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Treasure Valley housing crisis causes ripples across economy, community

The Treasure Valley’s affordable housing crunch touches more than just individuals struggling to make their rent.

Boise’s housing crisis is one of the major forces shaping the community and could play a major role in the economy in decades to come. As median Ada County home prices soar over the half a million mark and rents climb by double digits, housing costs hit more than just the wallets of lower-income residents.

[‘Renovicted’: Boise renters report displacement from renovations as landlords seek higher rents]

When housing costs sharply outpace wages, it has wide-ranging impacts on the region’s economy as a whole. It means less money in the pockets of residents to spend at local businesses, strains employers as they try to hold on to workers, and can destabilize communities and the mental health of residents.

Idaho Housing and Finance Association’s Executive Director Gerald Hunter said the lack of affordable housing close to downtown Boise could eventually push restaurant workers, baristas, and other low-wage workers out and leave downtown struggling. He pointed to a more extreme example of this already happening in Idaho’s resort areas, like Sun Valley.

“Without that housing, downtowns dry up and you have people living further and further away and you push costs from housing-related issues to transportation issues because now you’re trying to get people from further away into downtown for work,” he said. “That’s very clearly a concern.”

Higher rent, less spending

Rising rents mean residents, especially those earning the lowest wages, are more strapped for cash. That puts taking their family out to eat, paying for new clothes, or possibly renting a cabin in the mountains for a weekend away out of reach. And it costs Idaho’s economy hundreds of millions every year.

A 2018 study conducted by Denver-based Shift Research Lab found Idaho missed out on $670 million per year in economic spending due to the number of Idahoans who are paying more than 30% of their income in rent. This number is likely higher now due to the growing gap in housing costs and wages in the three years since it was calculated.

Franklin and Orchard
Updated rendering of a proposed affordable housing project from J. Fisher and the City of Boise at Franklin and Orchard in Boise. Via City of Boise

Economist Phyllis Resnick, who worked on the study and now leads the Colorado Futures Center, said researchers used consumer spending surveys that track what Americans of all incomes spend their money on. Resnick and other researchers used this data and information on how many households are considered “rent-burdened” because they pay more than a third of their income to rent to calculate the number of spending that doesn’t hit businesses due to rent.

The study looked at households making under $50,000 per year.

“We really looked at households that are struggling and we said ‘okay what would they spend that money on and where’s the money not being spent based on the fact that folks are spending more on their housing’,” she said. “It’s not just the household that’s housing cost-burdened, it’s all of the businesses that don’t have enough customers with disposable income to support a healthy business climate.”

How do real estate investors factor in?

Earlier this year, BoiseDev reported on investors purchasing properties in the Treasure Valley, including how one in five single-family homes in Ada County are not owner-occupied.

This adds another dimension to the economic question of affordable housing’s impact on the economy because this increases the amount of money paid by renters that flow out of Idaho’s economy and into the pockets of out-of-state owners instead of local landlords who spend the income in Idaho.

Boise State Economics lecturer Guido Giuntini said this is a complicated question to study because there are so many factors to determine if the impact is negative or positive on an economic system. Out-of-state owners do pull money away from the state’s economy and take it elsewhere in the country, but he said large developers are often much better equipped to build large amounts of housing to meet the growing need in Southwest Idaho.

Homes, Houses in Boise.
Homes in Boise. Photo: Don Day/BoiseDev file

“The first part is some of the profits go out of state, plus there’s a problem of supply and demand which is why the cost of housing goes up so much,” Giuntini said. “To address that, one thing you can do is to increase the housing stock. That’s one solution to the problem, but increasing housing is difficult. How many Idahoan investors can do it versus how many from out of state?”

Resnick, from the Colorado Futures Center, said the rise in rental properties being owned by large investor groups instead of local owners causes a range of problems, like rent hikes and maintenance issues. But, she said it would take investors owning much more of the rental stock to put a drag on the economy. Especially one as robust as Boise’s.

“My gut is telling me that you’d have to have a fairly high concentration of that to see a major impact on the economy,” Resnick said. “If you’ve got one or two hedge funds that own a few homes as part of a larger portfolio, then there’s always a marginal impact, but for it to have a significant impact you’d have to have an awful lot of leakage over time to have a big impact on the economy.”

‘It creates an enormous challenge’

Disappearing affordable housing hits more than the economy.

When housing at all levels is scarce, it drives up prices for all units and leaves the lowest-income workers more vulnerable to homelessness. Hunter, with IHFA, said this costs the whole community, not just the people who find themselves without a home.

“It’s not just the lowest income people we’re talking about because you move up the moderate-income ladder and they’re facing these same kinds of struggles, but when you get down to the bottom run of the ladder and they can’t find another place to live if they’re displaced you start to push yourself into this situation where we create additional homelessness,” Hunter said. “Once you have a household that becomes homeless the cost to the community goes up considerably.”

Boise State University conducted a fiscal analysis and an economic study of the New Path Community Housing project, which is a Housing First development serving 49 chronically homeless individuals. The study from the first year of operation found the residents of the project had fewer stays in emergency shelters, spent fewer days in the hospital and in the Ada County jail. It resulted in an estimated $1.3 million in overall savings for the community.

A rendering of the now complete New Path Community Housing. Courtesy of the City of Boise

Housing instability also takes a toll on mental health, particularly in children. Resnick and Jennifer Newcomber, who also worked on the study on the spending lost from high rents, have heard it has a big impact on the education system. In Denver, Newcomer said one school district told her a student either enrolls or unenrolls in their school every 7 minutes due to economic instability.

“It creates this enormous challenge in the classroom in respect to academic performance,” Newcomer said. “Teachers are constantly grappling with figuring out how to keep current kids on track but accommodating new kids coming in. it also creates this other tier, but it really creates a social emotional dynamic that’s not healthy for kids.”

A closing window

Stable housing also means more camaraderie, according to a report written for IHFA on housing by Professional Community & Economic Developer Erik Kingston.

“Communities benefit from less traffic, more stability, and engaged- residents,” Kingston wrote, about cities with abundant affordable housing. “School and job attendance go up, while public costs associated with community health and safety go down. Stable households are better able to build social capital and cultivate supportive networks essential to economic mobility and opportunity, which in turn reduces their reliance on social programs or public assistance.”

But, as unforgiving as Boise’s housing market is right now, Hunter says we haven’t yet reached a crisis point and there is still time to intervene.

“It’s a challenge,” he said. “I would say though that as bad as it is in Boise right now, there are other places in the country and other urban centers that are much, much worse. You have to be grateful we haven’t gotten to that point but it puts pressure on us to make sure we don’t get into situations where we can’t find a way to address these challenges.”

Margaret Carmel - BoiseDev senior reporter
Margaret Carmel is a BoiseDev reporter focused on the City of Boise, housing, homelessness and growth. Contact her at [email protected] or by phone at (757)705-8066.

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