The threat facing the large majority of Connecticut municipalities is silent and barely visible, but creeping slowly toward them.
Demographic and economic pressures — aging residents with little savings, young professionals with sizable education debt, high heating costs, rising gasoline prices — threaten to eat away at the towns' revenue-raising ability and, as a result, their ability to preserve a high level of services.
The reason is simple: Most towns don't have enough of the smaller, denser, more affordable, energy-efficient, walkable and close-to-transit homes the market now demands and, most likely, have too many of the single-family homes today's market — and the market for the next decade or more — is less likely to want.
In fact, four-fifths of our municipalities — 133 — are dominated by single-family homes. At least 70 percent of their housing stock is single-family. But robust future demand for single-family homes is very much in doubt.
After the 2008 crash knocked down home sales and median sale prices, the number of transactions has begun to modestly recover. But prices haven't. In 2012, the median price fell in 99 municipalities and stayed the same in four more. After grand lists in most communities shrunk as a result of the housing downturn, some towns are seeing small increases. But most of the increases have been fueled by personal property value growth, with real property recording only the slightest increases.
On top of that, several factors could well depress demand for single-family homes:
•Many baby boomers, an ever-larger portion of Connecticut's population, no longer need nor want their large homes. With their children gone and no one else to mow the lawn or plow the snow, their homes are often too expensive to maintain and too large to justify the tax bill.
The Employee Benefits Research Institute reported last year that more than half of all retirees and workers have less than $25,000 in the bank. And a recent Washington Post investigation found that "More than one in four American workers with 401(k) and other retirement savings accounts use them to pay current expenses … undermining already shaky retirement security."
•Meanwhile, millennials — those in their 20s and early 30s — aren't pining for single-family homes. Their lifestyles are different. And even if they wanted the boomers' homes, many couldn't afford them. The New York Fed has reported they carry an average education debt of $24,300. Although not all are quite so indebted, down payments and mortgages might be tough. They may want to save up by renting for a while.
•Moreover, energy costs make single-family suburban living expensive: the average household spends 32 percent of its income on housing and 19 percent on transportation, according to Reconnecting America. Those living far from transit spend 26 percent on transportation while those living close spend 9 percent. Add that to high heating prices and, again, you get higher demand for smaller, more affordable alternatives and less for homes that are large, expensive and out of the way.
If lower demand for single-family homes leads to lower sales prices, lower values and grand lists that flatten or fail to grow enough to pay for sufficient municipal services, how will towns respond?
Some will increase tax rates, politically perilous because some property owners' taxes — and anger — will rise. Others will reduce services, potentially lowering property values further.
The best answer? Towns from Ridgefield to Madison are giving the market what it wants, weighing locations for apartments, townhouses and other options near their town centers and transit facilities.
The Census Bureau just reported Connecticut has the nation's fifth lowest vacancy rate. Because of our housing supply shortage, we have the sixth highest rental prices and eighth highest home values; 41percent of all residents spend more than 30 percent of their income on housing. That's bad for them, and for our economy.
By adding the right type of supply, we can provide homes people can afford and, in the process, make municipal grand lists healthier by providing the homes that residents, and the market, value.
David Fink is the policy director of The Partnership for Strong Communities. A forum on "The Peril and The Potential: How the New Housing Market Could Affect Towns, Residents and Revenue-Raising" will be held at The Lyceum in Hartford at 10 a.m. Friday. For information and registration: email@example.com.