Aspen’s great experiment
An interesting sociology experiment is playing out in our backyard. What does a community look like if housing is unaffordable for the people who work there?
My background is economics. I was never a very good economist, so I will keep things simple so I don’t blow my own mind. A basic rule of thumb is you shouldn’t spend more than 28-36% of your pretax income on your home (mortgage, taxes, insurance etc). Assuming the high end of 36% and current mortgage rates, a family would need to earn about $183,000 per year for a $1 million mortgage.
I am not sure what the typical price is for a home in the Aspen school district these days, but let’s just run the numbers on a $5 million home. Assuming you put $500,000 down, the family would need to earn about $823,000 per year. How many families are W2-ing that much a year working in the Roaring Fork Valley? Expand the thought experiment downvalley to include $2.5 million homes and ask yourself how many families in the midvalley W2 $412,000 a year?
We have tried to mitigate housing costs with “affordable’ housing.” I used air quotes, because in much of the country our “affordable” housing costs are similar to free-market housing prices. That said, as housing turns over most people who W2 income in our valley are going to have to live in a government-run housing scheme or leave. I don’t believe the American dream ever included your largest investment being in a housing project with limited regulated price appreciation disincentivizing home maintenance and improvements.
Given these realities, how much do we need to pay workers to live locally in free-market housing? Looks like $200,000 to $400,000 a year. While I don’t have visibility into our teachers, nurses and managers of stores, restaurants and hotels, I would be willing to bet that almost no one who works in Aspen can afford to live in today’s Aspen. What does a community look like when those who work in the community either live in housing projects or drive 40-pus miles to work? Apartheid S. Africa springs to mind. I am anxious to see the results of this experiment in five years.
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