Rising home prices throughout the country are creating housing needs for communities everywhere.
Housing experts say there are multiple tools that can be used to address workforce housing shortages, but there is no magic, one-size fits all, answer.
Luis Torres with the Texas Real Estate Research Center said a city or county can help out directly by purchasing homes or subsidizing the purchase of land for affordable housing – but both of those options do cost taxpayers’ money.
Alex Schwartz, a Professor of Public and Urban Policy at The New School in New York, said sometimes local governments offer low interest rates on home loans – although he said that likely wouldn’t help much now with interest rates already extremely low.
Torres and Schwartz both said local governments need to be mindful of their regulations when housing prices are already at a premium.
“I think one of the biggest things is to not try to implement more regulation,” Torres said. “I think the issue is to try not to introduce more cost burdens on the home builders.”
Schwartz said governments could also tweak the building code requirements or land use regulations like minimum lot or house sizes, in an effort to encourage affordable housing development.
“That will reduce the cost,” he said. “If you are only building large houses on large lots, that housing is not going to be as affordable.”
Torres said another common tactic is for local governments to create partnerships with private businesses in an effort to tackle the issue.
“There are some solutions, but it is a question at the end of the day of private industry and government getting together and discussing what the best outcome for us is,” Torres said. “But definitely don’t add more cost and red tape for the home builder.”
Locally, Lake Havasu City officials have said they prefer to foster private partnerships to develop workforce housing rather than have the city jump into the real estate market itself.
“The city is not in the business of building houses or being a landlord,” said Lake Havasu City Manager Jess Knudson. “The city’s role is to bridge partnerships and bring the people to the table that we think would create some synergy with others. You need the investors, you need the landowners, you need the developers, and water experts and all those folks who need to be in the room to make the project advance. So we are doing our best to build those partnerships on the public side and on the private side.”
Knudson said the city encourages any type of new construction project to reach out and work with the city, but Havasu is particularly interested in potential workforce housing developments. He said the city can help encourage such development through giving the potential investor the resources they need to complete their plans, walking them through the city’s zoning, and more. Mayor Cal Sheehy said in some cases the city helps to bring people together who can partner on affordable housing developments.
“If we have a land partner we will bring together a financial partner,” Sheehy said.
Sheehy said he is meeting regularly with about five such groups who are exploring different methods and types of workforce housing for various projects in the area.
Partnership for Economic Development CEO James Gray said his organization is also involved in helping out with anyone interested in workforce housing developments. He said the PED tries to help out in any way they can, ranging from finding a piece of land to identifying state financial incentives available for the project.
City officials say there are several groups exploring various potential workforce housing models to see if a project is financially viable in Lake Havasu City.
“We are hopeful that one or more of these projects will be able to move forward that will give some relief for attainable and workforce housing measures within our area,” Sheehy said. “We are also expanding that to areas outside of the city boundaries, so county areas that make sense like Havasu Heights that can offer another type of solution.”
In the end, however, the city says it will be up to private industry to move forward with any particular potential solution.
“When it comes down to the details [the city is] not putting any money in, we are not putting land in, so we need to bring those people together,” Sheehy said. “We are very involved, but obviously we have less say when I have no money in the game. But we have a lot of influence and we use it to bring awareness to the issue, which is how we started before the pandemic.”
Lake Havasu City does have a say in the permitting process and zoning within city limits, however, and the City Council has signaled that they are interested in working with anyone who is willing to address the issue. Knudson said city staff is currently looking into a city ordinance in Flagstaff that pushes affordable housing permit applications to the top of the pile in an effort to reduce wait times. He said staff may bring a proposal to the City Council at a future meeting.
“If it is something that is working we are going to take a close look at it and duplicate it, or improve on it,” Knudson said.
Any development outside the city limits would be under Mohave County’s jurisdiction. The county’s Economic Development Director, Tami Ursenbach, said the county is also pushing for affordable housing developments.
“Every developer that comes in and is willing to spend money, I talk about affordable housing,” Ursenbach said. “What are they willing to do? Will they consider putting in affordable workforce housing? We have some that are going through and putting pencil to paper to see what will work out on the property they have already purchased – and it is not just one company, it is several. So it is up to those companies to decide what they are going to do, but those discussions are happening now.”
Ursenbach said prior to the pandemic most of the conversations regarding workforce housing have been on a case-by-case basis with a specific business, city or geographic location. But the county is starting to move towards a more comprehensive approach to the problem. At its first meeting in August the Mohave County Board of Supervisors discussed putting together a county-wide roundtable to bring communities together to talk about the issue and potential solutions.
The Supervisors decided to delay the roundtable for the time being in order to give county staff time to put together some information and take stock of the options available.
Mohave County Community Services Director Michael Smith told the Supervisors that his department is currently looking into several possibilities, including commissioning a new housing study. He said there hasn’t been one done in a long time – in Mohave County or any of its cities.
“The Mohave County Housing Authority will be presenting a proposal to the Board of Supervisors to facilitate the collaboration, and seek partnerships of various entities in an effort to address the housing needs of Mohave County,”
Smith said. “The Mohave County Housing Authority cannot successfully address the housing problem without the community’s support.”
Ursenbach said it is still too early to say what will come out of the county’s efforts, or even what options are on the table. But the goal is to start coming up with some of those answers soon.
“We are at a point where we need to bring in our attorneys, which we haven’t done yet, and figure out legally what we can and can’t do,” she said.
What it will take
The pandemic certainly contributed to the local and national workforce housing crisis, and side effects of covid have also made the issue more difficult to address.
Gray noted that the cost of building materials like wood, lighting, electrical and glass have all risen over the last year – and those extra costs make it more difficult to produce housing at a low cost.
“The problem right now is trying to build housing at an affordable model, to fit the environment which is not affordable,” Gray said.
The challenge is to work out a way to cut costs enough to create a solid business plan.
“Essentially, for development of a new building, it is going to end in how well the building performs,” Gray said. “How much does it cost, and what are the fundamentals? Ultimately in the end, it is going to come down to a formula where they have to offset the risk for the reward. Those percentages are a lot lower than people think. It is very thin.”
Chad Nelson with A Team Real Estate said right now spec-homes appear to be more attractive to developers and investors because they offer a much more immediate payoff and there is a high demand for those types of housing as well. With the limited inventory of single family homes on the market Nelson said it takes about 10 to 24 months from start to finish with a high probability that the home will sell quickly in this market.
But workforce housing is a much more long term investment and therefore a larger risk.
“Getting those investors to think about long term investments like workforce housing doesn’t typically work because the investment doesn’t really pay off until about 15 years,” Nelson said. “Most investors that have the cash to do something like that are typically older investors and they just don’t want to roll the dice.”