The local entrepreneurs I know are gritty, clever and not looking for a hand out. Fifty years ago starting any business here was a risky proposition. Air service was tenuous, winters were bitter, summers were mosquito infested, inflation and gas prices were headed for a spike.
Different times. Business risk now is about housing. Ask any business owner. Finding reliable, qualified staff that have housing is likely their number one challenge.
Some employers have taken the bull by the horns. Jackson Hole Mountain Resort is investing millions to house the employees it needs to run its extensive resort and retail services. So too is the hospital.
But too few developers and business owners have followed suit. Employers pay what the market will bear. And the labor market here includes many from places where wages and living standards are so much lower that jobs here are attractive, even if housing isn’t.
While an ever-increasing portion of the workforce squeezes into nooks and crannies or commutes from outside the county, job growth continues to snap back from the 2008/2009 recession at a torrid pace. Since the end of 2011 employment growth has averaged 3.6% year over year, and employment numbers at the end of 2016 were roughly 1,500 higher than at the pre-recession peak in 2007. At a 3.6% growth rate, employment would double 2011 numbers by 2031, if not sooner.
Meanwhile commercial developers are only required to mitigate the housing needed for a percentage of the peak-season employees their development generates. For a 1,000 sf restaurant, a developer must mitigate about $70,000 worth of housing, or the equivalent of 1.35 seasonal employees. Yet an employee generation study by Clarion Associates published in 2013 found that on average 1,000 sf of food and beverage space generated 3.91 full-time employees and 2.42 additional seasonal employees during the peak summer season (p. 55). In essence, 5 of the 6.33 employees generated by 1,000 sf of food service must house themselves. Or the community must publicly fund housing for them, which many consider a handout.
Proposed new rules obligate developers to fairly share the burden. On a downtown commercial lot that allows a three-story box, the developer could fill two floors with whatever mix of commercial development they think is most profitable, then provide housing on the third floor that roughly matches the need for housing generated by the commercial development. If extenuating circumstances don’t allow the housing to be built on site, the developer can pay an equivalent fee-in-lieu that would go into a housing fund to build workforce housing in a location and at a scale appropriate for the character of the neighborhood and the community.
Appropriate zoning incentives and low regulatory barriers on housing are important too. But the fundamental realignment of housing mitigation with the primary driver of housing need is long over-due.
Some feel fair mitigation requirements will stifle new development altogether. That fear needs a closer look. Developers charge what the market will bear, not what it costs to construct commercial space. Developers assess market demand for space and the ability for that space to generate revenue over a given time frame based on likely rates of return and how those returns stack up against alternative investments. The cost of mitigation alone does not at all determine whether or not the space is rentable. The market does. And the market in Teton County is booming.
Increasing mitigation requirements may raise rents and force businesses to absorb higher costs per square foot. But given the massive demand for goods and services in Teton County, I wager that gritty, determined business people are up to the task. They might do more with less and increase productivity per square foot. Or they might establish pricing power through quality, innovation and differentiation.
Prices for goods and services may rise. But I wager that many of the 3.5 million visitors will gladly pay a relatively high price for quality, whether for a finely-pulled espresso drink, a local micro-brew, a farm-to-table meal, a local craft, or a high-end service. And I wager that many of our local residents will gladly do the same.
Higher mitigation requirements will also ensure that the employees behind those products and services are housed. And then the biggest risk for business owners will no longer be finding employees with safe, secure housing. It will be putting out the best product they can. And that’s something, knowing the entrepreneurs I know, I’m not too worried about.
[…] had me at a reference to the 2013 Employee Generation Study … Commenting on a recent suggestion by Teton County staff that all year-round employees generated by de…, Teton County Commissioner Mark Newcomb defends the […]