Workforce Housing: Working Families at Forefront of National Debate

Over the years, the term “affordable housing” has been synonymous with low-income housing. But today’s economic realities have created the need for a new, related term: workforce housing. Workforce housing is housing that is affordable for entry-level professionals and for the very workers – nurses, police officers, janitors, and teachers – who are crucial to a well-functioning society.

“Workforce housing was not on anyone’s radar screen five or six years ago. The term was created by the Urban Land Institute to describe the group of households that have incomes between 50 and 120 percent of area median, including those who may qualify for some kind of subsidy, but many that won’t,” says John McIlwain, a senior fellow for housing with the ULI.

“This is a growing crisis. Perception is following reality, and the reality is that back in the ’50s, ’60s and ’70s, you could afford housing if you were working. But the income of the basic workforce has not increased in proportion with the rate of inflation and now these people can’t afford housing,” adds McIlwain.

The federal government defines “affordable housing” as housing that costs no more than 30 percent of gross income. In September of this year, the National Housing Conference (NHC) – a non-profit coalition that focuses on housing policy released statistics that underscore how critical this issue has become. Based on 2001 federal data, 14.5 million households in the United States pay more than half of their income for housing and/or live in a substandard unit.

The Big Picture

McIlwain’s case can alone be made by some startling and unprecedented facts from a 2001 study about housing costs in 60 of the nation’s largest housing markets.

The study focused on households where incomes depend on a police officer’s or teacher’s salary alone. The analysis indicates that half of the police officer households could not afford a median-priced home. For teachers, three-quarters were unable to qualify, according to the Center for Housing Policy, the nonprofit research subsidiary of the NHC.

The issue of workforce housing and, more specifically, the availability of workforce housing have become polarizing topics for many, from housing advocates and lenders to local governments and planners.

“The homeownership rate prior to the Second World War was less than 50 percent. Now, it is around 68 percent,” says Dr. Stephen Fuller, director of the Center of Regional Analysis at George Mason University in Fairfax, Virginia.

He continues: “In the United States, we have romanticized the notion of owning a house, but being able to buy a home is not a constitutional right. Housing is a private good. It’s like a chair, a light bulb or a car – people make them and people sell them – and yet housing has this social overlay because it has an impact on health, on productivity and on quality of life.”

Supply and Demand

While the workforce housing debate has many layers, there are several recurring themes and contributing factors linked to the dearth of moderately priced housing in some areas in the U.S. They include a shortage in rental housing, and the resulting increase in rental housing costs, a spike in housing and land costs that have outpaced the rate of growth in salaries, zoning and density laws, and the economics of supply and demand.

It makes sense that some might boil this debate down to simple economics: if people couldn’t afford higher-priced houses, then they wouldn’t buy them. And if they didn’t buy them, the builders wouldn’t build them. But this presents somewhat of a leap in logic if you examine all facets of the issue. For example, organizations such as the National Association of Home Builders blame the rising cost of homes on regulations that increase construction costs such as impact fees, architectural requirements, and density restrictions.

There’s also the myth that moderately priced homes drive down property values and adversely affect a community’s economics and demographics. But in truth, maintaining a viable community hinges on one often overlooked factor: balance. Unless a mix of housing and incomes can accommodate citizens on various rungs of the socioeconomic ladder, that balance will be lost, says Dean D. Bellas of Urban Analytics, Inc. in Alexandria, Virginia.

Not Just a Big-City Problem

The issue spreads beyond the country’s urban centers. Even in outlying areas where housing is thought to be less expensive, the workforce housing crunch is having an impact. More and more municipalities and counties are realizing that the challenge of attracting businesses and retaining employees is affected by availability of moderately priced housing.

Just 15 minutes south of the Washington Capital Beltway, the Charles County Board of Education has been dealing with the issue as rental costs climb and the number of available units declines. “We’ve had teachers who have backed out of contracts because they came here and couldn’t afford the [rental] housing in this area,” says Keith Hettel, Executive Director of Human Resources for the Charles County Board of Education.

Hettel’s concern was highlighted in a report from the National Low Income Housing Coalition called “Rental Housing for America’s Poor Families: Farther Out of Reach Than Ever 2002.” The report defined the “housing wage” for a region as the amount that a full time worker must earn per hour in order to be able to afford a two-bedroom unit at the area’s fair market rent. In the state of Maryland, that figure is $16.82 per hour, or 327 percent of the current minimum wage of $5.15 per hour.

Charles County’s “Hourly Wage Needed to Afford” is even higher – $19.21 – which is the exact same amount attributed to the more affluent Montgomery County, Maryland. To put that in perspective, $19.21 per hour translates into $39,956.80 per year based on a 40-hour workweek. The starting salary for a teacher in Charles County is $33,743. Police officers start at $36,432 and correctional officers, $30,111.

In other words, none of these entry-levels professionals can afford a two-bedroom home in Charles County.

The Board of Education’s Hettel believes that frank discussions with elected officials and an analysis of solutions will help the county meet this debate head on. But as we will discover in the second part of this story, communication isn’t the only tool that’s being used to turn the tide in the workforce housing crisis. From tax credits and community land trusts, to inclusionary zoning ordinances and creative financing and building programs, communities have found or are finding ways of dealing with this dilemma.

Published in the November/December 2002 edition of Economic Development Forum (Charles County, Md.)