Connecting state and local government leaders
Local officials are highlighting affordable housing as a leading concern, according to a new National League of Cities report. “The median price for a single family unit is over $700,000, which is a 30% increase in less than a year," says one mayor.
There have been plenty of challenges for U.S. cities over the past year, with the public health crisis brought on by the coronavirus, the economic and budget troubles it caused, and the reckoning that many communities had over racial injustice and law enforcement practices.
When reading through the latest National League of Cities “State of the Cities” report, all these issues are reflected in various ways. The report also makes clear that local leaders continue to see infrastructure investment as a major priority. But something that’s hard to ignore are the concerns city officials are voicing over housing.
The annual report, which offers a window into what municipal leaders are most focused on, was released Thursday. It incorporates survey responses from local officials in nearly 600 cities, towns and villages, as well as an analysis of 57 recent mayoral speeches.
On one hand, the findings show that home property values rank as the leading “positive condition” over the past year. Just over half of city officials included home property values among the top five positive conditions in their communities.
Housing markets in many parts of the country have been red hot, as the supply of homes falls short of what’s needed and demand surges. The rush of buyers is being driven in part by low interest rates, the increased flexibility many Americans gained during the pandemic to work remotely, and by more millennials entering the market.
Some of the communities seeing the biggest booms aren’t coastal metros long known for their astronomical housing costs—like San Francisco and New York—but rather mid-sized cities in states like Arizona, Montana and Idaho. In places like these, there's growing alarm about residents being displaced as home prices soar.
Rising home values can strengthen property tax collections—which account for nearly a quarter of city revenue when intergovernmental aid is not counted, as NLC notes. For city finances, that can be a plus.
But, at the same time, affordable housing supply, or lack thereof, is the No. 1 “negative condition,” identified in the report. About 37% of cities noted the issue as one of their five most negative conditions during the pandemic. The fourth highest-ranking issue on the negative condition list, flagged by 18% of cities, is the price of rentals and apartments.
Cyndy Andrus, mayor of Bozeman, Montana, explained during an event NLC held to unveil the report that her city has been growing rapidly (its population swelled to about 50,000 in 2019, from 37,200 in 2010) and is in “desperate need” of additional affordable housing.
“We went into Covid with a housing shortage,” she said. “Today, the median price for a single family unit is over $700,000, which is a 30% increase in less than a year.”
The mayor noted that state lawmakers blocked the city from enacting certain zoning policies meant to bolster the supply of affordable housing and said Bozeman’s strategy now is to put a levy proposal before voters this fall that is geared toward addressing the issue.
Shortfalls of affordable housing are often linked to other types of hardships. And NLC’s report also found that 63% of officials from the biggest cities reported increases in homelessness. They indicated that they’d also seen rises in the need for financial assistance (92%), temporary housing (74%) and food assistance (73%).
“The Covid-19 pandemic exacerbated existing inequities within and among American communities. Especially for people of color,” said Clarence Anthony, NLC’s CEO and executive director. “For those individuals and communities already facing economic hardship, the pandemic had a devastating effect.”
Meanwhile, an issue that scored second highest on the negative condition list in the report, with 25% of officials identifying it in their top five, is inactive and vacant commercial developments.
This finding comes after a year where office buildings emptied as many people worked from home and as public health restrictions left businesses, especially restaurants, bars and entertainment venues, shuttered or subject to strict capacity limits.
While questions about how long it will take downtowns in bigger cities to bounce back from the pandemic are getting a lot of attention, the report says that small business and commercial declines appear to be hitting smaller towns particularly hard as well.
Christiana McFarland, NLC’s research director, said it could be another year or so before the pandemic’s effect on property tax revenues starts to show up in city budgets. That's partly due to delays in how property tax revenues respond to changes in the economy. How commercial property taxes in some places will fare is especially uncertain and will depend to some extent on how downtowns rebound.
“I think there’s just a big question mark right now around property taxes and property tax revenue. Clearly the drastic increases in home values will have a positive impact at least at some point down the road for city revenues,” McFarland said.
But she also noted that cities are in many cases restricted by laws that cap the property taxes that they can collect. “In many places, the tax structure does not respond in the same way, or at least at the same pace as the economy does,” she added.
Regardless of what happens with tax revenues, cities like Bozeman have a difficult path ahead as they try to overcome their housing challenges. "As in most communities, the resources and support that we could use most" (from the federal government), Andrus said, "would be aid in affordable housing."