Colorado is currently in the midst of a severe and escalating housing crisis, significantly impacting those with the lowest incomes. Ranked as the 8th most unaffordable state for housing, the situation is marked by two interconnected challenges: affordability and availability. Businesses should be aware of the effect this may be having on the labor force including employees and potential hires.
A staggering 86% of Coloradans express concerns about housing, categorizing it as either an “extremely serious or very serious problem.” Data underscores the gravity of the issue, revealing a disturbing trend where housing costs have nearly doubled over the past decade, forcing households to allocate a larger proportion of their income to secure housing and putting financial strain on families and individuals. Additionally, there has been a sharp increase in first-time homelessness, indicating that people are not only struggling to afford homes but also finding themselves without stable housing. The consequences of this dual crisis are far-reaching, affecting the most vulnerable members of the community.
The high cost of housing in Colorado affects both renters and home buyers. The median sale cost of homes in Colorado has approximately doubled over the last decade, creating a significant barrier for first-time homebuyers. Soaring costs, combined with a shortage of available homes, effectively lock potential buyers out of the market, forcing individuals to remain in the rental market for extended periods and contributing to the escalation of rental costs and heightened competition among renters.
The situation is even more critical for extremely low-income households, whose earnings place them at or below the poverty guideline or 30% of the area median income.The shortage of affordable rental homes exacerbates the challenges faced by these vulnerable households. Many of these low income families find themselves severely burdened by housing costs because halfmore than half of their income being allocated to secure shelter. This financial strain creates a domino effect, compelling them to make difficult choices, such as sacrificing essentials like nutritious food and healthcare to meet housing obligations, increasing vulnerability to unstable housing situations, including evictions.
It isn’t just the unemployed that suffer from housing problems. Some statistics show that approximately half of those experiencing homelessness are employed, albeit earning low wages. A 2021 study from the University of Chicago estimates that between 2011 and 2018, 53% of individuals in homeless shelters and 40% of those without shelter had at least some labor earnings which suggests they had jobs for at least some of the time they were unemployed., Employers should not assume that none of their employees are suffering from stress and problems related to housing.
It isn’t just unskilled labor that have these challenges. For example, some commentators note that healthcare workers such as health aides or other staff are pressured as well. This can cause a variety of problems for employers. It seems certain to reduce the labor pool in the Denver Metro area because employees, particularly lower-wage employees, are unable to find housing within a reasonable commuting distance of the employer. This may contribute to the Colorado Hospital Association’s predicted large shortfall in number of health care employers available to meet demand.
Other employers are likely to face similar problems. Some Colorado towns report that almost half of the applicants for certain jobs withdraw their applications when they realize how expensive housing would be if they accepted. This isn’t likely to get better anytime soon.
Looking ahead, the state of Colorado anticipates adding an average of 35,000 households annually until 2040, further intensifying the housing shortage. By 2032, the median rent is expected to skyrocket to $2,700 per month, demanding an annual income of $106,000 or an hourly wage of nearly $51. This surge in housing costs will disproportionately impact low-wage workers, including those in the hospitality, food service, stocking, order filling, home health, and teaching sectors. As a result, many will be compelled into substandard, overcrowded living conditions or forced to reside in communities distant from their workplaces, incurring higher transportation costs, or, in some cases, being priced out of the state altogether.
As a result of this, employers will face increasing pressure to raise wages to attract talent, be forced to hire less attractive candidates due to a smaller labor pool, or both. These can have ripple effects on the business. Higher wages, of course, require evaluation of company finances to determine how they can be paid. Some companies can increase customer prices to try and offset these prices, but not all. Some businesses, such as those that work on insurance projects, might be unable to easily change prices. Others may be unable to increase prices without alienating their customer base.
A smaller labor pool can also cause problems with respect to workplace rules. An employer who is concerned about an inability to replace a worker may be motivated to be more lax in enforcement of its workplace rules than it would be otherwise. This could lead to greater risks or lower quality products.
There are no easy solutions to this problem for any individual employer, but there are certainly some ideas to consider. Where remote working is possible and realistic, a schedule requiring only some in-person work can help by allowing an employee to live further away and endure a longer commute. Employers could make sure that employees understand the additional benefits available to employees that can help reduce the number of living expenses that the employee has to pay after housing. This includes not only company-specific benefits but also Colorado programs such as the FAMLI paid sick leave program. For some professions, moreover, there are even state programs to assist individuals in buying housing. In some professions, such as seasonal employees, some employers even opt to provide for employee housing directly. All of these ideas have their own requirements and risks, too.
A business looking to use creative solutions, new benefits, or changes to its employee structure to mitigate the harms to employees and itself of high housing cost would be well-advised to consult with an attorney and a certified public accountant, depending on the solution. Some practices may have legal or tax consequences. A good business attorney can help analyze the situation and make sure the business knows the risks and benefits to a new course of action.
If your company is facing issues related to the Colorado housing crisis and needs legal assistance, consider contacting an experienced Denver business attorney at Underhill Law, P.C.