A shortage of new homes has helped drive up prices in metro Denver at some of the fastest rates in the country. One of the downsides of those big gains is that the very workers who could help relieve the housing shortage, for the most part, can’t afford to own a home here.
“One way to assess the affordability of housing is to ask whether the people who build homes can afford to buy them,” said Edward Pinto, director of the American Enterprise Institute’s Housing Center, in a new report.
The AEI’s Carpenter Index looks at what share of entry-level homes, defined as the lower half of the resale market in price, someone earning the average household income for a carpenter can afford. AEI defines an affordable home as one that costs three times household income.
Across much of the country, construction wages have failed to keep up with rising housing costs, but the problem is especially pronounced in California and cities with heavy in-migration like Denver, Seattle and Las Vegas.
In metro Denver, the average carpenter could comfortably afford a home worth $218,000 at three times household income in 2018. Those represented only 13.7% of the entry-level homes on the market.
Back in 2012, carpenter households in Denver made a little less and could afford a home at $176,000. The big difference is that price point represented 52% of the entry-level homes on the market that year.
Metro Denver ranked 94th out of 100 metros examined when it came to housing affordability for carpenters. By contrast, the average carpenter household in Detroit; Dayton, Ohio; and Kansas City, Mo., could afford every entry-level home in those markets.
The local construction industry has long complained about the difficulty in attracting enough workers in the skilled trades, and it has tried to remedy the shortfall by setting up trade schools and apprenticeship programs to draw in more young adults.
But they haven’t gone to the extreme of the ski resorts, who have subsidized rents and even built worker housing to ensure those working for them have a place to live.
Another problem is that builders over the past decade have largely focused on move-up and luxury homes, which offered better profit margins. Only more recently have entry-level homes in the range of trade workers been a focus.
Affordability is better in Colorado Springs than Denver, but it also deteriorated over the last decade. Back in 2012, three-quarters of carpenter households could afford an entry-level home in Colorado Springs. By 2018, that ratio had fallen to 27%, just above one-quarter.
“A shortage of housing remains a major issue for the United States. Years of underbuilding has created a large deficit, particularly for states with strong economies that have attracted a lot of people from other states,” according to a study released Wednesday from Freddie Mac, the national mortgage guarantor.
Freddie Mac estimates the nation is short about 2.5 million housing units, and among states, Colorado has one of the most severe housing shortages in the country after Oregon.
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February 29, 2020 at 08:00PM
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Construction workers can build a home, but not buy one, in metro Denver - The Denver Post
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