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Home » Archives » October 2005 » Albert Hall Deserves Response

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10/09/2005: "Albert Hall Deserves Response"

To the editor:

Mr. Hall clearly put some serious time and thought into his letter of 10/1/05 entitled "Availability of Services & Relative House Prices are Separate Issues" and deserves an equally thoughtful response. The problem of attracting and retaining a viable workforce, especially in essential services is indeed a difficult problem that has been attempted with varying degrees of success by a number of communities. Likewise, the issue of rapid price appreciation in desirable markets is common to many destination communities like our own. Mr. Hall raises two questions: can or should anything be done about the high cost of housing and is the high cost of housing a problem in maintaining essential services?

I cited the Bitterroot Valley in Montana since it is probably the best example of a naturally beautiful region coupled with very conservative traditions. The point was that the lack of county wide zoning did not save this area from being ruined in the view of the original residents. The open question that Mr. Hall raised is whether or not regulations can make a difference citing more comparable communities like Nantucket, Martha's Vineyard and Aspen. Nantucket is probably the most similar to the San Juan Islands in that it is an island that can only be reached by sea or air. However, it is different in that corrective measures were not taken until too late. Nantucket suffered a deep recession upon the decline of the fishing industry and welcomed the rapid surge of development, at least initially. Their proximity to major population centers produced very rapid build out before they realized the problem with workforce housing. In this case there was no choice but to accept the additional costs associated with a commuting workforce. With home prices now beginning at $750,000 and very little available land for affordable housing, it is not surprising that they are having difficulty.

Each community has somewhat different issues, but the common thread seems to be that they started too late. One notable exception is Aspen where commuting is still an option (albeit not very desirable) and where a wide variety of approaches have been attempted (including a real estate excise tax) with some degree of success. They have used very restrictive zoning and permitting, almost out of desperation, and now have over 2,000 units with a goal of 4,000 by 2015 when they expect to reach their maximum population of 30,000. While there is criticism of some of their programs, it is clear at this point that they are making progress. We could have a much longer discussion about other regions, but I submit that there is positive evidence that a balanced program involving planning coupled with public and private investment will work. We have an advantage in that we have recognized the problem early and can act before it is too late.

Regarding specific costs, modest homes of the type that we are discussing for working families have roughly one third to one half of their cost in the land with the remainder the cost in materials and labor. Labor is roughly 40% of the cost of the structure. Affordable housing projects reduce these costs in a variety of ways including those described in our most recent bulletin. I might also point out that affordable housing can be a better market for the local construction industry than the high cost homes that they seem to be focusing on. The designs are simpler, the materials are more readily available and the customers are grateful with fewer call backs. Yes, costs are quite a lot less in the Midwest for quite a few reasons, including labor availability, transportation costs, land costs and so on.
Mr. Hall's second, and perhaps most relevant question, relates to the connection between housing costs and the workforce, especially essential services. He is probably correct in his assertion that if we do nothing that the market will ultimately compensate, but we might not like the result. Part of the research performed by the Orcas Research Group involved a survey of infrastructure employers on the three main islands. The universal feedback was that we have an aging work force with retirements of workers with critical skills over the next 5 years. Friday Harbor schools will lose half their faculty, for example. This is consistent with data more generally available that shows a reduction of working age residents in the 25 to 44 age group despite a rapidly growing population coupled with a bulge in older workers approaching retirement that is double the national average. The cost of housing was cited as the primary concern in attracting and retaining these skilled infrastructure employees. Interestingly, when we included non service sector employers on San Juan and Lopez, we did not find the problem to be of as much concern, primarily because they use fewer skilled professionals and have more freedom to raise prices to cover higher labor costs. By contrast, most of our public sector jobs have grade scales set at the state level with little flexibility for wage increases at the local level.

The significant question that we should ask ourselves is, if we are content to do nothing and let the market prevail, how will our community change and is that acceptable? In some cases, our costs will increase substantially. For example, we rely heavily on volunteer firemen and EMTs. If they were forced to commute from the mainland, we would have to revert to a salaried staff of triple the current size in order to maintain 24/7 coverage. This is admittedly the most severe case, but increased costs of labor across the board would quickly cause many other problems including severe financial pressure on our retired residents, and incremental pressure on our diminishing working force. Other than increased cost, there is also the intangible concern that a workforce that does not live in the community does not have the same strong ties to the community. The whole atmosphere of the islands would change as a result, as has been observed on Nantucket and other island communities. Personally, I think that our island culture of strong reliance on each other with a healthy dose of volunteer spirit is something worth working to save while we still can.
Paul Losleben
Orcas Research Group
Olga, WA

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