purchase property to construct affordable housing for teachers and staff.

“While Aspen and Austin are pricey housing markets, their need for housing that the general workforce can afford is universal,” says Williamson. “In fact, both markets have a lower percentage of renters who spend 35% or more of their household income on rent than the national average.”

Teachers aren’t the only concern to many cities, however. Other essential jobs include registered nurses, police and sheriff officers, EMTs and paramedics, clinical lab techs, and janitors. “The Labor Market Institute identifies 473 job classifications as ‘critical occupations,’ totaling more than 100 million workers or roughly 70% of U.S. workers,” says Williamson, with the top essential for public health and safety — half of which earn between $32K to $80K.

That means many of them make less than even a teacher’s salary in places like Aspen. And with home values breaking records multiple times last year nationwide, it is hardly a stretch to imagine that many of these workers face an affordability crunch.

Homebuilders, who are now building at a faster rate than pre-pandemic and offering buydowns and price decreases, are part of the solution. But economists don’t expect this to lower home prices in the new year and expect new home sale prices to remain above existing home sale prices. Homebuilders also tend to build where it’s most cost-effective and faster, which means new construction tends to be concentrated in the Sun Belt.

“Mortgage rates, too, ended 2023 on a downward move in response to expectations of federal funds rate cuts, giving a boost to buyers’ purchasing power,” says Williamson, who also admits that economists do not expect a material impact on prices in 2024.

And then there are various federal, state and local housing agencies that focus on providing affordable housing. Many of those have been helped in recent years by funds created by a slew of tech and healthcare companies, including Amazon, Apple, Facebook, Google, Microsoft, United Healthcare and others.

Still, any pricing impact the billions spent by these agencies and companies may have had on affordability seems to have been outweighed by the pandemic-prompted surge in prices and mortgage rates.

Williamson sums it up: “With affordability slipping and home prices steady, school districts becoming landlords may just be the canary in the coal mine. Affordability will likely be a central focus throughout 2024 as local economies seek to attract and retain essential workers.”

HousingWire, TBWS

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