California’s thriving economy is becoming a victim of its own success. Last month, the Golden State surpassed the U.K., becoming the 5th largest economy in the world. In April, California’s unemployment dropped to 4.2%, the lowest rate ever recorded since the state started formally tracking unemployment in 1976. Business is booming, especially in California’s largest urban centers: the San Francisco Bay Area, Los Angeles, and San Diego. But low unemployment, coupled with lack of housing supply in the very same economic centers, is creating a significant labor shortage, leaving employers struggling to hire and retain employees across many industries.
Construction firms building major new developments in San Francisco are having a such a serious challenge hiring construction workers that they’ve resorted to hiring workers who commute from Sacramento and beyond or even relocating workers from Seattle and Southern California who they temporality house in hotels. Hospitals and health networks are facing a shortage of doctors, nurses, and in-home caregivers, which has become so acute that last year the Presidents’ of Dignity Health and University of California joined to co-chair a new healthcare workforce commission. Farmers in the Central Coast and Central Valley are struggling to hire farm workers despite raising wages, forcing them to cultivate crops requiring less labor and in some cases letting produce rot in the fields. The bottom line is that the worker shortage is hurting California businesses’ bottom line.
Historically, businesses in California have depended on an influx of migration in order to meet the needs of a growing economy, but beginning in the early 1990s, the number of newcomers dropped precipitately and has remained low since.
According to the California Chamber of Commerce, the slowdown in new migrants from other parts of the country is directly linked to housing:
“It is no coincidence that slower labor force growth has occurred as the cost of living has soared in California. As recently as the mid-1970s, the median price of a California home was just a few thousand dollars higher than the national median. But since 1990, the California median has consistently exceeded the U.S. median by more than 50%, with the state median at least double the U.S. median in 10 of the last 27 years. Meanwhile, rents have reached such heights that rent burdens in many communities across the state are among the nation’s highest.”
-- California Chamber of Commerce, Economic Advisory Council, December, 2017
These circumstances leave California employers in a bind. If rising wages can’t attract new employees because housing has become so unaffordable that moving to California is out of the question, employers are left with few options. Companies, nonprofits, and government agencies looking to build a thriving workforce have to confront the housing challenge themselves.
Down payment assistance programs give employers a new tool to address their recruitment and retention challenge: the ability to help their employees buy homes by directly investing in their homes. By structuring these down payment support programs as a shared equity investment, rather than a loan or cash grant, the solution scales with the magnitude of the problem. If housing prices continue to increase, so will the value of the investments, leaving more money for the employer to address future housing needs. If housing prices decrease or stagnate, there will be less money returned but their employees will face less of a housing challenge.
In either scenario, employers can feel confident that they are taking a sustainable, long-term approach to managing the real business impact of housing prices. It’s a solution that we believe is needed for major employers across America, especially in California, where housing has never been more urgent.