Pickings were slim in September when Andre’ Edwards started looking for places to rent on the island.
Edwards, a Dallas native, had just gotten a job as the general manager of the Galveston Papa John’s Pizza and moved into the area eager to get started.
But by October, he was still renting a room in Dickinson and still trying to find a place to live on the island. He had been living as a nomad, of sorts, packing up and moving from one short-term rental to another as the search dragged on.
“It’s just kind of been a doozy,” he said, surrounded by grocery bags full of his belongings.
“Every time I find a house I want, it’s already off the market by the time I try to go look at it. They’re going real quick.”
The places he could find were outside his budget, he said.
“Galveston is looking pretty shy on places as far as being affordable,” Edwards said.
Edwards’ situation is an example of a phenomenon troubling many business operators on the island. They worry rocketing housing costs pose a fundamental threat to the island’s economy, one that could siphon away workers and create a labor vacuum.
At the same time, workers face a daunting challenge in finding places to live in a country where housing costs have far outpaced wage growth and where rent takes a larger and larger share of the paycheck.
To Keath Jacoby, former CEO of community planning group Vision Galveston, the issue of keeping residents on the island also is an issue of jobs.
“We have an aging population,” Jacoby said. “To me, we are in a dire economic trajectory. There are going to be workforce issues.”
A family that moves off the island takes its spending money off the island, its children out of Galveston schools and is more likely to jump on jobs closer to home, she said.
“This is about the long-term viability of Galveston,” Jacoby said.
Galveston Independent School District also worries about losing employees to the mainland.
Teachers’ wages have improved over time, but it’s still challenging for new teachers to find housing in Galveston, said Dyann Polzin, chief human capital management and student services officer.
“Many of them end up living on the mainland,” Polzin said. “After they’ve been here for a year or two and they meet other new teachers, they often decide to be roommates and they’re able to live on the island. That’s something that we see a lot of.”
Galveston has for years imported much of its workforce from across the causeway, said Jeff Sjostrom, executive director of the Galveston Economic Development Partnership.
Sjostrom has spent years developing methods intended to counter that by supplying more affordable housing to Galveston workers, but the problem persists.
“The previous studies we’ve done through the years always pointed to the availability of housing and the affordability of housing as the primary drivers for why people would live off the island and not on the island,” Sjostrom said.
Most employees at the University of Texas Medical Branch don’t live on the island either, said Vivian Kardow, vice president of human resources and chief human resources officer.
The medical branch imports 73 percent, 7,411, of its 10,122 Galveston campus employees from the mainland. Across all its campuses, the medical branch employs 15,361 people.
The high cost of housing makes recruiting a challenge, she said.
“Galveston may not be a source of recruitment, but UTMB, the brand, does attract people,” Kardow said. “I do think the weather events scare a lot of people from living on the island. It is costly not only to purchase, but to maintain a house.”
The medical branch’s island operations have lost employees even to its mainland facilities, she said.
“When we opened the Clear Lake hospital, we did have some migration of our own employees from Galveston to Clear Lake, though they didn’t leave UTMB,” Kardow said.
“Recruiting for Galveston is a bigger challenge than recruiting for the off-island facilities because most of our people have to drive farther to get here.”
Since Hurricane Ike in 2008, about 80 percent of the 1,000 or so workers assigned to American National Insurance Co.’s sleek white tower in downtown Galveston have lived off the island.
“We’ve kind of taken the attitude that we don’t care where an employee lives,” said James E. Pozzi, company president, CEO and chairman.
“It doesn’t matter to me,” Pozzi said. “I really want employees to be happy in the environment that they’re living in.”
Overall, Galveston imports almost two-thirds of its workers, according to U.S. Census Bureau data.
Of the almost 36,000 people who work in Galveston, 23,930 drive into the city for their jobs, according to the data.
About 12,000 people who live in Galveston leave to work off the island every day, according to the data.
Most of the inbound workers come from League City, Texas City and Houston.
It does matter where some workers live, though, said Enrique Lopezlira, director of the Low-Wage Work Program at the University of California, Berkeley.
“You want your nurses and your teachers and your firefighters and police to live and work and be part of the community,” Lopezlira said.
If public safety workers commute from far off, response to emergencies might be delayed, he said.
The city of Galveston has expressed this very fear, along with a general concern about key workers being disconnected from the community.
The city in 2014 introduced an annual $2,500 stipend to encourage employees, especially firefighters and police officers, to live on the island.
But officials found the stipend didn’t make a significant difference and began phasing it out in 2019.
At least one island employer was concerned enough about housing prices to get into the market in a limited way.
Pat Brady lives in one of 14 units Galveston Restaurant Group owns and rents to employees.
Brady works as a maintenance man for the restaurant group and needs to live on the island because he’d get called out on weekends or with little notice if equipment breaks, he said.
Brady had been renting the same 2,000-square-foot house for nine years when the property owner, also a friend, finally raised the rent.
“He had to raise my rent, which was fine with me because he was cutting me a deal over those nine years,” Brady said. “But it went up to like $1,875 from $1,175.
“I thought, now’s a good time to move,” he said.
He felt lucky when the company offered him one of the units it owns and rents at below market rate to employees.
“It’s our way of trying to solve the housing issues,” said Johnny Smecca, a principal with Galveston Restaurant Group.
“We’re just trying to subsidize their rent as an incentive.,” he said.
The company reduced rent by about 25 percent, in hopes employees can invest that into their savings, Smecca said.
The units also are the restaurant group’s way of competing for workers with other organizations, he said.
While business owners are brainstorming ways to attract workers to Galveston, wages across the nation have generally stayed stagnant compared to booming housing costs, Lopezlira said.
“Housing price inflation has been outstripping wage growth for many years since the great recession,” Lopezlira said. “Since 2012 or so, house prices started to rebound, probably because of the low cost of credit.”
Between 2010 and 2019, the median value of homes in Galveston rose from $136,000 to $198,200, a 45.7 percent increase, according to the U.S. Census Bureau. In the same time period, median household income on the island rose from $36,165 to $49,319, just a 36.4 percent increase.
In Galveston County, fair market rate for a two-bedroom apartment is $1,176 monthly, according to a 2021 study by the National Low Income Housing Coalition.
A worker would have to make at least $47,040, about $22.60 an hour, to achieve a living wage. That’s the point at which rent consumes less than a third of income, according to the report. Paying a third or more of wages for housing is considered burdened, according to federal standards.
For a minimum wage worker in Texas making $7.25 an hour, that means rent of more than $377 a month would be burdensome.
In other words, it would take 100 hours a week at minimum wage to make enough to afford a one-bedroom apartment at the fair market rate of $946 a month, according to the coalition.
Wages haven’t kept up with policies such as very low interest rates, which fuel demand, encourage speculative real estate investment and multiple home ownership, reducing supply and driving prices up, said Luis Guajardo, urban policy research manager at the Kinder Institute for Urban Research at Rice University.
“Stagnant wages, that’s a big part of the equation,” Guajardo said. “That’s really up to policymakers at the state and federal level.
“We’re seeing more polarization of incomes,” he said. “We know that the purchasing power of your typical middle-class family in 2020 is somewhere around 30 percent lower than it was going back to 30, 40 years ago.”
Even moving is no solution for low- and moderate-income earners if prices are high everywhere, said Andrew Aurand, vice president for research at the low-income housing coalition.
“Now, they also have the transportation costs as well,” Aurand said. “It’s not really a solution. Because every community faces this problem, part of the solution has to be at the federal level.”
It’s also not about wages alone, but also health care expenses, paid sick time, all of which is cost out of an employee’s pocket if it’s not coming from the employer, Lopezlira said. That’s money that could go to a house, he said.
“If jobs can provide not just a living wage but they also provide opportunities for people to save for retirement, then they could use some of that retirement to buy a house,” Lopezlira said. “It’s the overall quality of the job that would allow people to get into a house.”
GOOD WHILE IT LASTS?
By mid-November, Edwards still was searching for a place on the island to live. He had wanted to rent a house but was considering apartments and other options, many off-island.
Brady was hearing of service workers getting roommates or multiple generations living together to cover costs.
“It’s probably worse now than it was even five years ago,” Brady said. “I worry about the average person. It’s good in some respects for Galveston, but the average person is going to have to be on the other side of the causeway.”
For Smecca, the rising housing prices create an existential threat, not just to renters and homebuyers, but to business.
As housing costs increase, workers demand more in pay, he said.
“We give it to them the best we can,” Smecca said.
Then, those costs get passed on to the customer.
“If you’re not raising prices … ,” Smecca said. “You have to. There’s no choice about it.”
Those increases ultimately drive up the costs of everything else, he said.
“As long as the consumer will continue to come to Galveston and pay the higher hotel costs, the higher food costs, as long as they continue to pay those prices, everything is great,” Smecca said.
“Until they don’t want to pay it any longer.”