Large employers may get into real estate
State Sen. Heather Somers, R-Groton, is floating the idea of Electric Boat getting into “the real estate business” to meet the demands of a workforce not expected to peak until 2031.
Somers said using tax incentives at the federal, state and local levels could encourage large companies either to partner with developers or become developers themselves. It’s a concept that’s not limited to the submarine manufacturer, the state senator emphasized.
“We don’t seem to be making enough headway in establishing housing that is affordable for either entry-level folks or even retired folks to be able to stay here in the state of Connecticut,” Somers said by phone this week. “We just don’t have the inventory.”
The EB hiring boom began in the wake of a $9.5 billion contract awarded by the U.S. Navy in 2020 for the first two Columbia-class ships, which includes construction, testing and associated design work. The company also was awarded funds for additional work in 2021 and this year for $314 million and $474 million, respectively.
In Groton alone, a 2021 analysis by an economic development consulting firm found a potential demand for about 5,260 new housing units over the next 10 years or so. Of those, about 1,900 were attributed to Electric Boat.
Encouraging large companies to bolster the housing stock right where they need it is an idea that has produced conversation but no action so far, according to public and private officials invested in building southeastern Connecticut’s workforce.
Electric Boat spokesman Dan McFadden this week said the company isn’t currently exploring any plans to construct housing for its employees.
“Those conversations are open and we are
willing to look at all options, but there is no proposal under consideration, and EB is not actively pursuing building employee housing at this time,” he said in an email.
McFadden said there were 13,413 people working in its Connecticut facilities at the beginning of this year. He predicted the number to grow to 16,500 by 2031.
State Rep. Holly Cheeseman, R-East Lyme, this week said she hadn’t heard any conversations specifically related to Electric Boat getting into the housing business. But she reiterated comments she made to The Day during last year’s election season about the importance of bolstering affordable housing opportunities.
She said she’d like to see employers “have some skin in the game.”
That could range from incentivizing employers to provide assistance with down payments or security deposits, to actual housing construction.
Cheeseman this week pointed to efforts by some of the country’s largest theme parks to construct housing affordable to lower-wage earners.
Universal Parks & Resorts last year partnered with the real estate investment company Wendover Housing Partners to build 1,000 units for a mix of incomes on 20 acres in Orlando, according to a news release from the real estate company.
Wendover founder and CEO Jonathan L. Wolf at the time touted the “first of its kind” approach.
“Through this partnership with Universal, we hope to serve as a model for how private employers, local governments and developers can work together to address socioeconomic issues in the communities where we live and work,” he said.
Disney in a November news release said it had selected the Micheals Organization to build, own and operate a development of more than 1,300 units on 80 acres in southwest Orange County, Florida for applicants within a certain income range.
Cheeseman called the focus on housing “a sound investment.”
“Companies like Disney and Universal are building them because they recognize you can’t have a successful company without workers, and workers need a place to live,” she said.
A ranking member of the legislature’s powerful Finance, Revenue and Bonding Committee, Cheeseman said she’s been speaking with committee leadership and the Department of Economic and Community Development (DECD) to see what can be done.
“And I hope we’ll see something moving forward,” Cheeseman said.
Somers broached the subject with DECD Commissioner Alexandra Daum at a January confirmation hearing. Daum said companies would “likely score off the charts” if they submitted workforce housing applications for a range of existing community development funds.
Daum told lawmakers the lack of housing options in southeastern Connecticut came up during her visit to the Electric Boat headquarters a few weeks prior to the hearing. She said her first question to one of the hiring executives was whether the company had considered building its own housing.
“The answer was yes,” Daum said, before adding that she hoped she wasn’t speaking out of turn on behalf of the submarine builder.
Somers assured the commissioner she’d heard the same thing. The state senator summed up the gist of the company’s response in her own words: “Geez, we might have to get into the real estate business,” she recalled.
McFadden, the Electric Boat spokesman, this week said it’s a misrepresentation to suggest the company is interested in creating its own housing stock. Instead, he described the company as “actively engaged with the state and other entities on strategies to increase the stock of affordable and available housing, which is an important issue for the company and the entire region as we seek to grow our employee base in Connecticut.”
Somers this week said her informal conversation with Electric Boat representatives simply indicated their willingness to look at the issue. But there have been no sit-down meetings and there are no plans on the table.
Affordable vs. workforce
Somers described the issue in terms of housing affordability for workers, but balked at calling it “affordable housing.”
“People think about affordable housing as something that it’s not,” she said.
In its broadest sense, housing is considered affordable when those who live there don’t pay more than 30% of their income on the mortgage, rent and related costs.
In more targeted definitions, affordable housing refers to making options available in the lowest income levels. Housing advocates say that’s where at least 85,000 more households in Connecticut are looking for rents or mortgages they can afford than there are places for them to live.
Housing advocates say many people conflate today’s affordable housing with the kind of high-rise apartments that proliferated in the 1950s and 60s under the federal Section 8 program, which had the effect of segregating low-income people and families.
But Somers noted the affordable housing framework promoted now in Connecticut incentivizes developments that offer pricing for a mix of income levels.
The state definition of “affordable housing,” used in areas from tax incentives to zoning statutes, requires a certain percentage of units be set aside as affordable for a certain number of years to those who make less — sometimes much less — than 80% of the state or area median income.
A single person living in and around Groton who makes up to $63,120 a year would qualify for affordable housing, according to US Department of Housing and Urban Development formulas. For that worker, a monthly payment of $1,690 for a one-bedroom apartment would be considered affordable.
Someone identified as “extremely low income” by HUD standards — which equates to $23,670 a year — would pay $591 for an affordable one-bedroom apartment based on the federal guidelines.
The starting entry-level salary at Electric Boat in 2019 was $40,000 for skilled trades and $70,000 for engineering, technical and administration roles. That’s according to a report from the Southeastern Connecticut Council of Governments and the Subase New London Joint Land Use Study.
McFadden said the company will not comment on updated salary figures.
The spokesman said Electric Boat last year hired 2,339 people in Connecticut, including 50% in the skilled trades, 25% in engineering and related technical fields, and 25% in administration and support roles.
The term “workforce housing” is often described as an option for middle-income earners just above or below the median income for any given area. Frequently cited professions include police officers, teachers, health care workers and retail workers.
Michael Nogelo, CEO of the Eastern Connecticut Workforce Investment Board, said he isn’t aware of any specific employer-driven development efforts, but said the need for more housing is “absolutely on the radar” of businesses in the region.
The organization administers a network of programs with a focus on manufacturing and healthcare. Its board of directors includes representatives from regional businesses, state agencies, organized labor, and local educational institutions.
Nogelo described workforce housing as something that “people who are taking in-demand jobs in the region can afford.”
“So it’s sort of matching prevailing wages to the housing stock,” he said.
The group’s “pipeline” programs for finding and training people for regional jobs include a focus on young people who live in the region already.
Housing is needed whether the goal is to keep workers in the state or to bring new hires in, according to Nogelo.
“We definitely see it as a long term issue, and it needs to be addressed,” he said.
Somers said encouraging companies to get involved with addressing housng is worth a conversation in the legislature.
“Our employers need it. The employees need it,” she said. “So how do we make that happen at a more rapid pace than we’re seeing right now?”
The term “workforce housing” is often described as an option for middle-income earners just above or below the median income for any given area. Frequently cited professions include police officers, teachers, health care workers and retail workers.