November 2004

Planning

Copyright by American Planning Association

Putting the Force in Workforce Housing

By Tim Sullivan

The 150 people who showed up at a town hall meeting in Edina, Minnesota, last spring looked the picture of prosperity: This Minneapolis suburb is home to a growing number of jobs, big earners, and large, expensive houses. Edina residents' average income is $66,019, its average home price $338,000.

But, as those who came to the meeting knew, these numbers are part of the problem. There is a growing mismatch between the city's low- to moderate-wage jobs and its expensive housing stock. "It's a conundrum," says Edina associate planner Joyce Repya. This conundrum has a name: workforce housing.

One attendee remembers the school district superintendent saying that when he was a math teacher in Edina 30 years ago, educators could afford to buy houses there. Not anymore. Now, not just teachers, but day care workers, service industry workers, even firefighters and police — many of the occupations considered the building blocks of communities — are being pushed to live in central Minneapolis or the outer suburbs and forced to endure hour-plus commutes. Edina, apparently, is listening.

"There's a growing awareness that to be a long-term viable community, we have to have a variety of people," says Tom Dolan, a parishioner at Our Lady of Grace Church, which is taking aim at the workforce housing problem.

The church has partnered with Third Way Network, a nonprofit group, to help develop more affordable housing in Edina. One of the ideas is to ask Edina's sizable over-65 "empty nester" population to create an accessory housing unit for a teacher or other employee. The group has begun to push for city codes that would allow these separate apartments to be carved out of existing single-family houses.

"We don't just do projects," says Paul Halvorson, the founder of Third Way Network. "We go out and engage people and see what will work."

Others are looking for creative solutions as well. Last year, the nonprofit organization Housing Minnesota held a workforce housing conference attended by 200 Minnesota government officials, business leaders, and housing advocates. There Minnesota Gov. Tim Pawlenty called housing "not just a social justice issue, but an economic vitality issue."

"The state needs these jobs," says Housing Minnesota organizer Steve Boland. "So the question is, if those are the kinds of jobs created, what are you going to do to make them viable?"

It's taking hold

Across the country, states and local governments are looking for answers to that question. "You need to think of housing as a part of your economic infrastructure as well," says Dean Christon, the deputy executive director of New Hampshire Housing Finance.

National efforts are under way as well. This past spring, the National Association of Homebuilders, along with the Fannie Mae Foundation, launched an initiative to expand affordable housing for working families in 1,000 communities across the U.S. The groups have not yet decided on the number of additional housing units to be built.

"Workforce housing" is still a fluid term. In recent years it has come to mean the gap facing those who earn too much to qualify for affordable housing subsidies, but not enough to afford a home or an apartment. The National Housing Conference, among the first to identify the issue in the late 1990s, defines workforce housing as housing for those with at least one full-time worker who earns between minimum wage and the amount needed to afford to live in the area.

The Urban Land Institute puts the bottom end of the workforce housing bracket at 50 or 60 percent of median family income — the upper cutoff for many federal subsidies. As John McIlwain, ULI's senior housing fellow, explains, these middle-income working families used to qualify for federal subsidies such as Section 8, but are now on their own.

The need for workforce housing was born of the economic boom in the 1990s, McIlwain says. While salaries for the top American earners increased dramatically, the bottom 60 percent barely kept up with inflation. Home prices doubled.

Comparing jobs and housing

For three years, the National Housing Conference study, "Paycheck-to-Paycheck: Wages and the Cost of Housing in America," has looked at how wages in five occupations stack up against housing costs. The study examined how families relying on the earnings from these jobs fare in the nation's 60 largest housing markets.

The conference released its most recent study in July, and, as in previous years, the results were not encouraging. The study found that, nationwide, families dependent on salaries from all five occupations — janitor, retail salesperson, elementary school teacher, police officer, and registered nurse — could not afford a median-priced, $170,000 home. Families dependent on the wages earned by a janitor and retail sales clerk also had to pay more than 30 percent of their household income (a rule of thumb for affordability) to rent a two-bedroom apartment.

Consequently, families priced out of the housing markets where they work must live in areas they can afford. Often, for those working in the central city, the only affordable houses or apartments are in outer ring suburbs, or vice versa. In the case of California's Silicon Valley, workers must often commute from different metropolitan areas altogether.

This brings related problems. According to Hal Clapp, who runs a housing initiative at Greater Twin Cities United Way in Minneapolis, "All of our programs are being affected by the lack of affordable housing. It's hard to do mental health courses when the kids are bouncing around the city."

Workforce housing advocates argue that when workers and their families live near their jobs, everyone benefits. "Jobs, housing, ­neighborhoods, and transportation: home­ownership can be one of the key linkages to bring them all together," says Ted Gilbert, the president of Homeownership One Street at a Time, a nonprofit based in Portland, Oregon.

The once and future company town

The most basic kind of workforce housing was common in the U.S. a century ago, when company towns ruled the expanding frontier. In coal mining towns in Appalachia and timber camps in the Pacific Northwest, companies legislated all aspects of life. But they also provided amenities for their employees, including boardinghouses and barracks to house them and their families.

Although the company town had its drawbacks, including miserable living conditions for some, parts of the concept are being revived under the rubric of "employer-assisted housing." A report by the National Housing Conference released last summer called employer-assisted housing a "win-win-win": Employers benefit from a stable workforce living nearby, employees benefit from time saved on their commute, and communities benefit from reduced congestion and increased investment from new residents.

Advocates say communitywide employer-assisted housing is easiest to provide in smaller towns where the relationships between a company, its workers, and local government are clearer — and where there are fewer inexpensive suburbs or central city areas where workers can live. In Marshall, Minnesota (pop. 12,700), the city took notice when businesses began having trouble recruiting workers. A housing shortage was the primary problem.

"We came to realize, through feedback from some of the businesses, that we needed a larger employee base in order for companies to expand," says Stan Finnestad, the president of the city's economic development authority. "There were shortages in all aspects of housing."

In 1999, the city and Schwan Foods, its largest employer, began work on a project they named Parkway Addition. Along with the city, the state, and a nonprofit housing fund, the company invested funds to help construct 72 single-family homes and 48 rental townhouses, and to provide down payments and other financial assistance to homebuyers.

While Marshall officials expected full occupancy within five years, it took only two. Now, work is under way on Parkway Addition II. "We've had additional people moving to town and have seen people who rented now own," Finnestad says.

Carrots for employees

In larger metro areas like the Twin Cities, the geographic relationships are more complex, says the United Way's Hal Clapp. It's harder to convince employers and governments in these places to collaborate on a project like the Parkway Addition.

So Clapp and others have begun developing employer-assisted housing as an employee benefit. Employers provide workers with a zero-interest forgivable loan to help cover closing costs or down payments. For each year the employee stays at the company, 20 percent of the loan is forgiven.

St. Paul-based Bremer Financial Corporation has adopted a similar program. "It's a huge need and something we felt compelled to do," says Yvonne Miller, vice-president of employee benefits.

The Bremer program, which began as a pilot in the spring of 2003 and is now available to employees at all of the company's 100 locations in Minnesota, Wisconsin, and North Dakota, incorporates United Way's forgivable loan for homebuyers. It also features a rental program in which the company helps to cover the first and last month's rent with a loan of up to $2,000 that the employee pays back over 18 months. The program is available to employees in households earning less than 80 percent of the area's median family income. As it happens, the company's average Twin Cities salary of $43,500 falls into that category.

In coming years, Bremer and Schwan may no longer be the exception: The National Housing conference said last summer that employer-assisted housing programs could "become as familiar as employee health care."

Silicon Valley's housing push

Another source of workforce housing consists of broad coalitions of which employers are only one part. California's Silicon Valley provides a model.

Silicon Valley boomed with technology industry job growth in the late 1990s. Today, the median income of Santa Clara County is $105,000, while its median home price is over $500,000. One widely quoted statistic is that during the boom, only one housing unit was created for every seven jobs.

"Even people who are making $80,000 can't afford a home, let alone teachers and service people," says Felix Reliford, the principal housing planner for the city of Milpitas, north of San Jose.

The reality then became two- to three-hour commutes, says Laura Stuchinsky of the Silicon Valley Manufacturing Group, a coalition of area employers that has taken the lead in providing housing options for workers.

In 1999, the coalition and other groups created the Housing Trust of Santa Clara County as a "rapid-response investment tool" to aid the construction of new affordable housing developments and to help first-time home buyers. Within two years, the trust met its goal of raising a $20 million endowment. Today, says trust spokesman Maury Kendall, the trust spends a lot of time and energy setting up one-on-one meetings with corporate CEOs, showing them how housing fits into their company's charitable giving guidelines.

The city governments in Santa Clara County have also played a key role in the housing trust. For example, Milpitas has earmarked redevelopment money for the trust, as well as its own housing projects. "What people realize is that their sons and daughters won't be able to afford to live here," Reliford says.

With its endowment, which it began spending in 2001, the housing trust has provided money to over 1,077 first-time homebuyers, rental housing worth over $194 million, and hundreds of units of special-needs and shelter housing. Its investments of $13.6 million have leveraged $616 million of public and private money. Kendall says one-third of the trust's single-family home-buyers have been educators.

Another key piece of workforce housing is the push to change state and local regulations affecting housing and new development. Local laws requiring developers to complete long, detailed studies can become a deal breaker for those who want to include affordable components in their projects.

San Francisco's inclusionary zoning ordinance may be a model. The city requires any development with more than 10 units to designate 12 percent of its units as affordable to people earning 60 percent of the median family income. Jaime Rossi, a housing consultant for the San Francisco Chamber of Commerce, sees this regulatory approach as a complement to the subsidies reserved for the city's lowest income residents. Now he is pushing for more.

Last spring, the chamber endorsed Proposition J to encourage developers to build owner-occupied housing for people earning 80 to120 percent of the area's median income by relaxing height and density restrictions and expediting permit reviews. City voters defeated the measure by a more than two-to-one margin.

Now the city is working on other regulatory changes. One supervisor has proposed another way to expedite affordable developments, and Rossi wants to do away with the city restriction on auxiliary units.

Limits to success

Others have tried to address workforce housing at the state level. In New Hampshire, a 2001 legislative report led to a handful of bills. They explicitly stated that workforce housing is an obligation of local governments and offered an accelerated appeal to developers who are turned down locally but meet workforce housing guidelines.

California, too, has begun to attack its workforce housing shortage on the state level. Three years ago, as part of a smart growth summit, 33 community leaders throughout the state identified housing as one of the most vital issues for California's future. Another group suggested that small developers be protected from litigation that prevents them from building affordable projects.

But, as in New Hampshire, where the proposed legislation was shot down, a coherent workforce housing policy is a tough sell in California. "Local governments fiercely resist any command-and-control regulations," Binger says. "The state needs to provide some substantial incentives, but the hard lifting is at the local level."

Locally, the real hurdle for workforce housing may be something besides too little money or too much regulation. In politically charged San Francisco, the message from many residents is a familiar one: Not in my backyard.

"NIMBYism was invented here," says Rossi. "What's the benefit for them to have more development? Nothing."

Rossi's aim is to show San Franciscans why that's not true. "The aesthetics of neighborhoods are important, but what's really vital is the people who live in them," he says. And, he says, broad-based coalitions may be most effective in steering communities toward the creation of more affordable housing units in the long term.

One such group, the San Francisco Housing Coalition, has emerged to attack the NIMBY mind set by endorsing good housing projects. The coalition is composed of environmental groups, neighborhood associations, developers, and others. If it likes a project, a whole network of powerful people is immediately behind it. "We try to bring it down to the human interest," says executive director, Kate White, who notes that 26 of the coalition's 28 projects have been approved.

The challenge exists everywhere, including the Twin Cities. In Minnetonka, one of the area's most affluent suburbs, faith and community groups discuss the workforce housing issue with their constituencies and congregations. These groups, says Minnetonka community development director Ron Rankin, are "doing a great job in raising people's awareness in the need for affordable housing and showing how broad that need is."

Meanwhile, back in Edina, the Our Lady of Grace parish is plugging away, one house at a time. "We're not going to help thousands of people. But if there were hundreds of communities [doing the same thing], it would be a significant contribution," says Tom Dolan. "It's a beginning."

Tim Sullivan has reported for the Oregonian, the Salt Lake Tribune, and other publications. He lives in Portland, Oregon.

Resources

National Housing Conference: www.nhc.org

Housing Trust of Santa Clara County: www.housingtrustfund.org

Housing Minnesota: www.housingminnesota.org