Economy

High Housing Costs, Limited Childcare, Hurt Bozeman Economy

Labor shortages are hitting nearly every industry and every income level in the city

By Associated Press

BOZEMAN – Annekje Thompson’s stint in Bozeman only lasted a year.

The now 19-year-old moved to town from Roundup in April 2020 to work on a farm. That job came with housing, and she was later able to rent a room in a house while working two jobs, one at a Montessori school and another at a restaurant.

She was working more than 40 hours a week, bringing in about $2,000 a month between the two jobs. But she needed to find new housing, and started looking for “anything and everything in Bozeman” this spring. Most places weren’t affordable, and listings she saw that were within her budget were snatched up quickly.

After weeks of trying, Thompson gave up on Bozeman and moved back home.

“For people like me who are just starting out…. they get good jobs and they want to stay there. They love the place, but can’t afford to live there,” Thompson told the Bozeman Daily Chronicle. “It’s really hard. And it doesn’t make a lot of sense to me. It’s very frustrating.”

Thompson, who is planning a move to Billings instead, is one of many people across the spectrum of age and income who are being shut out of the housing market in Bozeman.

Rising housing costs and inadequate supply are forcing some Bozeman workers to bunk with an uncomfortable amount of roommates or try to make living in a hotel or camper work for a while.

Some are simply leaving town, seeking out places where they can afford to live, and people applying for those vacant jobs in the city are turning them down after taking a glance at the housing costs.

At the same time, labor shortages are hitting nearly every industry and every income level in the city. Some restaurants are reducing hours and considering cutting services. The city is cutting hours at the Bozeman Swim Center as positions go unfilled. Bozeman Health is having trouble filling vacancies.

Some employers are increasing their wages. Others are tacking on hiring or moving bonuses, or directly trying to help their employees find housing.

But business leaders say it isn’t enough. Even people in senior level positions or those making a decent salary are getting caught in the housing crunch.

“The cost of living in the city of Bozeman is getting away from us,” City Manager Jeff Mihelich said at a recent city commission meeting.

The problem isn’t new — housing costs have been rising in Bozeman for years.

But most agree the problem has gotten much, much worse in the past year.

“Everything was pretty difficult before the pandemic, and it’s probably just gotten worse,” said Tracy Menuez with the Human Resources Development Council.

Business leaders say the county’s housing crisis has become a labor crisis. The problem is evident in the ubiquitous hiring signs popping up around the city.

“You can drive downtown Main Street and you can see pretty much every bar, restaurant, store is hiring. You can go down 19th and look at all the big box stores and they’re all looking for employees, and you’re seeing these huge signs that are announcing how much they’re paying and that you can start immediately,” Bozeman City Commissioner Christopher Coburn said. “And we didn’t see that two or three years ago.”

Businesses across the country and state are reporting similar issues in the wake of the COVID-19 pandemic.

According to the Montana Department of Labor and Industry, the statewide labor force has shrunk by 10,000 or more workers compared to pre-pandemic numbers. An information sheet from the department notes this is in “despite an influx of new residents from out of state.”

While the nationwide unemployment rate was 6% in March, it was 3.8% in Montana and 3% in Gallatin County. According to department data, just over 2,000 people in Gallatin County were unemployed in March.

It was as high as 12.6% in April 2020, and largely hovered between 2% and 3% for most of 2019.

Even as the unemployment rate nears pre-pandemic levels, some local employers who had to lay off employees in the early days of the pandemic say hiring back a full workforce as COVID-19 restrictions start to ease has been difficult.

Kelly Wiseman, general manager of the Community Food Co-Op, said some of the roughly 40 employees the business laid off last year left the area and haven’t come back.

Other employees left their jobs because they were fed up with run-ins with anti-maskers, Wiseman said.

“There were a lot of very belligerent, angry people walking around acting like toddlers, in my opinion,” Wiseman said. “I think a lot of workers got sick of it.”

Dawn Brown, human resources director at Montana Ale Works, said it seems all the restaurants in town are trying to hire from the same shrunken pool of workers.

Ale Works is trying to hire about 30 more people, Brown said, as they anticipate business picking up as the pandemic’s hold weakens. They’re getting some applications, Brown said, but not nearly enough.

While some are blaming the federal unemployment benefits, and the ongoing COVID-19 pandemic has made returning to work difficult for some, Brown and others pointed to increasing housing costs as the primary culprit.

“Everybody else is hiring for the same positions, and there’s only so many people who want to work in those jobs. I’m sure COVID has scared a lot of people away from wanting to work in the public, and the fact that it’s hard to find child care in Bozeman is making it difficult for people who have kids,” Brown said. “I think the fact that it’s so expensive to live here and there isn’t very much housing is definitely playing into it.”

Several employers reported that housing costs have been an increasingly prominent barrier in the last few months, causing some employees to leave their jobs and making it difficult to fill vacant positions.

When once keeping an employee around for a year was the standard at Ale Works, Brown said its now an accomplishment to keep employees for three months.

The problem extends beyond service industry businesses: Anna Rosenberry, assistant city manager for Bozeman, said the city has seen employees leave their jobs after considering Bozeman’s housing market and deciding moving somewhere else was the best option.

“(It’s) really heartbreaking too, because they’re great workers who’ve done a great job, they’re members of the Bozeman community. But they just don’t see their future here with housing prices the way they are,” Rosenberry said.

At the same time, candidates who may be able to fill vacancies are more commonly turning down job offers after doing the math on their offered salary and prices for renting or buying a home.

The issue is hitting across the spectrum, from the service industry to employers offering well over $30 an hour.

Paul Reichert, executive director of Prospera Business Network, an economic development nonprofit in Bozeman, said he’s hearing it from all sectors.

“Pretty high level, senior positions are going unfilled, as well as folks looking for seasonal workforce in accommodations or retail businesses,” Reichard siad. “You can go out there and ask an employer or business owner and there’s not one that can’t tell a story of, ‘We haven’t been able to hire. People turned down job offers.’”

Gallatin County has more open jobs than normal, county administrator Jim Doar said, and there were 75 positions open with the city of Bozeman earlier this month, including some short-term positions.

Rosenberry said it’s hitting the city at all levels.

Where once a job might have been filled in one recruitment cycle — which involves job postings, application reviews and interviews — Rosenberry said it now takes two or three. The city withstood almost the entire pandemic without a human resources department director because it took so long to fill the position.

At Bozeman Health, Edie Willey, chief people officer, said there has been trouble filling positions across the health system, including nurses, nutritionists and non-clinical staff in the IT or legal departments.

“It seems like on a weekly basis, I’m hearing candidates having either turning it down or asking for a sign-on bonus, asking for moving location bonus to help offset some of the costs of coming here, or they’re not moving here,” Willey said.

Some travel nurses, who work on short-term contracts to fill gaps in health care workforces, are also turning down assignments in Bozeman because they can’t find a place to live, Willey said.

The city was an attraction for job candidates in the early years of Bridger Aerospace, which opened in 2014, said founder Tim Sheehy.

Now, the opposite is true.

“I think we’ve had over a dozen rejections of job offers in the last few weeks along with people saying, ‘Listen, I love the company. I’d love to work for you, but I can’t rationalize moving my family out of a four-bedroom home on two acres into a two-bedroom condo for the same price,’” Sheehy said.

Some places struggling with hiring are cutting back on operations.

Some restaurants have cut hours or are considering scaling back menu options to make it easier for a smaller kitchen staff to handle the work.

The Co-Op may have to delay reopening the food services it shut down at the beginning of the pandemic, and the city recently announced it is closing the aquatics center on Saturdays with 21 of the 32 lifeguard positions vacant.

Sheehy, who acknowledged his 250-person staff in the Bozeman area may have helped contribute to the high demand for housing themselves, said they are looking to grow their staff by another few dozen employees.

The housing market will make that difficult, Sheehy said.

“Housing is now at a point where it’s constraining our economic growth,” said Brit Fontenot, the city’s economic development director. “It’s going to constrain our ability to attract employers, it’s going to constrain our ability for businesses to grow and create more jobs. And so it really constricts our economy by not having places for people to live.”

Some employers are taking a look at their wages.

The Co-Op recently raised its starting wage to $16 an hour, after running some numbers through a cost-of-living model that determines what pay a single worker would need to afford to live with a roommate and save some of their earnings.

The model spit out the number of $15.80 for an hourly wage, Wiseman said. A few years ago, it was $12 an hour.

Both the city and the county are looking at employee salaries, and Bozeman Health is often adding in hiring and moving bonuses to attract new employees.

The health system set a minimum wage of $15 per hour in January 2020, which chief advancement officer Jason Smith said resulted in increased wages across the board and came with a $7 million price tag.

But even increased wages aren’t filling many job vacancies, and employers and local officials say simply increasing wages is not a sustainable solution.

“Paying our employees a livable wage is the best way to help address this challenge, but keeping up with it continues to put us and I think every business in our community, under pressure,” Smith said.

Chamber of Commerce president Daryl Schliem noted businesses need to have a balance between revenue and wages.

For Bozeman Brewing Co., increasing costs in the city aren’t netting the business any increase in sales, owner Todd Scott said.

“So if your sales are staying static and the wages need to go up in order to retain key employees, then it’s got to come from somewhere,” Scott said. “And it ultimately comes out of the bottom line.”

As housing costs remain far above pre-pandemic levels, some business owners are looking toward the future with concerns about how they can keep up.

According to data from the Gallatin Association of Realtors, inventory of single-family homes was 68.1% lower in April 2021 than last April, and inventory for condos and townhouses was 82.9% lower.

The median price for a single family home was $704,750 in March this year and $660,000 in April. Condos and townhomes sold at a median price of $430,000 in March and $385,000 in April.

“The reality is that housing is just so expensive here and … our wages just can’t keep up,” Doar, with the county, said. “I don’t know that we will ever be able to pay people (enough) to buy a $700,000 house.”

Employers are finding other solutions.

Bozeman Health is increasingly hiring remote workers for non-clinical roles, Willey said.

Other employers are trying to recruit more aggressively locally, to find candidates who won’t balk when they see what one-bedroom apartments are renting for, Reichert with Prospera Business Network said.

Some employers are exploring other solutions beyond compensation, like buying homes for their employees or working with developers to build more housing.

Gallatin County is exploring using some land near the rest home on Durston Road for an employee housing development, Doar said, and Bozeman Health is also considering whether getting involved in housing development is a viable option.

But, like increasing wages, Willey said building homes directly for employees feels like a “Band-Aid solution.”

“I feel still like that’s …. and not necessarily getting at the bigger issue which is, I would love to see affordable housing here, I’d love to see the community, the city, county, make some changes around that,” Willey said.

Most agree that the burden cannot fall solely on employers, but rather on local governments, private developers, and anyone in between.

Even if the housing issues were solved, workers face a number of other challenges.

Menuez, with HRDC, flagged a lack of accessible child care as a major factor contributing to the labor shortage. Schliem, the Chamber president, added workforce training and transportation as other key issues that need addressed.

“If we could solve the day care, housing and transportation issues I think we would have an adequate workforce,” Schliem said. “But without solving some of those issues, no, I don’t think we have an adequate workforce to bring back.”

These issues, present before the pandemic, are no longer abstract for most in Bozeman. Some people can’t find a place to live. Many of those who can are struggling to afford it.

Even those who have a home they can afford are seeing the issue hit their friends and neighbors.

“The pandemic sort of helped clarify that despite the very prosperous veneer of the city of Bozeman, and the surrounding areas, there are certainly a lot of people who were struggling before,” Menuez said.

Some of those struggling are being forced to leave town.

Ellie Wright, 23, moved here last year from New England and works at a preschool in Four Corners. She found a place to live with a handful of roommates in Bozeman, but needs to find new housing soon.

Wright looked for weeks, but has been unable to find anything that works for her in Bozeman.

As a result, she is planning a move to Livingston. She is excited about living there, but is wary of making a 45-minute commute from there to her current job, especially in the winter.

She’s not sure if she’ll be able to stick with it.

“I think people feel pretty helpless these days because it’s pretty out of our control,” Wright said. “I think it’s just sad because I think (for) a lot of young people …. housing is pretty scarce and it’s just not accessible anymore.”

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