Where are all the workers – Part IV

By Zach Hagadone
Reader Staff

This article is the fourth installment in a series during which the Reader has examined various aspects of the labor shortage affecting area employers. For previous parts, visit sandpointreader.com.

Headlines around the country carried a similar message Oct. 12, following the release of a new jobs report from the U.S. Department of Labor that afternoon: “U.S. Workers Quitting Their Jobs Hit a Record in August,” wrote The New York Times; “A record 4.3 million workers quit their jobs in August, led by food and retail industries,” CNBC reported; “A record number of workers are quitting their jobs, empowered by new leverage,” added The Washington Post.

Taken together, those headlines touch on a number of the ground wires running through the nationwide question: “Where are all the workers?”

Over the course of three articles, the Sandpoint Reader has spent the past month picking apart that question as it relates to the local economy. The answer is multi-faceted. As The Times pointed out Oct. 12, the worker shortage has much to do with the fact that people are simply dropping out of the workforce. The reasons for that are as varied as early retirement spurred by the COVID-19 pandemic to those who were laid off and can’t go back to work because they’re now required to stay home to care for children and/or elderly relatives.

CNBC zeroed in on the most hard-hit sectors, including two of the traditionally lowest-paid — in Bonner County, those workers earn an average in the $20,000 to $25,000 per year range — and those workers may have left their jobs because their paltry pay isn’t sufficient to cover cost of living. They are either collecting unemployment or looking for higher-paid work, often pulling up stakes for new communities with lower prices for essentials, especially housing.

In Ketchum, city officials talked about, though ultimately abandoned, the idea of a “tent city” to help house workers. Photo courtesy Wikipedia.

Meanwhile, as The Post pointed out, many have left their previous employment because they rightly realize that worker-strapped employers are now more willing than ever to negotiate much higher wages just to attract and retain employees.

Frequently lost in the big numbers are the lived experiences of individuals who find themselves enmeshed in the interlocking pressures affecting employers and employees alike. 

In an email to the Reader, Nishelle Gonzales, who owns and operates both 7B Handyman & Contracting and 7B Clean, said she and her partner — along with their six children — rent a home for $2,200 a month, and she considers that “an extremely lucky amount to pay, considering the inflation in this area, and we have seen rental prices go for double that amount in the surrounding homes in our neighborhood.”

Meanwhile, her businesses employ a combined total of three workers, but local demand is such that they could triple that amount — at least.

“We have gone as far as to hire individuals out of the prison system, rehab, homelessness, and have begged for friends and family to move here and help us,” Gonzales wrote. “There lies the conundrum: Where would they live?”

That dilemma surfaces over and over: prevailing wages, especially in rural communities like Bonner County, come nowhere near to covering the extreme prices for housing. Even in the case of Gonzales’s businesses, which pay from $20 to $40 per hour, “we still are unable to grow our employee bench.”

Even worse, though she and her partner were able to secure another one-year lease on their rental, they’ve had to consider relocating away from Sandpoint — even out of Idaho — reconciling themselves to the realization that, “there is no adequate housing for the middle class, so there is no one here to serve the droves of people coming from out of state. What will the long game look like? Will people continue to pay exorbitant prices when there is no industry to support the area and their demands for service?”

As Gonzales pointed out, “Where there are no homes, there is no hope. There only seems to be a gaping hole where our middle class used to thrive. There has to be some legislative intervention that allows actual affordable housing to be built, and to have some wages increase — especially large corporations.”

Gonzales also zeroed in on a critical issue often ignored or sidelined by proponents of the “build more houses” approach: “What percentage of homes in Bonner County sit empty as vacation rental income skyrockets, at the same time homelessness and displacement does?”

“I believe legislative intervention is one of the ways we can create the Idaho that works best for all who live and work here,” she wrote. [Y]ou can bet that Idaho is selling its soul and disguising itself as a place of personal freedom and deregulation, and that does not work for the people that live and work here. Our family is a living example of this.”

No economist, labor analyst or development expert could have put it better: chronic low wages, especially in amenity-rich places like Sandpoint, have left workers vulnerable to an influx of cash-flush newcomers willing to pay astronomical prices for housing, thus pushing those workers (and ultimately their employers) further and further to the margins — in some cases, even out of their own communities. 

The most obvious solution is simply to construct more housing, but that approach, while increasing supply and ideally resulting in lower prices, is using a meat cleaver where a scalpel is needed. Perhaps a longer-term, more thoughtful approach is warranted, and that’s what a number of other regional communities, as well as planners, are trying to suss out. In essence, the solution may well be to plan smarter, rather than building bigger.

The case of Ketchum

Ketchum, and surrounding Blaine County, which includes the world-famous ski destination Sun Valley, can be considered the granddaddy of resort communities — certainly in Idaho, but also among the first rank in the western United States. Considering its long association with amenity migration, a host of iconic celebrities calling the county a home-away-from-home for more than 80 or so years, the Ketchum area is no stranger to the conflict between high housing costs and the low-wage labor necessary to maintain the infrastructure that makes it an attractive place to visit.

That said, “it’s become amplified by COVID and migration to cities like Sandpoint and Ketchum — we’ve seen inventory of housing go down by 90%,” Ketchum Mayor Neil Bradshaw told the Reader. “That has led to pricing inflation in all categories.”

At the same time, “we haven’t seen much wage inflation,” he said, “which has meant a shortage of laborers.”

For instance, Bradshaw pointed to 100 help wanted ads in the local paper versus two “for-rent” ads.

“It’s a crisis, and it affects everyone,” he said, adding that “the heart and soul of the town has always been the people. … Sure we have the huge houses, well, now it’s less affordable because all of those smaller units have been bought up and lived in.”

Ketchum made national headlines in June when city leaders considered establishing a “tent city” to house workers priced out of the housing market. While officials shelved the idea, Bradshaw said many workers are living short-term in RVs and finding other stop-gap measures. The mid-term solution is to make it easier for long-term rentals in accessory dwelling units. One promising long-term solution is the Bluebird Village workforce housing development in downtown Ketchum.

The Ketchum City Council approved the project Oct. 4, which calls for 51 deed-restricted apartments ranging from studios to three-bedroom units on city-owned land.

Those units will only be available to those making between 50% and 70% of the area median income, which means between $50,000 and $60,000 per year. According to Boise State Public Radio, rents for a one-bedroom unit would range from $660 to $980 per month.

It’s a big project and required a lot of heavy lifting for the city — planning went back three years, predating the COVID-19 pandemic and subsequent explosion of in-migration of coastal urbanites to the Mountain West, and only became possible when the city and the project’s Seattle-based developer won a 9% low-income housing tax credit from the Idaho Housing Finance Association.

While that’s a big win and a step in the right direction, Bradshaw said what’s really needed is some action by the Idaho Legislature to give cities more flexibility in regulating their housing markets.

“The state Legislature allows us to decide our COVID response but doesn’t allow us to decide on our housing response,” he said. “In Idaho we do not have the tools in our housing toolbox to address our housing crisis.”

Specifically, he referred to state legislation that frankly states: “Neither a county nor a city may enact or enforce any ordinance that has the express or practical effect of prohibiting short-term rentals or vacation rentals in the county or city,” and, “Neither a county nor a city can regulate the operation of a short-term rental marketplace.”

Short-term rentals are defined as housing that is rented for fewer than 30 days, which often equates to vacation housing.

What’s left to municipalities, then, is regulation that “safeguard[s] the public health, safety and general welfare in order to protect the integrity of residential neighborhoods in which short-term rentals or vacation rentals operate.”

That establishes a vague band of available options, rooted in a number of interpretations that can often put neighbors at odds with one another while embroiling local officials in controversies that run block by block. 

When a host of statewide planning professionals, economic development experts, government representatives and other stakeholders met for a virtual meeting of the Idaho Chapter of the American Association of Planners from Oct. 6-8, that issue merited its own session, with many speakers echoing Bradshaw’s point about communities needing a freer hand, specifically when it comes to short-term rentals.

“We need as many arrows in our quiver as we can get,” he said, “and our quiver is limited compared to most other states.”

Long-term solutions for short-term rentals

Aaron Qualls served the city of Sandpoint for many years, first as a Planning and Zoning commissioner, later on the City Council and, until December 2020, as city planner. He also serves as president of the Idaho Chapter of the American Planning Association. In that latter position, he presided over the recent statewide conference.

In an interview with the Reader prior to the conference, he centered ordinances related to short-term rentals and accessory dwelling units as a more creative solution to the housing crisis than building more and more single-family homes — most, if not all, of which will ultimately sell for market prices that run from the low end in the $300,000 range to upwards of $700,000 and $800,000, depending on their size and location.

“There’s not a lot of incentive among developers right now to do anything other than big single-family homes,” he said. “That’s just because of market forces.”

Yet the perceived supply-side housing crunch that is affecting so many workers could be managed, if not somewhat mitigated, with more aggressive approaches to how and where short-term rentals and other uses are allowed.

For instance, he said, there is already a mechanism for collecting a 7% bed tax on short-term rentals that is effective through 2024 — that money, or a portion of it, could be used to leverage grants for supporting workforce housing development. It could also be used to fund infrastructure needed to support that development. 

“This is something that’s already authorized; it would just take council action,” he said. It would, he added, “incentivize that ‘missing middle’” of affordable housing.

Another option might be to offer pre-approved plans for accessory dwelling units — that is, small residential structures detached from a single-family home but still located on the same lot. 

“If you had pre-approved plans, you could plop them on — meeting setbacks for an ADU — and you wouldn’t necessarily need a fee for impacts,” he said, ultimately making them more affordable for property owners to develop.

The ultimate goal is to increase density in preexisting residential neighborhoods without over-burdening the infrastructure.

Call it “micro-infill development,” but the city of Sandpoint has addressed both ADUs and short-term rentals, the latter which Qualls said were subject to a revised ordinance in 2019 that included a number of unique regulations. 

In broad strokes, the ordinance differentiates between owner occupied and non-owner occupied units. For the former there are no limitations, other than a permit and safety inspection. For the former there is a limitation on the number of permits to be granted within residential zones and all others must be put on a waitlist. Neighbors must be notified of the use and they carry with them a slightly higher fee. What’s more, non-owner occupied units are subject to an inactivity clause, which stops investor-owners and the like from maintaining a unit without actually renting it out.

Certain exemptions exist for waterfront development and those units closer to downtown, with the ordinance focused on neighborhoods. No limits are placed on short-term residential rentals in mixed-use commercial areas — other than a permit and safety inspection — but all non-owner occupied units are required to have a local representative and remit the 7% local tax. 

Violations of noise ordinances and other safety regulations are treated with two warnings. On the third complaint the permit is revoked. 

As of the most recently available data, Qualls said there are 53 non-exempt non-owner occupied short-term rentals in residential zones in Sandpoint and 43 known enforcement actions since 2018. 

Meanwhile, the city of McCall has been a regional example worth emulating when it comes to short-term rentals. Another prominent Idaho resort community, McCall has many of the same amenities as Sandpoint: a lake, a ski mountain, located within a few hours of a major metro area, and boasting the same kind of small-town character coveted by both locals and tourists alike.

McCall, however, has been in the tourism game longer than Sandpoint, and, therefore, has more experience with the tension between big-money housing and wage-labor needs. Community and Economic Development Director Michelle Groenevelt told attendees at the recent planning conference that McCall has an estimated 500 short-term rentals, 430 of which are known to be taxed and all of which function to take otherwise available single-family residences off the market for local workers. In her city, Groenevelt said short-term rentals that can sleep 20 or more people require a conditional use permit, putting the process before the public and carrying a number of fees.

“It basically equates to having a commercial or a hotel use in a neighborhood,” she said.

McCall also has a 7% tax on hotels, motels and short-term rentals, and added the implementation of its local housing strategy to the list of eligible recipients for the funds raised through that tax.

“The idea is that while these short-term rentals are basically contributing to the housing issue, we’re also able to go back and request funding from our local option tax funds to help offset the impacts,” Groenevelt said. 

An example of how that’s starting to bear fruit is with an incentive program for deed-restricted local housing units specifically funded through the local option tax dollars collected from short-term rentals.

“There’s very much a nexus between the idea of taxing the short-term rentals and using those funds for our housing issue,” she said.

Asked to provide a “key takeaway” from the conversation about short-term rentals and how they affect the local workforce, Groenevelt said, “If you don’t have any regulations in play it’s really good to be proactive; if it’s not in your community already it will be.”

Pick up the Oct. 28 edition of the Reader for the fifth part in this series, which will address other regional solutions to worker attraction and retention, including housing but also the “leviathan in the room,” as one expert put it, related to low wages in Idaho and how the Legislature might approach both issues. If you have a story of how the worker shortage and/or housing affordability has affected you or your business, share it with us at [email protected].