A strong local economy needs strong businesses. Strong businesses need a strong and talented workforce. That’s why a current hot topic in the economic development world is the importance of attracting talent for sustained economic success. As we’ve explored on this website, amenities, cultural identity, and placemaking are critical components of communities where people want to live.
But what happens when your community has become so desirable that few can afford to live there? Call it what you want: gentrification, progress, displacement or affluence – the reality is, when a place transforms into something really special, real estate prices begin to soar out of the reach of many people who are working there.
I recently had a conversation with Don Ensign, one of the founders of Design Workshop, a landscape architecture and urban design firm that got its start in Aspen. He said one of the main challenges he faced as a business owner was retaining talent once his employees built up a few years of experience with his firm. Here’s what he had to say:
“The perilous economic upshot of disappearing affordable housing is the impact on public, non-profit and low-wage employee retention, key ingredients for a healthy local economy. Absent proximate affordable housing, employees are obliged to go ever greater distance seeking affordability. These folks sacrifice family life quality, incur additional commuting expense and endure unproductive commuting hours: the unhappy predicament resulting in high worker turn-over.”
He continued with this point: “Recruiting and training new people is enormously expensive. In addition, the new employees are the least experienced and most stressed, inevitably delivering less than optimum performance.”
To both recruit and retain businesses (and the talented individuals that will make that that business grow) a community not only has to be special, but it has to be attainable. Plain and simple: if a person cannot afford to “buy-in” to the community where they work, their commitment to that place – and probably that job – is going to be lessened. This is a special concern for communities of the Intermountain West, because they struggle not only with the high-costs affiliated with resort communities, but are also often geographically constrained by the mountains around them, making new residential development difficult or impossible, which further drives up the cost of the existing housing stock.
So what constitutes affordability? The United States Department of Housing and Urban Development (HUD) defines affordability as a household paying no more than 30 percent of its annual income on housing.
Housing, however, is not the only piece of the puzzle. Transportation is the second largest expense for families, but few consider these costs when choosing a place to live. The Center for Neighborhood Technology tells us that a more complete measure of affordability is for combined housing and transportation costs take up no more than 45 percent of a household budget. Recently, HUD developed the Location Affordability Portal, which allows users to view maps that analyze the affordability of their community by comprehensively looking at these costs. These maps demonstrate that even though housing may be cheaper farther away from community centers, the savings are usually negated by the increase in transportation costs.
I did a cursory examination of a few Colorado counties that have identified economic development as a high priority and found affordability to be a key challenge: LaPlata, Summit, and Eagle Counties.
Combined transportation and housing costs for all three counties were above 50 percent of the average household income. A disclaimer – while the Portal allows you to show maps that analyze renter costs, owner costs, or a combination of both, I chose to focus on owner cost maps, which are higher than renter costs. I did this because, although attitudes have changed slightly since the recent housing bust, homeownership remains a high priority for Americans. Harvard University’s Joint Center for Housing Studies tells us that a recent New York Times/CBS study found that 86 percent of renters state they would like to own a home someday. Access to homeownership continues to be viewed as a critical component of personal wealth accumulation.
If homeownership is an impossible expense for an average worker in a given community – getting them to stick around may prove to be a challenge and can negatively affect that community’s workforce. High transportation costs only add to this burden.
My point is that if your community is in the process of developing an economic development plan, affordability is a critical consideration – albeit a complicated one. Transportation alternatives that reduce commuting costs and a diverse housing stock are key components of a community’s economic development strategy. Remember to think beyond recruitment and create a place that allows young professionals the opportunity to plant roots in your town; make a commitment and grow there. Your businesses – and community – will benefit greatly.