Signs of Hilton Head Island’s workforce housing shortage are everywhere: a bridge clogged with commuter traffic, rents rising far beyond wages, businesses forced to cut services or hours without enough staff.
The lack of affordable housing has become one of the most serious issues facing the town. But Hilton Head is far from the first to face this problem.
Tourism destinations across the country have seen the same pattern for years: High demand for a destination and geographic barriers like mountains or an ocean drive up real estate costs, pricing out workers and civil servants that keep the community running.
But unlike Hilton Head, some other resort communities have spent decades developing affordable housing programs to fight the problem.
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On Hilton Head, there are currently no major housing proposals, and the town has no dedicated funding source, staff or detailed plan in place to grow affordable housing.
This summer, the town’s Planning Committee is meeting with hopes to offer some solutions, possibly taking examples from other communities, according to Mayor David Bennett.
“I feel like at this juncture Hilton Head can’t really afford to keep any solutions off the table,” Bennett said. “The issue is severe enough for that.”
So the question remains: Could Hilton Head learn from other tourist towns?
The Island Packet and The Beaufort Gazette surveyed three communities with established housing programs to find out.
Encouraging the garage apartment and basement flat
City: Santa Cruz, Calif.
Strategy: Accessory dwelling rules loosened
Median owner-occupied housing value: $659,500
Median gross monthly rent: $1,545
Source: U.S. Census
A housing program in Santa Cruz, Calif., represents a model for encouraging property owners to build rental housing themselves without much financial commitment from local government, city officials there say.
Santa Cruz has become one of the least affordable places to find housing in the United States. The seaside town found its housing market dramatically inflated by demand from the tech boom in Silicon Valley, just 25 miles away.
Wealthy out-of-towners in the tech industry bought up coastal property, making living in the city out of reach for many workers in its most common occupations: retail and hospitality, city officials say.
In the early 2000s, the problem grew so pressing the town resolved to do something. But options were limited. The city was almost nearly built out, and there were tight conservation restrictions on development of the natural areas outside its borders.
“It takes a lot to build and land is always in short supply here,” said Carol Berg, the city’s housing and community development manager. “We found there was really only one way to grow: infill development.”
To encourage infill, which is the redevelopment of existing property to accommodate more housing density, the city made it easier for homeowners to add extra housing units on their land, such as above-garage apartments, stand-alone backyard cottages and living units attached to their homes.
Each housing unit needed to have a separate kitchen, sleeping area and bathroom facilities.
The city revised density restrictions on properties and made the permitting process simpler and quicker, Berg said. Public outreach programs also encouraged homeowners to take advantage of the changes and helped them through the process.
But while some similar proposals elsewhere have been met with public dissent over traffic, parking and other density issues, Berg said there was not much opposition to the project in Santa Cruz.
“It was a natural thing,” she said. “The City Council recognized that this could be a great tool. Rental housing was not being built by market-rate developers without some subsidy, but this was a way for rental units to be built at no cost at all to the city.”
The framing of the program to the public also helped encourage support, Berg said.
“We presented it to them not as housing for hordes of people to generate problems in the community,” Berg said. “It was a place for parents to age in place, sons and daughters to live. It was something that would allow homeowners to stay in their homes longer because of added rental income.”
Public awareness of the housing problem in the city and certain events, including an elementary school leaving the area because of families moving away, also helped generate public support for solutions, she said.
After the changes, building permits for the projects, known as accessory dwelling units, multiplied by four, Berg said. Each year, about 30 to 50 living units are built through the program — a significant increase in available housing for a small city, Berg said.
Most of the units become rental properties and are used as another source of income for homeowners, she said.
Could it work here?
Accessory dwelling units are not expressly forbidden by the Hilton Head’s land ordinance, but density requirements on most residential properties currently keep most homeowners from having that option, said Teri Lewis, the town’s Land Management Ordinance official.
The town briefly considered allowing some flexibility to residential density restrictions in a 2014 revision of the Land Management Ordinance, but decided against a change, Lewis said.
Some town leaders see barriers to a program allowing more accessory dwelling units here.
“I’m not sure how many people who came to retire or live here want to find themselves in the landlord business,” said Bennett. “I’m not sure it’s something that would have success here.”
The prevalence of private communities on Hilton Head may also present an obstacle, said town manager Steve Riley. Even if the town loosened restrictions, private communities may still prevent many homeowners from adding density, Riley said.
Still, the fact that the program doesn’t require major town funding and uses already developed land is a good aspect of the proposal, Riley said.
“I think it’s one of the stronger options for the future,” he said.
Local government chips in
City: Key West, Fla.
Strategy: Public-private partnership
Median owner-occupied housing value: $438,400
Median gross monthly rent: $2,339
Source: U.S. Census
Key West provides an example of a local government contributing significant funding and resources to encourage developers to build workforce housing.
In the late ’80s and early ’90s, the city began to contend with its housing crisis, according to Jimmy Weekley, a city commissioner and former mayor of Key West from 1999 to 2005.
Traditional apartment houses on the island were turned into vacation rentals or boutique inns, and the development of hotels began to grow the island’s tourism industry, Weekley said.
“We started to realize: We’re losing our workforce,” he said. “Employers couldn’t find people to fill jobs that paid well above minimum wage.”
Over the years, the city developed a strategy in which the city partners with private developers to build workforce housing, Weekley said.
In 2016, for example, the city contributed millions to ensure that a former Navy housing complex became affordable rental units.
The City Commission voted to partner with a developer to purchase the 157-unit townhome complex called Peary Court. The city contributed $12.5 million to the $60 million purchase; in exchange, the developer promised that all units in the property would remain affordable permanently.
The development now has income limits and requires that residents work locally. The rents follow affordable guidelines set out by the local government.
There are several longstanding programs in Key West that helped make such an investment from the city possible, Weekley said.
Key West has a clear funding source, using money from its affordable workforce housing trust fund, which takes a portion of hotel occupancy taxes each year for housing projects.
The city also has a housing authority that oversees all affordable public housing initiatives. The authority is tasked with ensuring that units stay affordable and creating a plan laying out specific housing goals for the city.
But even with those programs in place, there was some local resistance to the Peary Court project, Weekley said. The city originally hoped to buy the complex outright, but that proposal failed in a referendum vote.
“There is always going to be some people that will oppose this kind of thing,” he said. “They worry it’s subsidized housing and have a problem with that.”
But nevertheless, Key West has continued to expand its affordable housing resources. It hopes to develop several city-owned properties into additional affordable housing projects, Weekley said.
This year, the city also raised parking fees by a dollar to add more revenue to its affordable housing trust fund.
Could it work here?
There is one major obstacle that prevents Hilton Head from replicating something like the Peary Court project: The town has no funding source dedicated to affordable housing.
While Key West was able to use accommodation tax revenue to create a housing fund, South Carolina restrictions on those taxes likely wouldn’t allow that on Hilton Head, said Riley.
“That’s the way it is now so, to me, I don’t see any clear place where we could get that money,” he said. “But that doesn’t mean it always has to be that way.”
The town also doesn’t have its own housing authority or similar body that would be able to provide oversight to make sure housing units stay affordable, mayor Bennett said.
There have been some other efforts, however, to use town resources to encourage affordable housing.
In 2010, the Town Council donated 14 acres of land between Leg O’ Mutton Road and Mathews Drive to Hilton Head Regional Habitat for Humanity. Habitat is now spending about $1.4 million to build up to 35 houses in the community, called The Glen, by 2021.
Mortgage payments are about $550 per month for a three-bedroom house, said local Habitat president Patricia Wirth. More than 175 interested families took applications for the first 10 units alone; 13 homes have been completed so far, she said.
The project remains the only active affordable housing construction project on the island, Wirth said.
Bennett hopes to see more affordable housing on donated town land, though he noted much of the town’s property was purchased for conservation purposes and may not be able to be used for development.
The ‘gold standard’ of workforce housing
City: Aspen, Colo.
Strategy: Major government-funded program
Median home value: $547,100
Median gross monthly rent: $1,567
Source: U.S. Census
The mountain resort city of Aspen, Colo., is often considered the “gold standard” for affordable housing programs, according to Bill Hettinger, a tourism workforce housing consultant.
“Aspen stands out among resort communities in both the longevity of its programs and abundance of its preserved affordable housing,” he said.
More than half of Aspen’s population lives in affordable housing, Hettinger said. There are about 2,900 affordable units in the Aspen area, many with beautiful views overlooking the mountains.
The units allow locals with a wide range of incomes to live in the community where they work, despite skyrocketing prices in Aspen’s housing market, Hettinger said.
The affordable housing efforts in Aspen began in the 1970s when the city council opted to make major investments into building affordable housing projects and establishing a local housing authority.
“They wanted this to be a real community,” said Aspen City Council member Adam Frisch. “We wanted to be a place where families could actually live.”
The effort began requiring new commercial and residential developers to provide affordable housing for the jobs a project was expected to create. Now, a builder must pay for one affordable housing unit for every 1,000 square feet of commercial development, or for every 6,500 square feet of market-rate residential development, Frisch said.
“The mantra is that development pays it’s own way,” he said. “If you build a building, it’s going to create jobs at some level, so the community says the developer has to chip in to house those people.”
To meet the requirement, developers can build affordable housing, convert market-rate units, or pay a fee into affordable housing funds.
Other mountain towns, such as Boulder and Telluride, Colo., later followed Aspen’s lead by instituting similar programs.
Aspen also created funding sources dedicated to affordable housing, raising about $5 million to $10 million annually toward that end, records show. A 1 percent tax on all real estate sales accounts for the majority of the funds; a portion of the city’s sales tax also goes to affordable housing.
The Aspen-Pitkin County Housing Authority oversees about 1,300 rental units and and 1,600 sales units, mostly built by the authority, according to its website.
But it’s not just low-income residents who are eligible. Single individuals can make up to $147,000 a year and still be eligible for some levels of affordable housing if they work at least 1,500 hours a year in the city, according to the housing authority’s website.
The rental units are price-controlled, and sales units have caps on value appreciation to keep them affordable.
Demand is so high for these units, however, that sales almost always come down to a lottery between prospective buyers, with sometimes 30 people vying for a single unit, Frisch said.
Still, community support for the housing program is deeply ingrained in Aspen, said Frisch.
“Our schools are full of kids; we have reduced traffic; some people have worked here and lived in affordable housing here for 40 years,” he said. “That’s what we get in return for the investment. There is a value in making this a real community.”
Could it work here?
One aspect of Aspen’s program has been discussed on Hilton Head: that new development or re-development projects be required to provide affordable housing.
But town leaders say the strategy never materialized.
“With Hilton Head being 96 percent built out, there’s not a lot of new construction going on,” said Bennett. “On the surface it could help, but I’m just not sure how much.”
As for Aspen’s large number of government-built projects, a major funding source would have to be identified for that to happen on Hilton Head, said Riley. The town is limited in its ability to tax real estate sales but could pass a sales tax for that purpose if the public supported it, he said.
“It comes down to: How do you pay for it all?” Riley said.
Hilton Head’s housing stats
Median owner-occupied housing value: $434,900
Median gross monthly rent: $1,066
Locals paying more than 35 percent of income on housing: 40 percent
Source: U.S. Census