Data Dump: Housing crisis drags on
Plus: O&G watch and a picture of a raven
Earlier this summer, while strolling into Albertson’s in Durango to buy a couple pints of Ben & Jerry’s, I noticed a Help Wanted sign on the door: They were looking for staffers and would pay $16 per hour to start. Woah! I said to my friends. Sixteen bucks. Not bad. It’s about time employers are paying a living wage. My friends, who live in Durango and are more familiar with the cost of things, looked at me like I was insane.
I’m not. Insane, I mean. Just wrong. It turns out that is not a living wage in Durango or, really, just about anywhere. Not only do housing costs continue to shoot up, but add in inflation and you get a pretty damned unsustainable situation.
Sure, you may have heard that the housing market in some places is slowing, thanks to rising interest rates, an unsteady stock market, and crashing cryptocurrency values. Sales for the first half of this year were down from 2021 nearly 50% in the Jackson Hole area and even more in Aspen and Snowmass. Prices have even cooled in some places, which is kind of like saying Phoenix’s high temperature cooled from 120 degrees F to 115 F. Your brain will still melt, just a bit more slowly.
A “cooling market” in 2022 looks like Bend, Oregon, where the median residential sale price dropped from $700,000 in March to $684,000 now. Or Aspen, where a 500-square-foot condo sold for a measly $750,000—a full $25,000 less than the asking price. Whoopee. Or La Plata County, Colorado, where the median home price for the entire 1,700 square miles is $625,000, nearly $100,000 more than a year ago.
So, yeah, the housing un-affordability crisis is still on, big time. It seemingly has spread to every corner of the West, even to one-time bastions of affordability. And it’s not just sale prices: Rents are now exorbitant, too. The crisis is most pronounced in public lands gateway communities like Durango, Moab, Salida, Bend, or Flagstaff. But even downright urban areas like Aurora, Colorado, are infected: the average rent there is nearly $2,000 per month, which I guess is a bargain compared to Denver’s average of $2,500 per month.
I have to admit that the whole thing leaves me baffled. Sure, the whole remote-work, Zoom Boom thing freed up folks to sell out of the Bay Area or some other high-priced urban area and buy into Truckee or Boise or Durango. I get that part, though I do find it hard to believe that remote workers are buying $13 million homes in Aspen and Jackson. But isn’t there a point at which the Truckees/Bends/Durangos become too expensive for Zoom Boomers, even those with some equity from elsewhere?
And isn’t there a point at which even those who can afford these prices will finally come to their senses and say they just don’t want to? A point at which folks decide it’s not worth it to fork out two-thirds of their income just for the privilege of being a resident of one of Outside magazine’s ten coolest towns? When will they say, Hey, wait a minute, I don’t have time to hike the great trails because I’m working all the time to pay the mortgage, and my favorite restaurant isn’t open when I want to go there because their would-be employees can’t afford to live here? When, in other words, will it all come crashing down?
Let’s go back to the $16-per-hour grocery store job. If the employee is single and works 40 hours per week all year long, they’ll take home around $2,200 per month after taxes. Let’s say $100 of that goes to pay a bit of student loan debt interest. There’s no way they can buy a house-apartment in or near Durango, even if they go in on it with a fellow checker. So, they’ll have to rent. According to the Zillow rental affordability calculator, they could afford to pay about $900 per month on rent. I searched various rental sites and it looks like the bottom of the market in Durango is $1,000, and there’s just one of those. Okay, so they stretch it—beats living in the car. That leaves about $1,100 to pay for utilities; phone bill; vehicle fuel, insurance, and maintenance; and, of course, food. And sure, they could probably find a place in Cortez or Farmington for $800 per month, but then they’d be spending $200 or more per month on gasoline just for the commute.
And here’s the thing: Most service industry jobs don’t pay $16 per hour.
One might think that the market, left to its own devices, would work it out in a rational way. Perhaps businesses would pay (a lot) more to get and retain workers, and charge $35 for a cheeseburger; or developers would build cheaper workforce housing if they were only allowed to do so. Alternatively, the workforce would just leave, and the businesses and amenities that rely on them would go away, eventually taking the gentrifiers—and inflated housing prices—with them.
Except, where would the workers go? The “drive-to-qualify” dynamic of a decade ago, which had people commuting hours each way to affordability, is dead. Even remote workers who make less than $100,000 per year are having a hard time finding a refuge—even in Superfund sites. Silverton? Forget about it. Leadville? Nope. Okay, okay, maybe Naturita, but probably not for long.
Making it easier and cheaper for developers to build more housing might increase the housing stock enough to match demand, thereby driving down prices. But that would only work where the market behaves rationally. And in the Durangos, Tellurides, Moabs, and Leadvilles of the world, the market is far from rational. It’s a whacked out freak show. Build more free market housing and you’ll just end up with a larger inventory of overpriced, unaffordable homes; if there aren’t enough residents to buy them, then investors will snatch them up for short-term rentals or second homes or overpriced rentals.
I imagine this can go one of two ways. The federal, state, and local governments can come together and come up with real, lasting solutions. Start by forking out cash to build workforce housing and to fund sweat-equity and other affordable housing programs. Levy a progressive real estate transfer tax on all property sales over the level of affordability for the median household income of the area. Restrict and tax short-term rentals and second-homes, and incentivize people to rent property to local workers at affordable rates. Establish managed camps for the unhoused population and set up affordable workforce campgrounds for those who prefer to live out of their van, car, RV or tent.
Or, the communities and their leaders can do nothing, hoping the problem will just go away or that the market will find some sort of equilibrium. And it might. But I suspect, instead, that most of the workers will stick around despite everything because they have no choice. They’ll cram four or five into an apartment, or try to find a place to hide their tent where they won’t get rousted by the authorities. And then, when the stress of living like that, combined with working one or two jobs, gets to be too much, they’ll drop out or be pushed out and then, unhoused, they will no longer have the means to find another job. Maybe another worker will come along, looking for the “second paycheck” of natural beauty and clean air, and step in and keep the cogs of the amenity economy running. Or maybe not.
In related news…
Oil and Gas Watch
Another peer-reviewed study on the human health impacts of oil and gas development has been published and the news is not good. Yale School of Public Health researchers found that children living near unconventional oil wells at birth are up to three times more likely to later develop leukemia. The study was conducted in Pennsylvania, but the results have grim implications for all of oil and gas country, which covers good portions of New Mexico, Colorado, Utah, and Wyoming.
Oh, boy. This week a federal court reversed a judge’s 2021 ruling blocking the Biden administration’s oil and gas leasing pause. That, theoretically, should clear the way for Biden to pause leasing again, if he so desired. But there’s one problem: The Inflation Reduction Act, which was signed into law this week, basically blocks the administration from pausing or banning oil and gas leases (one of the concessions needed to get Manchin to sign on).
Also, here’s the rig count for selected Western states. Given sustained, high oil prices, one would expect the number of working rigs to be far higher. But while it’s slowly increasing, the rig count has yet to climb up to pre-pandemic numbers. That’s because oil companies are pocketing the profit and buying back stocks rather than investing in new development.