The Federal Reserve is expected to hike interest rates again this month. It would mark the fourth interest rate hike this year as it makes borrowing money even more expensive.
The prospect of another rise is putting recreation-dependent communities nationwide in a difficult position as they work toward affordable housing solutions. Those solutions sometimes require communities to purchase homes and other properties.
“It really comes down to supply and demand,” said Jason Dietz, the housing director for Summit County, Colorado. “There’s a lot less supply out there for available housing, available land to develop. The demand is through the charts because people from all across the country, all across the world, are looking for natural amenity regions, like Summit County, to own property in.”
Summit County has 619 square miles of land. On it, there are 31,831 residential units. According to the county, that is 83% of the maximum number of residences allowed by zoning laws.
About a third of those residential units are short-term rental units, and another third are second homes. That leaves the final third, or about 10,000 residential units, for the county’s 31,000 people, according to local records.
It makes competition, and therefore pricing, high, leaving little room for the people who help make its economy run.
“The tourist economy requires a lot of jobs and a lot of employees, and one of the biggest limiting factors in Summit County is the lack of attainable housing for the local workforce,” said Dietz.
This is happening nationwide, as well. A Headwaters Economics analysis shows that every time a recreation-dependent county’s population increases by 10%, the share of wages spent on rent in that same county increases by 7%.
In many of these natural amenity regions, those new residents are wealthy, which drives up the price further and sometimes leads to barriers in finding solutions.
“We need to attain more diversity. You need smaller houses. You know, the barrier to entry is very, very difficult,” said Johnny Schwartz, a founding member of Able Construction, which develops high-end homes in the Northeast.
In 2014, Schwartz tried doing something different when he proposed building a 12-unit housing development in the quaint, yet expensive, beach town of Westport, Connecticut. He said the units could be sold for less than half of the area’s median home price of $1.2 million at the time, but the development never got approved because locals had their concerns, a common theme in many of these wealthier communities. Instead, a more expensive 5-unit dwelling was approved
“It’s just economics,” said Schwartz. “The land is very expensive so you can’t build a cheap house. You’re starting at a very high price point. The only way you could do it is to have more density.”
The current housing market has made it difficult for municipalities to consider new builds. So, Summit County and other counties have had to come up with creative solutions; one of them, looking at already-existing infrastructure.
In Summit County, officials are working on an offer to lease an out-of-service Days Inn so it can turn into an affordable housing complex.
“There’s no single issue that causes it,” said Dietz. “There’s no one, single solution to fix it. It takes a lot of creative thinking. It takes a funding source because the private market, the private sector, the free markets, they are not solving it. It’s housing that costs more than what it can be sold for and so it takes a lot of partnerships.”