Who needs workforce housing?

Workforce Housing for a strong Andover Economy

There is a housing shortage that threatens Andover’s long-term viability as a prosperous community.

A couple of months ago I attended a meeting of Lakes Region business leaders. At that meeting I heard several executives complaining that their large companies were unsuccessful in hiring the local workers they really need, even though their companies had boosted starting wages 5%, along with offering a $1000 signing bonus. One person in that group blamed our local companies' troubles on the federal pandemic relief packages and a widespread lack of character among people in our region, saying “nobody wants to work anymore”! 

This explanation doesn’t ring true to me. Although I believe that the trouble these companies are experiencing is real, the cause of their trouble is not that somehow, vast numbers of lazy workers in the Lakes Region are idling at home. The true reasons, as I see them, are not so simplistic and as politically polarizing as heaping blame on “lazy workers” or “government handouts”, as some claim. Town planning boards, including Andover’s, must take action to correct a policy error we made decades ago. That policy error was one that blocks appropriate development of entry-level workforce housing, by limiting new construction to expensive single-family dwellings.

Nearly everywhere I go in our area of northern Merrimack County, I see “Now Hiring” signs. Yet, employers are not able to fill positions. The problem is widespread. The NH State Police say they have 25% of their positions unfilled, and their starting wages are above $24/hr. Even fast food places are offering a seemingly attractive $14 to $16 per hour to start. (For a fascinating deep dive into typical wages paid for every line of work in our greater Concord area, go to the nhes.nh.gov website and examine the data on wages-conc.pdf.) 

Why are so many jobs in NH remaining unfilled? There is one glaring reason: wages here are too low relative to housing costs.

Currently, the jobless rate in NH is 2.3%, far below than the national average of 3.6%. Many rightly regard low unemployment numbers as good economic news, and yes they are, if those numbers are considered in isolation. We NH folks work hard! 

But NH’s low unemployment numbers indicate that we are in a so-called “tight” labor market where job offers exceed the number of job seekers. Job seekers can be choosey, and will even move out of our state in search of their best work-life opportunities.

From the viewpoint of some person who does not already own property in Andover, it is bad news that our local housing market has really exploded since the start of the pandemic. From a first-home buyer's perspective, the existing shortage of entry-level and workforce homes has become even worse. As the global pandemic frightened many folks away from crowded residential neighborhoods from Boston to NY, people cashed out valuable southern New England suburban properties and bought beautiful homes in the rural Lakes Region, including in Andover. In recent months the Beacon reported that median sales prices in Andover have rocketed up, many homes being only on the market 5 or 6 days before sale, sometimes closing thousands above the asking price. 

This “land rush” may be thrilling for established Andover property owners, but it is a strong signal to “go away” for local first-time homeowners. 

Let’s consider a real-world example from the viewpoint of a recent local high school graduate, who is hoping to find an entry-level manufacturing job at one of the large employers in the area. This person is willing to work hard for decent pay, and hopes to settle down here and start a family. Unfortunately, our hypothetical new worker has no savings, nor the means or inclination to pursue a post-secondary degree.
 
First, let’s see what pay range manufacturing companies within easy commuting distance from Andover are offering their new hires. A quick look at a nearby company’s offerings online at Glassdoor describes only a single entry-level office position, for an "Enviro, Health & Safety Intern", requiring at least one year experience and a Bachelor’s or other degree. The pay range is $38-$74K/year, with $54K being "most likely", according to Glassdoor. Unfortunately, our hypothetical entry-level worker doesn’t qualify as a candidate for this job.  Another nearby company in a similar industry advertises a “foundry machine operator” position for $17-$22/hour, or roughly $34K-$44K/year, while a different foundry company offers an entry-level, second shift job at $17.50-$19/hour, or $35K to $38K per year. Our inexperienced worker might probably accept an offer on the lower end of that pay range.

How do those income figures square with housing costs in our area? For example, Zillow shows a very tight local housing market, with only a single apartment currently for rent in Franklin, at $1500/mo for a 2BR on Prospect St. To afford that, you'd need an income of $54K/year, ($27/hr) or a roommate to split the place with, and you’d both need an income above $13.50/hr. (I’m using the rule of thumb that a person should spend no more than one-third of their income on housing.) Of course, if this single Franklin apartment is already rented, there are apparently no current alternatives closer than Claremont or Concord.

Might it be more affordable to buy rather than rent? The cheapest listing for sale today is on Victory Drive in Franklin. They are asking $165K, with a $990/mo mortgage. The next cheapest year-round listing is a mobile home in Andover, at $179K, with a monthly mortgage slightly above $1000. Down payments of 20% on these properties would be around $33K-$39K, with a 30-year fixed rate mortgage at 5%. 

Can anybody moving to our area take a job as a laborer, then afford a starter home or apartment to live in? Not likely. It doesn't sound to me like our area is an inviting place for entry-level workers, and helps explain why 62% of NH high school grads leave the state, never to return.

But the worst news is, that if our area is unattractive to workers, profitable companies who rely on hundreds of workers to meet the rising demand for their products in today’s rebounding US economy will not be able to hire workers they need to remain open here in NH. The companies will either go out of business, or move to another state with low housing costs, higher minimum wages or both. If either of those things happen, NH jobs will disappear, the total value of Andover’s and neighboring towns’ tax bases will decline, and tax rates on remaining property owners will rise to cover our towns’ fixed expenses, such as maintaining roads and heating public buildings.

There are only two ways out of this quandary, and both should happen soon if a local economic calamity is to be averted. One is to raise the federal minimum wage, which would help level the playing field for NH versus lower-wage southern states. The other is that housing affordable to young entry-level workers must be built in our area. If these two things do not happen, the population of NH will continue to shrink and age as younger folks seek their fortunes elsewhere, and the industries that power our local economy will leave with them.

The Andover Planning Board will be taking up the issue of the scarcity of workforce housing this year. Stay tuned to the Beacon for periodic reports!

- Ken Wells, Vice-chair, Andover Planning Board