Is ‘attainable housing’ a looming threat to sustained economic growth?

Tom was recently interviewed by The Villager about the 2016 Industry Cluster Study and what we can expect for the year. The following article, by Jan Wondra, highlights Tom’s take on affordable housing and employment growth:

“We are highly encouraged with the momentum we see in our industry clusters,” said Clark. “Colorado is certainly top of mind among site selection consultants and expanding companies for its highly educated workforce and high-performance business climate. Targeting our marketing and recruitment efforts in these ‘innovation’ clusters is the right strategy to drive our economic future.”

The study, completed by Metro Denver EDC’s Chief Economist Patty Silverstein and Senior Economist Lisa Strunk of Development Research Partners, analyzed nine leading industry clusters in the nine-county region. Ten clusters/sub-clusters added employment in 2015, while three posted negative growth. (See the Jan. 28 issue of The Villager for full recap.) Our region’s breadth of industries is highlighted as a major factor in our employment growth.

“The diversity of the industry base is what clearly differentiates our region,” said Silverstein. “A common theme across all nine clusters is the entrepreneurism, innovation and overall magnetism that they have in expanding the economic capacity of metro Denver. These industries shape the ‘culture’ of our business community that attracts the future workforce—particularly millennials—as well as vital investment in our economy.”

According to Clark, housing and transit long-ago preordained where the industry clusters tend to locate (recapped in Part I of this series). A significant segment of the tech/software cluster has tended to remain north of I-70.

“The founders of Level 3, who had a few billion to spend, tried for years to encourage housing in the DTC area, but the land they believed needed for housing wasn’t there,” said Clark. “While the fastest-growing corridor was the southeast, they said, ‘We can’t keep driving.’ Level 3 did studies and said, ‘You’re going to cut your labor force in half if you don’t do something about transit and housing.’ Well, we’ve got transit, but the housing piece is still a problem in the southeast.”

What some call our “affordable housing” issue, Clark calls something else.

“We call it attainable housing, not affordable housing. The questions become, can you subsidize living where you want to live? Does housing take more than 35 percent of your income?” said Clark. “We’ve attracted good jobs, created more high-paying jobs than low-paying jobs. But the dearth of attainable housing is the potential crisis; housing costs have out-performed wages. That has pushed people to other neighborhoods, which in turn requires transit.”

According to Clark, the No. 1 theme across all categories is quality of labor.

“That’s where the attainable housing piece interlocks. We have been the No. 1 market for millennials to move to, for a couple of years,” said Clark. “ But we’ll began to slip down that line. We’re hearing anecdotally that housing is an issue for those coming here without a job.”

The second common need across all clusters, says Clark, is access to higher education, something about which we should all be concerned. The benefits of higher education accrue not just to the person, but to the community, says Clark.

“We have to look at how we’re supporting education in this state. When you look at the taxes paid by a person with the earning power of a college education, a master, or a Ph.D., who’s going to contribute more based on earning power? Which will do more to keep things like Social Security solvent, a high school-educated worker, or a person with a masters degree?”

2016 indicators

When asked the categories with the greatest potential to forecast 2016 and beyond, Clark is forthcoming about the industry he believes will portend in the next few years, be it robust or tepid.

“I would tell people to watch construction numbers,” said Clark. “In the history of the U.S. economy, construction is a lagging indicator – the last thing that tells you if things are going well.  If construction here continues to be robust as it has been the last half of 2015 and first half of 2016, then it’s good.”

Normal economic patterns, says Clark, are three to four years of growth, two years of slower growth, then back up again.

“It’s a testimony to the diversity of the economy here that the numbers are so strong. If construction numbers go flat—then we will be looking at things slowing down. Not a recession by any means, but a breath.  Then folks might want to adjust, based on that.”