Las Vegas Sun

March 28, 2024

Housing affordability seen as long-term problem

Businesses, governments in area must do more to help workers, study says

Despite the housing slowdown that has dropped median house prices more than 20 percent in the past year, affordability remains a long-term problem that could stop industries and workers from moving to Southern Nevada, according to a study done on behalf of local governments.

The study conducted for the Southern Nevada Regional Planning Coalition by Restrepo Consulting Group and the Theodore Roosevelt Institute also suggests it’s not enough to have affordable housing on the fringes of the valley or in satellite communities.

The study calls on local and state government and businesses to work together to craft solutions to address housing affordability and accessibility. Possibilities include employers building housing for employees or, at a minimum, providing bus passes.

Because many new jobs will be where jobs are currently, the majority of the construction of affordable housing can’t occur on the fringes of the valley and in satellite communities such as Pahrump, said John Restrepo, the principal at Restrepo Consulting Group.

The potential is that any affordability will be offset by higher fuel costs, commute times, deterioration of air quality and need for more infrastructure, Restrepo said.

“We are building a large percentage of homes in the suburbs and in some cases the exurbs, and when you don’t build homes where people work, that creates a disconnect and affects productivity,” Restrepo said.

That means there needs to be an effort to create greater housing densities closer to the resort corridor and a greater investment in mass transit, Restrepo said.

One area local governments should address or revisit is the role of “infill” development to increase the supply of housing near the valley’s employment centers, the study said.

Local governments need to encourage developers to conduct feasibility studies to consider taller rental projects that use alternative construction techniques to make them cheaper to build, the study said.

“This could help to moderate the trend to develop largely bedroom communities in areas located away from major employment centers like the Strip and downtown Las Vegas,” Restrepo said.

For housing to be affordable, the monthly mortgage payment shouldn’t exceed 30 percent of the owner’s monthly gross income, the study said.

In the leisure and hospitality industry, the annual average salary is $30,372, which translates to an appropriate mortgage payment of $768 a month. The maximum affordable loan amount is $90,618, the study said.

In the construction industry, the annual average salary is $51,376, which translates to a monthly payment of $1,284 on a home valued at $176,699.

The dominant market segment in 2007 consisted of homes priced from $250,000 to $300,000, which were 24 percent of the housing stock. About 20 percent were priced from $200,000 to $250,000 and 12 percent to 13 percent were priced less than $200,000, the study said.

Even with the price drops, about 45 percent of the market was priced above $300,000, but homes need to be priced from $212,000 to $276,000 to be considered affordable, the study said.

From January to April, 57 percent of the housing units sold on the Multiple Listing Service were priced at $250,000 and below. That shows buyers are taking advantage of those opportunities, but Restrepo said there are still problems.

“We continue to face challenges despite the meltdown relative to some of our competitors when it comes to cost of living,” Restrepo said.

The bigger concern about the housing market, however, is not prices, but the availability of credit, said Steve Schauer, a loan officer with Flagship Financial Group. He said he believes the rapid price appreciation that hit this market won’t return anytime soon and homes will be more affordable.

However, more strict loan requirements have prevented many buyers from getting loans without putting down 3 percent to 5 percent, he said.

Workers are getting little help from companies in their bid to obtain housing, according to a survey of businesses. Only 5 percent of companies with 400 or more employees said they plan to offer any kind of housing assistance in the next three years, the study said.

“This is clearly a potential issue given the disparity between Southern Nevada household incomes and the long-term housing prices,” Restrepo said.

Local governments should work with financial institutions and lenders to provide pre-purchase counseling and assistance with down payments, the study said.

“This should not be understated,” Restrepo said. “These households have difficulty accumulating savings to purchase a home, as it relates to upfront fees. It is this wealth constraint that is a major hurdle to lower-income home-

ownership.”

Because of the credit crunch, Schauer said, lenders can do little. He said sellers are helping buyers with down payments now, but that won’t last when the market improves. Programs also exist for buyers to obtain grants for down payments.

Dennis Smith, president of Home Builders Research, said the answer might be employers’ providing grants to their employees to help with housing.

To create more affordable housing for employees, the study suggested, local governments should shorten the public approval process for projects and provide incentives for the development of workforce housing.

A version of this story appears in In Business Las Vegas, a sister publication of the Las Vegas Sun.

Join the Discussion:

Check this out for a full explanation of our conversion to the LiveFyre commenting system and instructions on how to sign up for an account.

Full comments policy