Bill Norton, Norton Asset ManagementI recently participated (along with 50 others) in a Developers’ Forum held at Eversource Energy Park and moderated by Pat McDermott, retired economic and community development director for PSNH and now at Hinckley Allen and Snyder. We had three rapid fire presentations. We started with a presentation from economist Brian Gottlob from Pol Econ Research. The general themes were:
• New Hampshire is doing better.
• Skilled labor force is our current need (and challenge).
• There are several simultaneous demographic changes going on.
• Communities need to be better informed/educated about how to boost their economies.
New Hampshire is no longer a leader in job growth. Today, employers are not able to fill openings. Labor availability will be New Hampshire’s greatest constraint on growth (labor as in skilled, educated, motivated and tech-savvy workers). Consequently, older workers are “staying on,” working longer, either full-time or part-time (to wit: yours truly struggles to scale back to a 4-day week). This “lingering” may be impinging on opportunities for younger workers. The key element is we do not now have a constant influx of skilled/educated workers, which was providing the momentum for our growth in the 1970s, 1980s and ’90s (not so much in the 2000s). Brian presented this quote: “The most valuable resource in the 21st century is brains - skilled, well-educated people have the most economic opportunities and are the most mobile. Where they locate, robust economic activity will follow.”
However, adding “skill” is more important than adding people. To thrive, New Hampshire (and New England) need to add “talent” at higher rates than other regions. One key component of that is a diverse spectrum of affordable (i.e., 30% of income) housing options and alternatives. New Hampshire is preponderantly single-family, detached homes on one, two or more acres... Not what bright, talented Millennials are looking for. Often these younger workers favor flexibility over home ownership – oops, that means rentals (apartments and condos), not mini McMansions. Alas, it takes time to change the mix of housing options... Apartment rents have doubled since 1990 ($600/month to $1,200/month). It was stated that it is often easier/cheaper to own a home than rent!
Two days later, I am at St. Anselm’s for a presentation about New Hampshire’s housing sector. Russ Thibeault of Applied Economic Research, Chris Masiello of the Masiello Group/Better Homes and Gardens and Bill Ray of the New Hampshire Housing Finance Authority presented. So, who are buying houses in New Hampshire today? 37% are first-time home buyers and 92% of sales (2015) were single-family homes (the highest in New England). Hmmm... Not exactly what Millennials and Gen Xers are looking for.
Thibeault said that while official “unemployment” is 3% and we have the most number of jobs ever (in New Hampshire), the “underemployment” is close to 9%. These are part-time jobs, lesser jobs than one’s skills and education should offer, and people stitching together several part time jobs... alas with little, if any, benefits. This is a drag on the overall consumer economy. I think of my 26-year-old son, many of whose high school and college classmates struggle to find steady, full-time work with benefits. Ironically, it is often cheaper to own than to rent, assuming one has the down payment and the credit score, which many young people with their college debt do not have. In fact, New Hampshire has the highest level of student debt in the country. Whether this causes delayed marriages and postponing home buying is either the chicken or the egg. And current regulations for planning and zoning favor new single-family homes, over apartments, condos and multifamily. In 2015, 20% of the 150,000 (new) renters were post-foreclosure and half of all renters make $35,000/yr (or less). So many/most of these households are over paying (more than 30% of income) or are living further out to get more affordable housing, but when their commuting costs are added back in - are they really saving? Building new affordable housing for this income group is very difficult and challenging.
One takeaway: There are fewer banks and fewer contractors since the crunch of 2009. It is not easy to ramp back up again. One of our clients, the Catholic Diocese of Manchester, has several church properties to sell. The highest and best use is often conversion to housing, but the economics are very challenging. So, we have a current disconnect between available housing stock/options and current demographics which drive demand. Real estate is not a “liquid” asset. It will take time to rebalance the mix. But that is what we must do to attract, maintain and sustain younger skilled, educated and tech-savvy workers to support existing and new businesses. While our colleges, universities and tech schools talk the talk, they really struggle to be nimble and adaptable to quickly put up courses and curricula that meet the specific needs of our employers (but more on that in a future column).
Bill Norton, CRE, FRM, is president of Norton Asset Management, Manchester, N.H.