Good and plentiful jobs make good markets better for real estate investors. You’ll get little disagreement on that, as it stands to reason that where there are more jobs (and workers to fill them), you need more housing. The fallout from the recession and concurrent housing crisis means more and more of those workers are renters, as they look to rebuild their credit. And workers bringing home a regular paycheck generally can be counted on to pay the rent – on time! – and take care of the property.
Plus, where there’s a sustained need for housing, prices will appreciate more and faster.
The numbers don’t lie: those jobs increasingly are being created in right-to-work states, according to the U.S. Bureau of Labor Statistics. Using BLS statistics from December 1991 to December 2011, Media Trackers Ohio plotted job growth in that Rust Belt state and its bordering neighbors (Pennsylvania, West Virginia, Kentucky, Indiana and Michigan – all non-right-to-work at the time) alongside the states where unions are barred from forcing workers to pay dues as a condition of employment.
The results are stunning. At 5.76%, Ohio ranks next-to-last in this comparison of job growth in those 28 states. Former union strongholds Michigan, dead last at 1.68%, and Indiana, fifth from the bottom at 13.28%, have since passed right-to-work legislation in an effort to reverse steep declines in employment, population and the tax base.
Other than Michigan, every state in this comparison beat Ohio’s numbers by at least double – and some (Idaho, Arizona, Utah and Nevada – all above 50%) by even more spectacular margins.
With steep labor costs in states that require union membership and collective bargaining, labor/management relations are often problematic. So when companies decide on the location of a new plant, frequently a site in a right-to-work state is a high priority.
But even though right-to-work legislation may be a major factor driving job growth, it is not the only factor.
New distribution/transportation models, lifestyle considerations, even the adoption of air conditioning have spurred the western migration of manufacturing and population from the traditional industrial and union-dominated Rust Belt states.
Spirited debate on both sides of the right-to-work issue is sure to continue, with the states now nearly evenly split. The pro-union side argues that hourly wages earned by non-union employees in workplace freedom states are considerably less than those earned by union members in “closed shop” states. The claim is that all a worker gains is a job at a lower hourly wage. But as various analysts point out, a paying job pays more than a job that no longer exists in a closed shop state. Also, while wages may be lower in right-to-work states, so is the cost of living in most.
Regardless of the rhetoric, landlords would be advised to pay particular attention to right-to-work markets because without jobs and job growth, there are fewer renters, less demand and rent growth and little property appreciation. And often, these states are more favorably disposed to investors with less burdensome regulations and taxes.