I’m worried. Maybe a bit disgusted, too.
It’s no secret that housing prices in many of the “best” places—particularly those at the gateway to public lands and outdoor recreational opportunities—have been climbing for years. Nor is it news that homeownership for the working folks in these places grows more and more elusive with each passing year.
Now, on top of that, there’s the Zoom Boom. Pandemic-spurred remote work is freeing folks from the office and the cities and they are buying up remote work-centers, aka houses, in places far away from cubicles. The effect has been akin to throwing gasoline on an already raging fire, and real estate markets from Bozeman to Bend to Tucson to Truckee have exploded.
I wrote about this phenomenon for High Country News a couple of months ago. With more end-of-year data available, it’s clear that the phenomenon is more than a momentary flare-up, that it goes deeper than a mere Zoom invasion, and that the real estate fire appears to be getting hotter and even spreading to previously lower-priced markets.
It’s the spread that has me worried.
I resigned myself a long time ago to the fact that I may never be able to afford to buy a house in my hometown of Durango, Colorado, and that I will always be an economic exile from the place of my birth. In the years since I made that realization, home prices have continued to flame uncontrollably (my income, meanwhile, is burning about as hot as rain-sodden cardboard).
But I could always find a little bit of comfort by moving that Zillow mouse a few miles away from Durango proper, as home prices tended to drop in direct proportion to the distance from the town’s historic center. Things would always be affordable over on the Dryside, I thought, or out Arboles-way, where my wife and I bought a very groovy home twenty years ago for a whopping $84,000 (but sadly had to let it go). It’s the old “drive till you qualify” non-policy of affordable* housing, leaned on by communities from Jackson to Aspen to Durango to ensure that they have workers to keep the places running.
But now even those far-out places are getting pricey. According to the latest statistics, prices are going up everywhere, and the stock of affordable** homes throughout the entire county is vanishing. The following graphs really drive it home, so to speak:
In other words, you could drive all night and still not qualify unless you make significantly more than the median income for the region. Even a couple of veteran Durango school teachers making a combined salary of $100,000, and with $500 in additional monthly debts, such as kids’ college tuition or student loan payments, only could afford a $370,000 house—far below the median home price—and that’s only with a $20,000 down payment. And who has $20k lying around?
Similar patterns are appearing everywhere, not just in so-called Zoom towns. The median home sales price in the Los Angeles metro area climbed from an already astounding $644,000 at the beginning of last year to over $720,000 now, out of reach of even relatively well-paid Angeleno workers; Denver’s prices shot up by 11 percent over the last year. Rental rates follow home prices.
Something is bound to break. As housing costs climb further out of reach of the average worker, the abyss between the wealthy and the poor widens. When drive-till-you-qualify breaks down, the non-Zoom workers have little choice but to crowd into substandard housing, move into tent-towns, or set up camp in the backseat in the Wal-Mart parking lot. And even those who already own a home see their property taxes rise, making it more and more tempting to sell out, take that equity, and hightail it to Greece, thereby gutting the community of its core members.
Perhaps the most maddening part of all of this is that the Zoom Boom isn’t the half of it: The biggest real estate action is happening in the ultra-high end luxury markets. Given the prices folks are forking out, it’s hard to imagine that these are one-time office workers becoming telecommuters. The Aspen market saw 90 sales over $10 million last year and the average home price shot up to more than $11 million. San Miguel County, home of Telluride, had a record-smashing year for real estate sales volume. “The lifestyle provided by our quaint town in the San Juan Mountains … was the prevailing force driving an extraordinary influx of demand,” crowed the Telluride Properties real estate activity report.
Half a million people have died in the U.S. due to complications from COVID-19 and the U.S. economy shed nine-million jobs during 2020. Yet the super-rich kept getting richer (WARNING: clicking this link may result in rage). And many of them, apparently in search of that “quaint” lifestyle, spent their excess cash on palatial resort-town refuges, even as businesses in those same communities struggled and local governments suffered from revenue shortfalls.
There is no vaccine against unfettered greed and Congress long-ago abandoned the progressive tax policies that kept runaway-wealth in check through the 1970s. Given that many members of Congress are multi-millionaires, meaningful change on that level may prove elusive, no matter which party is in power.
But there is a local and/or state level policy tweak that could, at the very least, allow communities to capture some of the huge volumes of cash being shuffled around in real estate deals: a real-estate transfer tax on high-end sales. It would have to be progressive. So, for example, the rate would be 0% for sales below $300,000; 1% for $300,000 to $500,000; 2% for $500,000-$800,000; and then the rate would ratchet up from there.
Naysayers will try to claim that this will dampen sales. It won’t—Aspen and Telluride both have one†. Nor is it a radical idea. A number of states have implemented them and others are considering it. Meanwhile it would bring in millions of revenues that could be used for affordable housing. A 2% tax on Teton County property sales would have brought in nearly $50 million last year, which could build a lot of affordable housing units.
Such a tax is not the solution. It merely would be an incremental step toward the massive overhaul of policy, tax structure, and even worldview that is needed to tackle the twin crises of unaffordable housing and wealth inequality that threaten to crush our communities, especially the “best places.”
On a somewhat related note: More than two decades ago, some New York real estate folks proposed building Cloudrock, a new town of sorts at Johnson’s Up on Top, a swath of mesa-land southeast of Moab, Utah, with stunning views of the La Sal Mountains. It would be anchored by a luxury “wilderness” lodge and include pricey condominiums, some of which would be Tuscan-themed, others built in the “spirit of the Anasazi Cliff Dwellings of Mesa Verde,” according to marketing material.
Cloudrock got mired in controversy and court cases and seemed to have vanished after the financial crisis of 2008. But then, a couple of months ago, it emerged from the dead, sort of: Sotheby’s International “marketed for the first time” Cloud Rock-Parcel One, a 175-acre “cliff edge development opportunity, ideally suited for a luxury wilderness resort or private estate.” It goes on:
In the center of our mesa, world-renowned Urban Planner Andrés Duany has designed our small village in the wilderness, a jewel in our landscape. A center for makers, creators & dreamers and the best off-the-grid coffeeshop in the world, for when you just want to take a short bike ride for good coffee and conversation.
Apparently it’s up to the purchaser of the land to build this stuff. Anyway, if that description makes you a bit nauseated, I’d suggest not looking at Cloudrock’s Instagram bio (close your eyes now!)
What the … !? Anyway, if you’re interested, the parcel’s asking price is a mere $22.7 million. But hey, that’s a small price to pay to be “Connected to the Stars,” no?
*It’s no longer so affordable when the costs of commuting long distances are factored in. In the Durango area, for example, the average person spends more than half of their income on housing + transportation.
**For this post I’m using the standard definition of “affordable,” meaning that no more than one-third of one’s total income is spent on housing.
†Colorado lawmakers prohibited communities from implementing real estate transfer taxes as part of the short-sighted, fiscally-idiotic TABOR reforms of 1992, which continue to plague state and local budgets. Several resort towns were able to implement a transfer tax prior to TABOR, meaning they are grandfathered in. It’s time to throw TABOR out, for once and for all. Arizona also has a ban on transfer taxes.