Two years ago, a commission studying growth trends in Montgomery County put metropolitan Washington's labor and affordable housing shortages in a context that mere statistics could never provide.
Expensive housing is "closing some of our opportunities" to attract industry, the commission said in its report, "Envisioning Our Future." An example cited by the panel, showing the relationship between labor and housing shortages, provided a telling clue to the slowdown that was underway at the time in the region's economy.
"One company learned that many of its employees commuted to Montgomery County from Pennsylvania because they could not afford to live in the county. They shared apartments during the week and traveled home for the weekends. That company opened a Pennsylvania branch," the commission said in the report.
An isolated development? This would have to be called a microcosm based on the evidence of labor shortages and affordable housing problems throughout metropolitan Washington.
The two have combined to form what the author of a new study calls a dual crisis. "The two are interconnected, and together they pose a threat to the area's continued economic vitality," according to George Grier, senior associate at the Greater Washington Research Center.
Grier's assertion, while seemingly alarmist, is more a measured assessment of the facts, which show that shortages in affordable housing and labor are serious problems. Indeed, Grier's conclusion affirms what several observers have been saying for some time now.
A year ago, in fact, Grier authored a study in which he concluded there is a housing crisis in the Washington area -- one of "shortages in the midst of plenty." Selective shortages have emerged and worsened, escalating costs have hit the rental market particularly hard and costs have risen rapidly in sales of new existing homes, Grier pointed out in the 1989 study for the research center. While the housing crisis is limited in scope, he said then, it is "justifiably called a crisis."
Just two months later the Metropolitan Washington Council of Governments (COG) released a report in which a task force concluded that affordable housing was the No. 1 problem in the region. The task force recommended that it should be the first growth-related problem to be addressed by the COG.
In the meantime, labor market experts have been saying for more than a year now that a shortage of workers was affecting growth and that the situation could get worse. Rapid expansion in the years immediately following the 1982 recession all but exhausted the area's labor supply. As the period of explosive growth lengthened, the increase in jobs coincided with a decline in population. Just this month the D.C. Department of Employment Services (DES) noted that the area's increase in jobs in 1989 was stronger than labor-force growth. This, said DES officials, indicates that jobs are attracting workers from beyond the boundaries of the Washington area.
Still, not even Grier's use of the word crisis in the earlier study has been enough to provoke more than passing concern in the public and private sectors.
Coming as it does now, it's possible that the latest study won't receive the attention it deserves either. Many in the area's private sector, for instance, believe the soft real estate market and the effects of that on banks' earnings and the flow of credit are the biggest threats to continued economic vitality. Worries about a credit crunch play to a bigger audience than an affordable housing shortage. Indeed, a proposal to build expensive housing in downtown Washington has created more interest than the difficulty low- and moderate-income workers have finding affordable homes. In the meantime, labor shortages tend to be overlooked as long as the area continues to maintain an unemployment rate of 2.7 percent or less.
Grier's conclusion about the threat posed by housing and labor shortages -- or the "dual crisis" -- has serious implications for sustained growth even at moderate levels, nevertheless. The warning is consistent with everything that we've seen in the current slowdown that began three years ago, predating the real estate crunch and tight credit. Now Grier has put business and government leaders on notice that the region's economy will slow further unless they act quickly to solve the crisis in the labor and housing markets.
"We have a housing market that is less and less affordable, not merely to the poor, but to the new workers that our economy needs to support," Grier noted in the report. At the same time, he pointed out, the area can "no longer depend on a 'home-grown' labor force to meet all its expanding job needs."
It's obvious that business can't expand if it can't attract workers and there isn't much chance of bringing new workers to the area if they can't find affordable housing when they arrive.
If affordable housing is going to be the first growth-related problem to be addressed, as the COG task force recommended, then government and business will need to do it in partnership. The COG, in fact, already has outlined a series of initiatives that might be used by employers and local governments.
Companies, for example, could provide mortgage guarantees to lenders who agree to make housing loans to employees of those companies. Or employers may construct housing for their employees, subsidize interest rates on workers' mortgages, provide funds to community organizations to build affordable housing or participate in group mortgage origination plans with lenders.
Local governments could also develop employer-assisted housing programs for their own employees, as the COG points out. But governments can play a bigger role through public intervention: Density bonuses and other incentives can be used to increase the inventory of affordable housing, as the COG suggests. None of that is likely to happen, however, as long as local government officials continue to resist changes affecting key zoning matters.
Worse yet, complacency in both public and private sectors could compound the threat that Grier warns of in the research center's jobs and housing study.