The High Cost of Living : High Home Prices Creating Labor Shortage in Northeast, Southland

New York, New England and Southern California have the highest ratio of housing costs to wages in the nation and are a facing severe labor shortage because of it, a new study shows.

While American business is spending billions to help house its workers, it also is being impelled to join the lobby for federally sponsored housing reform, which promises to be a major business concern of the 1990s, according to the study published in the Harvard Business Review.

Some effects of the crunch include companies abandoning big cities, managers refusing transfers from places such as Denver and Houston to Boston or San Francisco, and unions fighting for wage increases tied to the cost of housing.

“The housing shortage continues to drive up wages, drain the work force of every region it afflicts and force businesses to pour capital into ballooning recruitment and relocation budgets,” said the study, which appears in the magazine’s September-October issue.

Calculating an “affordability ratio” of housing prices to wages, the study found that Boston; Anaheim; Hartford, Conn.; New York; Providence, R.I., and San Francisco are the least affordable places in the country to live.

Some Refuse to Move

In Boston, the median 1987 price of a single-family home was $177,200, while the average annual wage was $23,148, for a ratio of 7.7. That makes housing unaffordable, according to the study, since a household would need an income of $59,449 to buy the average house.

The average national ratio was 4.2--$85,600 for the house with a $20,615 income. But a family still would need $28,718 to afford the payments.

Consequently, businesses in high-cost housing regions are spending billions of dollars to finance employee mortgages, relocate workers around the country and subsidize incomes to help meet housing costs, the study found.

Often, companies just can’t lure people to work in places with expensive housing, the study said.

“Many big- and middle-sized firms around the country are having a difficult time attracting employees,” Peter Dreier, housing director for the Boston Redevelopment Authority and one of the study’s authors, said Monday.

“An engineer who sells his three-bedroom house for $80,000 and moves to the East or West coast finds that for that money he can maybe get a one-bedroom condominium.”

Dreier said that 75% of Boston-area employers recently interviewed had raised wages or benefits beyond inflation adjustments because of the city’s housing woes. A new contract for the local hotel and restaurant workers’ union ties wages to housing costs rather than consumer prices.

The single-family house price in greater Boston is the nation’s third highest behind Honolulu and New York, and rents average more than $800 a month for a two-bedroom apartment, a more than 25% increase since 1981, the study said.

Driving Companies Away

In the San Francisco Bay area, only 15% of households could afford the 1987 median single-family home of $171,400 and rents rose over 25% from 1981-86. The situation is similar in Anaheim, San Diego and Los Angeles, the report said.

“It’s a very serious problem in the Bay Area,” said Stephen Barton, a housing policy analyst with the Bay Area Council, a business-sponsored civic group concerned with housing, employment and transportation.

To help fight the trend, San Francisco companies have worked with the nonprofit Bridge Housing Corp. to create more than 3,000 units of housing in five years valued at $238 million.

But in the New York City area alone last year, Mobil Oil, International Paper Co., J. C. Penney Co. Inc. and Lillian Vernon Corp. all announced that they were moving, taking almost 4,000 jobs from the area. The Grumman Corp. opened new engineering centers in Texas and Florida instead of near its Bethpage, N.Y., headquarters because of high suburban housing prices.

Big Issue for Business

A high-technology research consortium earlier this year cited housing as a reason for locating a $1.5-billion semiconductor research project in Austin, Tex., instead of greater Boston.

The study criticizes the Reagan Administration for slashing the federal housing-assistance budget 75% since 1980, to $8 billion from $33 billion. It says American business “has shouldered much of the housing burden” and calls for corporate leaders to lobby Congress for a comprehensive housing policy for the rest of the century.