While infrequent, being overly tired can sometimes have advantages. My case in point is the following column, which I discovered because I was too tired to write something completely new for this issue (and I had promised the editors I would have something for them). This was originally published in the pages of the Door Reminder during the first week of May in 2001. At the very end I provide the most current income numbers from the U.S Census Bureau for both Wisconsin and Door County.
This past week I had the opportunity to attend the Door County Economic Development Corporation’s annual meeting. Though this event received news coverage in the local paper, many of the most interesting aspects of the meeting were neglected.
My chief reason for attending was a desire to hear the findings of the committee that had researched housing needs in the Sturgeon Bay/Southern Door area. An additional bonus was the opportunity to hear a presentation from Scott Fergus, a former state legislator and currently director of C-CAP, a nonprofit organization that, in concert with a number of other organizations and agencies, helps to create attainable housing in the four county area of Waukesha, Washington, Ozaukee, and Jefferson.
Wendi Dunham, of the Door County Economic Development Corporation (DCEDC), started out by presenting the findings of the Attainable Housing Committee for the Sturgeon Bay/Southern Door area. Among the facts Dunham presented was that in March of this year there were 418 homes listed for sale in Door County. Of this total, only 36 were priced at or below $100,000 and 17 of the 36 were in Sturgeon Bay. She also noted that the number of rental units in the city are virtually full and have been virtually full for some time (there are 16 new units under construction). Many of these units, however, have significant monthly rents.
In what may have been a startling revelation to many in the audience, Dunham commented that 80 percent of the county’s residents would (or could) qualify for many Federal assistance programs.
Scott Fergus followed and reinforced Dunham’s comments by stating that, “Here in Sturgeon Bay it looks like nearly 75 percent of the households would qualify as low or moderate income.”
Among the many revelations offered by Fergus, one of the most surprising was that the average new home built in Wisconsin last year, cost $172,500. He augmented the importance of this fact by adding that 75 percent of Wisconsin households have an annual income level of $50,000 or less.
In the course of the meeting it was explained that when a customer goes to a bank looking for a mortgage loan the bank typically takes the annual income of the household and multiplies this figure by 2.5. The resulting number is used to determine the maximum mortgage the household can afford.
So let’s go back two paragraphs. If a family was doing well by Wisconsin standards and had an annual household income of $50,000, they could afford (according to the formula just outlined) a mortgage of $125,000. Yet, the average new home built in Wisconsin last year sold for $172,500, meaning that our hypothetical household is $47,500 short of affording an “average” new home in our state. Put another way, in order to afford Wisconsin’s “average” new home, our hypothetical family would have to increase their annual household income to $70,000 – a $20,000 annual increase!
Fergus also presented a table that illustrated various hourly wages and what those hourly wages were able to afford in terms of a mortgage. In this model a worker earning an hourly wage of $9 can afford a $55,000 mortgage. At $12.50 an hour a mortgage of $75,500 is attainable; a worker earning $15 an hour can afford a $90,500 mortgage; and, at $20 per hour a mortgage of $120,000 is possible.
These hourly figures are important because, far too often, when I bring up the subject of attainable housing, I hear the opinion voiced that employers need to do more to pay their employees a “livable” wage. Well, folks, the economic reality is that it isn’t that simple. In fact, if a “livable” wage is defined as an income that affords an employee the opportunity to afford a home in the current Door County housing market – particularly northern Door County – it is a fiscal impossibility.
Conservatively, a home in northern Door County costs $200,000. In order to afford the mortgage on such a home, the household income (using the same formula outlined earlier) would need to equal $80,000 (remember that 75 percent of Wisconsin households earn $50,000 or less annually). That $80,000 annual income translates into an hourly wage of $38! However, the cost to an employer is considerably higher than $38 per hour. By the time Social Security, Medicare, unemployment insurance, etc. is factored in, the actual cost of this employee is more than $50 per hour, and that is not taking into consideration any healthcare coverage or savings plans.
Most Door County residents work more than one job, so we are not relying on a single income to make up the entirety of our household income. I work at the bookstore and at the Door Reminder, while Barb works at a dental clinic. So our annual household income is made up of three separate incomes. For many families, the household income may be made up of three, four, five, or even six separate incomes. Unfortunately, however, these combined incomes are not sustained throughout the entire year. The onset of winter brings an end to many part-time jobs and a household income that for four or five months perhaps approached that $38 per hour wage, shrinks considerably (just in time for the heating bills to start arriving).
The model that Scott Fergus presented at the DCEDC meeting was very impressive. The array of groups that came together (particularly the lending institutions) to address the housing needs in the four-county area was breathtaking. Would his model work in Door County? Well, I, for one, have my doubts.
My chief concern in the model Fergus presented was the lack of permanent attainability in the housing that was created. Land is at a premium on our peninsula and is one of the many factors that drive up the cost of homes. In an area where land is in such short supply, creating attainable homes that, in several years, are escalating in value along with the rest of the market, leaves the peninsula right back where it started – only with less available land to build attainable homes.
As promised, here are the most recent figures from the U.S Census Bureau: the median household income for Wisconsin cover the years 2010 – 2014 is $52,738 (in 2014 dollars). For Door County, the median household income, with the same parameters as above, is $50,078.