Lack of affordable housing hurts Gallup economy

Second in a two-part series.

By Kevin Killough
Staff writer

GALLUP — When New Mexico First set out to produce a report that would provide useful input to policy makers seeking ways to tackle the problem of rural economic development, the organization knew a much more collaborative approach with communities would work best.

“We’re trying this new approach that we hope will encourage participants to think creatively,” Heather Balas, executive director of the nonprofit group, said.

The organization has been providing policy makers with recommendations on a range of public interest topics for more than 20 years. Usually, the organization holds a single statewide town hall meeting. But to get at the heart of the varying individualistic challenges communities face, New Mexico First held a series of town hall meetings across the state in small communities. Last Friday, deputy director, Charlotte Pollard was in Gallup talking to a dozen professionals from the area. She asked the group for their personal and professional needs, concerns and ideas.

Several themes arose from the discussion, but housing was a definite key issue. Many expressed the need for entry-level housing. Of course, a lack of affordable housing at that level will drive people away at the earlier parts of their career, and it’s unlikely they will return. That fact may be contributing to another concern expressed at the meeting. Gallup is aging as young people move away.

Real or Perceived?
Kari Isbell is the owner of the local Century 21 franchise. According to Isbell, the housing market in Gallup is very good for buyers right now.

“If you’re going to buy a house, this is the perfect time to do it,” Isbell said.

She said that Gallup offers houses in every price range and that the prices here fall in line with the real estate market averages. Compared to Santa Fe and Albuquerque, she added, Gallup is not suffering from the kinds of housing woes that have plagued much of the country.

“We really haven’t been hit with the housing bubble,” she said.

It is possible that Gallup’s perceived housing problem may be a product of the widespread media coverage of the falling housing market. And falling housing prices may be bad for sellers, but for buyers, it’s very good news.

Gallup is Full
But not everyone is in a position to buy a home. Apartments can be just as important of a housing resource for Gallup’s employment pool. Most of the city’s housing problems lie here. And it’s been a problem for decades.

“I came here 30 years ago, and it’s the same today as it was then,” Dan Frady, qualified broker at Remax Combined Investments, said.

Frady confirms that the rental prices are above normal than would be expected for the area. He says the main influence on the problem is the lack of units.

“It’s all a matter of supply and demand,” he said.
On the demand side, this is the worse time of year to be seeking rental housing in Gallup and the worse time in general. Gallup has the unique situation of having a large transitory employment pool. Many people in education and health care work only on contract, which have already begun after September. Frady estimates that between 20 and 40 percent of the renters that he brokers are temporary residents.

Beyond that, the market right now is being flooded with former buyers or those that don’t qualify. Banks have raised their standards for home loans, he says, which has created a credit crunch. Many would-be buyers are now renting, and those who have lost their homes to foreclosure are moving into apartments.

Gallup is very full right now,” says Frady.

It’s not unreasonable to assume that this could have a detrimental affect on the area’s economy. If people can’t find housing, then an employer seeking the pool of potential employees for any position will be limited to those who already live here. This will shrink the pool of candidates for a position, decreasing the chance an employer will find the most qualified person for a position.

In turn, goods and services produced in Gallup suffer as positions go unfilled or filled by under qualified people. Frady isn’t certain to the degree that this scenario is arising due to the rental market.

“I don’t know how many people we lose because they can’t find housing or adequate housing,” he said.

But it’s happened at least once. Frady told of one client of his who moved from New York state. He came in a U-Haul with his wife and kids. After a few days, unable to find anything suitable, he simply turned around and went back to New York. He added that a lot of people come here with unrealistic expectations of amenities than are offered by any complexes in Gallup. There are no gyms, pools, or concierge service at the small complexes available here.

Most people coming here do realize that apartments in a small town will feature the most basic living. Even still, it’s often a matter of just finding any place for many of those coming in for jobs. Apartment hunters are sometimes downright desperate.

“I can’t tell you how many times I rent over the phone, sight unseen,” Frady said.

If You Build It
Of course, that begs the question: if there’s such a demand, why aren’t contractors drawn to Gallup?

“The cost to build here is so expensive,” Frady answered.
This is a difficult challenge that affects development across the state. Max Valerio, chief engineer for the New Mexico Department of Transportation confirmed that building in New Mexico presents a host of challenges. For roads, he said, the sandy, grassless soil creates enormous erosion problems when sudden thunderstorms flood the desert .

“All of these elements do contribute to high construction costs and probably higher than normal maintenance costs,” Valerio said.

Apartment contractors face the same water runoff problems, plus the problems of digging through clay base to lay the foundations. Add to that the lack of available land. Frady points out that amongst the state, tribal, and forest land, very little is deeded land available for development. This drives up land costs.

“We’re a checkerboard community,” Frady said.

The extra costs to build will quickly increase the rents required to get a return on investments. While Albuquerque residents will pay $700 to $800 to live in a brand new complex, contractors are unlikely to find much of a market here in Gallup in that range. So, they pass the city by.

“No one is willing to take that risk here,” Frady said.
Until the economy grows enough to create a larger market in the higher rental rates, middle class renters will have to lower their standards.

“I recommend to people that you come here and take what you can get at first. Settle in. Then later, when something better becomes available, you can get what you want,” Frady advises.