Even before Covid-19, housing prices in the U.S. had been on a steady ascent for years.
Several metros — and their businesses — were already grappling with housing markets that were unaffordable for vast swaths of their residents.
Since the start of the pandemic, the problems have only gotten worse. Between April 2020 and April 2021, the S&P CoreLogic Case-Shiller U.S. National Home Price Index rose by nearly 32 points. By comparison, it took nearly four years for its previous 32-point jump.
But it’s not just single-family housing.
A new report from the National Low Income Housing Coalition found that “in no state, metropolitan area, or county in the U.S. can a worker earning the federal or prevailing state or local minimum wage afford a modest two-bedroom rental home at fair market rent by working a standard 40-hour work week.”
That’s unsustainable, and it’s a problem small businesses can’t afford to ignore.
Most companies in a community have little control on housing costs, but make no mistake: housing has always been a workforce development issue, and it’s likely to be even more important in the years to come.
According to a recent analysis by ATTOM, single-family homes and condos were less affordable than historical averages in 61% of counties across the country during the second quarter of 2021, up from 48% of counties across the country during the same quarter in 2020.
Skyrocketing housing prices in many metro areas have priced many would-be buyers — particularly young ones — out of the housing market.
That results in some individuals being entirely priced out of metro areas or cities, and that’s why business owners and executives can no longer afford to ignore housing and its potential effect on their workforces.
Since Covid-19, many employers have ditched a geography-dependent hiring strategy in favor of hiring the best talent, no matter where it is located.
Strong job growth has traditionally been a magnet to reel in talent to metro areas. That dynamic could change in the post-pandemic world as many employees will no longer be forced to relocate to advance their careers.
Markets with sky-high housing costs are likely to be a loser in that equation, and those losses would have a trickle-down effect on commercial real estate, local governments and service-sector industries.
The past year has proven many jobs can be done remotely, but there are still many that can’t — particularly in fields like retail and hospitality. Ketchum, Idaho, is a good example of the risks communities are facing. The city is home to Sun Valley Resort and has plenty of available jobs, but prospective workers can’t afford housing.
Communities that aren’t proactive about housing could soon face even worse labor shortages than they are seeing today, which could have a negative effect on revenue.
Beyond those challenges, the housing crunch is another stressor that can hurt workers’ mental health. After the past year, business leaders should take that risk seriously.
While CEOs and small-business owners can’t control the price of housing, there are some things they can do to limit the negative consequences.
Companies should be cognizant of the wages they offer and how they relate to the price of housing. Wages that would have supported a mortgage or a nice apartment five years ago may leave those employees priced out today. Companies would be wise to assess where they stand.
They can consider housing stipends and other measures to reduce the burden on workers.
Businesses may also want to think about the interplay between housing, commutes and remote work policies.
If you’re in an area where your wages will only comfortably support a house or apartment that’s an hour away from the office, perhaps it’s a good time to assess whether wages should be increased or the job should have more work-from-home flexibility.
CEOs and high-level business leaders should also be willing to play a role in community action on housing. They should advocate for equitable housing policies to allow an adequate supply of market-rate and low-income housing and pursue nonprofit avenues and public-private partnerships to ensure access to housing in their communities.
In too many communities, “apartment” is a dirty word. Projects that could alleviate housing challenges are stalled or denied zoning due in large part to myths or outright fallacies about their impact on traffic, property values or school capacity.
If single-family housing prices continue to rise like they have in recent years, that has to change.
Housing and workforce development will always be closely intertwined, but the next few years could be pivotal for how they interact in the long run.
CEOs, small-business owners and executives can’t afford to remain on the sidelines anymore.