Labor and Housing
With so much talk of union labor settlements, I think it wise to consider housing availability and affordability in the context of these discussions.
In Las Vegas, the culinary union and casino operators appear to have come to an agreement. The agreement provides a reported wage increase of $4.57/hour. This union represents more than 35,000 cooks, food servers, bartenders, housekeepers, and other workers employed at the largest casinos in Las Vegas. The median home price in Vegas is $545,000. Typical rent is $1,935/month, down from the $2,195/month high in July 2022. There is a homeowner vacancy rate of 1.9% and a growing rental vacancy rate of 6.7%.
In Hollywood, California the Screen Actors Guild strike appears to be ending. The union represents more that 170,000 members of actors, writers, and other media professionals. The median home price in West Hollywood is $4,847,500. Typical rent in West Hollywood is $3,400/month, down from $3,995/month in August of 2022. There is a homeowner vacancy rate of 2.2% and a rental vacancy rate of 3.6%.
Nationally, Kaiser Permanente and it’s 75,000 employees reached a deal in October ending the largest healthcare strike – ever. The Q3 2023 median US home price is $431,000, down from the $479,500 high in Q2, 2022. Typical US rent is $1,462/month, down 1.2% from this same time last year. National vacancy rates in Q3 2023 were 6.6 percent for rental housing up from 6% this same time last year. The homeowner vacancy rate is 0.8 percent, nearly unchanged over the last year.
This week President Biden, Illinois Governor Pritzker, and the United Autoworker union leadership celebrated the end of the UAW strike here at home in Belvidere, Illinois. The UAW has more than 400,000 active members and 58,000 retired members. According to their website, the UAW has 600 local unions and represents workers across the industry, including multinational corporations, small manufacturers, state and local governments, colleges and universities, hospitals, and private non-profit organizations.
While all these strikes created short-term economic losses for our nation, every community is affected differently – some more than others. Every individual and family are also affected differently. What can we glean from the data above? Simply, when costs go up, demand starts to go down. This is represented in home prices and rental cost trends noted above. While I didn’t report these numbers, I think its worth sharing that as home prices rose, inventory sat longer in the market and often required listing renewals to help move available product. The seller’s market is coming to an end in some communities.
With the UAW settlement, as a national labor union, we can look at the same national housing numbers as I did with the Kaiser analysis above; however, I want to look at what the UAW/Stellantis (Chrysler) deal means where I live – Rockford, Illinois. For any reader with a UAW/auto manufacturer in your community, I would love to hear your thoughts. How much is our data alike? Different?
Rockford, IL MSA
Over the last decade, the Rockford MSA seen a loss in labor force of an estimated 9,700 employable residents - 169,556, Sept. 2013 to 159,815, Sept. 2023. At the same time, our population dropped by approximately 9,400 permanent residents.
Source: US Bureau of Labor Statistics
Source: FRED
Today, median rent (November 8, 2023) sits at $950/month, up nearly 9% or $75/month over November of last year. The median single family sale price for a Rockford MSA home in September was $180,000, up 24% over the January 2023 median price of $145,0000; however, for a correct comparison, we need to look at a year over year seasonally correct comparison. The $180,000 Sept. 2023 sale price is still 4% higher than the Sept. 2022 median price of $173,000, and 0.6% higher than the August 2023 figure. Simply rent and home sale prices are still rising here.
The UAW/Stellantis deal promises to return and grow (by 2028) the assembly plant jobs and related suppliers to 5,000 jobs. This is a boon to our local economy, and frankly a real game changer. We needed this; however, will be ready for it?
Our market has already defied the odds in that our housing and rental prices have continued to rise, while our population has declined. This is in part due to the aging housing stock hitting obsolescence and internal or local demand for housing remaining high.
Now is the time to consider how we may react as a region to spur new housing growth for these new workers. Now is the time to consider how we may address land use regulations as reported in my November 2, 2023 post. One regulatory barrier I didn’t speak of in detail in this last post was the type of housing products in our market that could help to spur the production of new units. I didn’t speak of the “missing middle.”
Missing middle housing includes building types, such as duplexes, fourplexes, cottage courts, and courtyard buildings, and provide diverse housing options within neighborhoods. Historically, they have been embedded in, or alongside single-family neighborhoods. These housing products are “missing” because they have typically been illegal to build with current land use changes.
The following chart pertains only to the City of Rockford as that is where I’ve have done the deepest dive into our land use regulations. Pre-2008, or the great recession and housing market crash, there was significant building activity across most product types. During the great recession, the City of Rockford adopted and implemented a new Zoning Code (4/2008). Since the housing collapse and the concurrent zoning code implementation both single and multi-family product production is relatively flat with exception of a few unique spikes.
Source: SODC
When we start to break multi-family into more detailed product types, all activity and housing product production has dropped. You can see the significant change in the production of 3-4 and 5+ unit products.
Source: SODC
Source: SODC
Aside from the historic adaptive reuse of downtown Rockford buildings, there is no real volume being created in Rockford or, as the 2023 YTD permit chart shows below, in our MSA of Winnebago and Boone County.
Source: Census
Looking at a longer trendline, the chart below is what housing production has looked like in Rockford since 1960. While there are many reasons for a lack of production, I can’t help but consider the costs of the regulatory reforms I mentioned in last week’s post and what effect they may have in stalling a housing recovery in our region?
Without an introduction of new inventory, we won’t be able to absorb the return and growth of these 5,000 jobs. Without introduction of new inventory, it is likely that our region will continue to see growing rent and home sale prices since demand traditionally drives increases in price. It isn’t often we have an opportunity to ride the wave of significant labor force or population growth. We must strike now with land use reform and incentives to build and renovate housing product.
If we don’t respond with visionary leadership in housing production, we need to remember that these 5,000 jobs are only 3% of our labor market and of our current population, 1 in 5 homeowners are already cost burdened, or spending more than 30% of their housing costs on housing related costs and half of our renters are already cost burdened. See my October 18, 2023 post for more information on cost burden. To maintain our current population and grow to attract additional jobs, we need to maintain our labor force and they need housing that is both affordable and of good quality. When housing related expenses increase to unaffordable rates residents move. We’ve lived through this.
Now is the time to address land use regulations and reintroduce missing middle housing products and foster subsidies that help to bridge the costs of housing production. More about the Missing Middle movement can be found at Missing Middle Housing.
Continued thanks to Carlos Martinez for his research and fact finding that greatly contribute to these posts.