Every year the Milken Institute publishes its Best Performing Small Cities report and Grand Junction has climbed again in our ranking of the top 200 Best Performing Small Cities. We first appeared on the list at #189 in 2017. We jumped to #131 in 2018, #81 in 2019 and now find ourselves ranked #57. Of note, we ranked #12 overall in 12-month job growth from 2019-2020, which confirms what we saw happening last year- local companies expanding and new companies moving into the area in a wide range of industries. The report focuses on job growth and wage gains in the tech industry specifically. The report is an interesting read and I would encourage anyone interested in economic development to go through it.
One of the more interesting pieces of the overall report was its focus on housing. Communities that had addressed housing needs and had housing available for all income levels moved up the list, while communities that had unattainable housing markets moved down the list. Bend, Oregon dropped from #1 in 2019 to #13 in 2020 and the report pointed to a lack of attainable housing as the primary reason for its decline, as it was ranked #179 in affordability.
We’ve had solid growth and diversification over the past five years. We weathered the pandemic better than any other county in the state. There are so many good things happening. However, continued growth is not guaranteed. We have a housing crisis and if we don’t address it, everybody loses. We’ve seen this play out in so many resort communities where teachers and fireman are forced to live in subsidized housing, creating a culture where they never feel they can fully put down roots and be part of the community. Five years ago, this scenario would have seemed ridiculous for Mesa County, but today it is our reality.
For the past two years, I assumed that the private sector would meet demand and build housing- specifically multi-family rentals, which we desperately need. The Opportunity Zone tax incentive lends itself well to apartments and while we’ve seen a few projects come to fruition, it’s not nearly enough to fill the demand. The City of Grand Junction has embarked on a Housing Needs Assessment and GJEP has partnered with the Grand Junction Area Chamber of Commerce to form a Housing Committee to make policy recommendations based on the findings of the Assessment to encourage or incentivize attainable and affordable housing.
We can point to a lot of reasons for the housing shortage. We know that construction costs are very high right now and there is a labor shortage. One developer I spoke with has been waiting months to start a project simply because they can’t find a framer who can start before May. The cost of wood has skyrocketed and any job that is currently underway is experiencing cost overruns as a result, which will result in higher lease rates. The cost to build an apartment complex bumps right up against what we would consider market rates for the average income earner, leaving little to no margins for the developer. I’ve had a few builders tell me that the only reason their projects have any margin at all is because of the Opportunity Zone tax incentive, however that margin will soon be eclipsed by increasing development fees. If you tack on any added expense, such as tearing down or cleaning up a blighted property, it makes no sense to build market-rate housing anymore and therefore we continue to push our average wage earners out of the market.
After suffering multiple boom and bust cycles and watching the bottom fall out of the housing market in 2008, we’ve become a fairly risk-averse community. Banks are hesitant to loan and developers don’t want to be stuck holding the bag should it happen again. But it is going to take everybody coming to the table to take a hard look at what it will take to bring attainable housing to the market. Municipalities are going to have to reconsider their fees and policies. Banks need to consider better terms and funding options for developers. The Housing Needs Assessment should help us understand other issues that are holding up development and we’ll continue to dissect that data and come up with innovative solutions. And if we can solve this- which we can if we work together- we’ll just keep moving up that Best Performing Cities list.