Volume 3, Number 2 – May 2006

Housing: Why Economic Developers Must Engage

If you’re like me, the terms “affordable housing” and “housing policy” call up a series of strong images: huge urban housing blocks, implosions of decayed buildings, and a whole range of images around urban poverty. The result is that many economic developers (if you’re like me) tend to think of housing policy as something for housing or anti-poverty advocates to worry about. While these policy discussions are important, they don’t have a lot to do with our traditional focus on job and wealth creation.

This essay argues that our stereotypes are flat out wrong, and potentially dangerous. Economic developers should always have been concerned about housing policy, but now more so than ever.

Why should we care about housing? Like some many things, it all comes down to a changed economy. Back in the day, we worried about buildings and physical infrastructure because those things mattered. Business needed affordable infrastructure if it hoped to succeed. That’s still true today, but, as nearly all entrepreneurs and corporate chieftains will tell you, talent is now the key ingredient in a firm’s success. All else being equal, the firm with the most talented people will win. There’s a reason why Google makes new recruits take grueling intelligence tests. They want to hire and retain the best workforce in the world.

What’s true of firms is also true of regions. Places with the most talent generate the most innovations and the most prosperity. Recent data show that, over the course of the 1990s, education levels were the single most important driver of economic growth. Highly educated metro areas significantly outperformed low-education metros in the most critical areas of wealth generation and job creation. Similar results occur at the international level where nations, such as Denmark, Sweden, and Singapore, with strong education performance and significant investments in education regularly rank at or near the top of global competitiveness assessments.

This is where housing comes in. Affordable housing—or “workforce housing”—is important because it helps attract and retain talent. Like all of us, talented and creative people want a place of their own that they can afford. Unfortunately, many places—particularly on the East and West Coasts—no longer provide that option as well as they did in the past. The national picture is very scary. Between 2000 and 2004, the median house price rose 54%. Meanwhile, median family income dropped 3.5% over the same period. It’s even worse in many major metro areas.

Recent Census data on domestic migration patterns are telling. The three biggest recent gainers are suburban and exurban locations: Riverside, CA, Clark County, NV, and Maricopa, AZ. Meanwhile, high-cost urban regions—like San Francisco—are losing people, especially middle class families. There’s a reason why the exurbs are growing and middle and working class people are leaving urban areas. It’s not crime; it’s the absence of affordable housing. As people spread out, commute times rise and quality of life suffers. At some point, a breaking point is reached. The workforce votes with its feet and moves to locations with a wider range of housing options.

The plight of teachers and many public servants, such as police and fire fighters, may offer a taste of things to come. Many of these workers can no longer afford to live and work in major metro areas. They face a difficult choice: accept a horrific commute or move elsewhere.

As more communities approach this breaking point, there will be a growing interesting in finding solutions to the “workforce housing” challenge. The fix isn’t there yet, but lots of interesting experiments are underway. Here’s a few things that offer some promise:

  • Enhance Housing Supply: Making it easier to build more housing by cutting red tape and providing incentives for employers to provide housing support as a workplace benefit. In Austin, Texas, the S.M.A.R.T. Housing initiative (http://www.ci.austin.tx.us/ahfc/) provides expedited review and other specialized support for developers who include affordable housing in their new construction plans. In an effort to promote employer housing support, both Connecticut and Illinois provide tax credits for employers who support affordable housing projects. In Illinois, the donation tax credit provides a credit of up to fifty cents for every $1 in investment (www.ihda.org).
  • Build Incentives for Workforce Housing: More than 130 localities now use inclusionary zoning which requires all new developments to include some portion of affordable housing in all new projects.
  • Foster Housing Innovation: A new initiative, I’M HOME (Innovations in Manufactured Homes (www.cfed.org), is seeking to back financing, construction and manufacturing innovations in the manufactured home sector. Initiatives of this sort can have a huge effect, as more ten million American families now live in a manufactured home.
  • Embrace New Suburbanism: While we all should support efforts to make cities more livable, we must also recognize that most Americans live in the suburbs. Why not apply similar concepts to the suburbs? We need suburbs (and cities!) that mix commercial and residential uses, that are more dense, and that include a wide diversity of housing choices.

If we want to attract and retain talent in our communities, we have to provide what talent wants. And, while talent may appreciate active nightlife, bicycle trails, and the creative arts, they really appreciate a nice affordable home. Regions that get this message and act to support workforce housing needs will have a leg up on the competition.

Miscellaneous Plugs: Cool Blogs

 Blogs are booming and they’re not just about politics or music or even the latest from American Idol. If you really want to keep up with the latest thinking in the field, you should dive into the blogosphere. Here’s a few places that deserve a visit along the way.

Accelerating Innovation (http://innovate.typepad.com/innovation/): The pundits and politicians are rightly getting concerned (again) about America’s economic competitiveness. This blog, from the Center for Accelerating Innovation’s Egils Milbergs, will keep you up to date on what’s happening in this field.

Network Weaving (http://www.networkweaving.com/blog/): A new blog that examines the power of networks. How do you weave networks? Who does it well? Why does it matter? If these questions concern you, check out this blog from June Holley (formerly of Ohio’s ACENET) Jack Ricciuto, and Valdis Krebs.

The Entrepreneurial Mind (http://forum.belmont.edu/cornwall/): This blog comes to us from Jeff Cornwall, a professor at Tennessee’s Belmont University. It combines tips for entrepreneurs with analysis and research on the entrepreneurial economy.

What’s Happening at EntreWorks Consulting?

  • For Academic Readers:
    • EntreWorks President Erik R. Pages was recently appointed to a position as North American Editor for Local Economy, a British journal that covers a wide range of economic development related issues. Local Economy welcomes article submissions. To learn more, visit http://www.tandf.co.uk/journals/titles/02690942.asp. If you have ideas for an article, please send an email to info(at)entreworks.net.
    • EntreWorks President Erik R. Pages will be serving as Program Chair for the US Association of Small Business and Entrepreneurship’s Entrepreneurial Support Organizations Division. In plain English, this means that he will be coordinating presentations at USASBE’s annual conference in January 2006. We are looking for interesting proposals related to entrepreneurship and regional development. If you are interested in participating in this event, visit www.usasbe.org for more information.
  • New Articles and Presentations in the EntreWorks Library: The following articles have been added to the EntreWorks library. You can access them at: www.entreworks.net/library.
    • “Supporting Rural Entrepreneurship: What Can States Do?” Economic Development America, Winter 2006.
    • “Entrepreneurship Education is Not Just about Business,” Trustee Quarterly, Winter 2006.
    • “Attracting Retirees: What Do We Know? What Should We Know?” Presentation to the Georgia Retirement Workshop, Valdosta, GA, January 26, 2006.