‘Simply unaffordable’: What’s driving the high cost of living in Connecticut?

Hartford Courant – Monday, December 16, 2024
By Christopher Keating

Faced with the high cost of living, many Connecticut residents are struggling to get by against a torrent of inflated prices.

A steady stream of surveys, reports, and studies shows that many residents are literally living paycheck to paycheck or running up credit card debt to pay the bills. The latest survey by The Urban Institute think tank says that 52% of all people in the United States lack economic security. The costs are even higher in states in the Northeast, including Connecticut, where the cost of economic security in 2022 was estimated at $151,000 for a family of four.

That insecurity, officials say, and the ongoing impact of inflation are among the reasons why Republican Donald J. Trump won the presidency in a highly contentious election.

Now, as the state legislature prepares to start the new legislative session on Jan. 8, politicians are asking exactly what can be done to help those who are struggling financially.

The Senate Republican caucus says that action is needed to help middle-class families.

“From groceries and electric bills to insurance and housing, Connecticut has become simply unaffordable,” the senators said.

“Democrats have already refused to take swift action on lowering energy costs. They have refused to eliminate onerous taxes like the truck tax which directly increases grocery costs. Democrats rejected the Senate Republican plan to retroactively reduce the state income tax for the middle-class. Democrats said no to our plan for a $2,000 per child tax deduction and no to nearly doubling access to the $300 property tax credit. Every issue the state legislature debates in the 2025 legislative session must focus on one word: Affordability.”

Despite complaints from Republicans about affordability, the Democrats increased their majorities in both chambers of the state legislature. Starting in January, they will have wide majorities of 102-49 in the state House of Representatives and 25-11 in the Senate. That allows them to control the agenda and decide major issues like taxes and spending in the $26 billion annual state budget.

House Speaker Matt Ritter, a Hartford Democrat, said there is no simple solution to lower prices in the highly complicated industry of electric power. He and fellow Democrats rejected the idea of a special session during the hotly contested campaign, saying there is no quick fix that can drastically reduce electric rates.

“The Republican plan during the campaign was to take [federal] dollars, which had already been spent by the way, and use them to save $5 on their energy bills,” Ritter told The Courant in an interview. “That was a political stunt, and it’s still a bad idea after the election. … It wasn’t $5 per month. It was a one-time deal because [the federal money] would run out. It was $5 to $10 on a one-time basis.”

Overall, Ritter said his 102-member caucus will be working in the new year toward visible relief that consumers can actually see. Those could include housing vouchers, rental assistance payments, and health care subsidies on the exchange for consumers without private insurance.

“Sometimes, the assistance we give is not tangible,” Ritter said. “I want to be direct in our assistance that you can literally see and feel. … I want direct subsidies. There’s a difference between a credit and a payment.”

The legislature, for example, has awarded millions of dollars through the years from the property tax credit, but some consumers rarely notice it because their accountant simply checks off a box on the state income tax form that they do not notice, he said.

“In Connecticut, we’ve done a lot in the last couple of years, whether it’s raising the minimum wage or the earned income tax credit,” Ritter said. “We’ve done a lot of wonderful programs, but sometimes you’ve got to think about being a little more direct. … I want people to know that they’re being heard.”

One of the wild cards, Ritter said, is what President Donald J. Trump and the U.S. Congress will decide in the federal budget. Cutting Medicaid at the federal level, he noted, would trickle down to the states and directly impact Connecticut.

Some of the high costs in Connecticut are driven particularly by the steep prices for housing, electricity and groceries.

Housing affordability

The cost of owning a home in Connecticut is among the highest in the nation, with property taxes a major component, placing Connecticut behind just four other states.

Connecticut came in fifth highest in a study by Bankrate.com that found owners of a typical single-family house in Connecticut faced homeownership costs – not including mortgage principal and interest payments – of $23,515 annually compared with $18,996 in 2020, just prior to the coronavirus pandemic.

The increase represents a 24% jump, or $4,519 a year, and is 30% higher than nationally, according to the Bankrate’s “Hidden Cost of Homeownership Study.”

Connecticut’s overall costs – including property taxes, maintenance, cable and internet fees, annual energy bills, and homeowners insurance – ranked only behind New Jersey, Massachusetts, California, and Hawaii.

In Connecticut, on average, homeowners are paying $8,073 in property taxes in 2024, a 9% increase compared with $7,395 in 2020, the study shows.

Homebuyers are being squeezed – some of them sidelined all together – by soaring prices, fueled by strong demand and few properties available on the market. This has led to multiple offers on the few homes available, which pushes up the price as some buyers are willing to pay above the asking price to get the home they want.

In recent years, skyrocketing home sale prices, coupled with mortgage rates that have been double what they were several years ago, have been at the root of the squeeze. This has widened the gap between those who can purchase a home and those who cannot.

Mortgage rates have fallen in recent weeks, coming in at an average last week of 6.6% for a 30-year, fixed-rate home loan, compared with nearly 7% a year ago, according to mortgage giant Freddie Mac. In theory, lower rates should make home buying more affordable.

But Jeffrey P. Cohen, a professor of real estate and finance at the University of Connecticut’s Center for Real Estate in the university’s business school, said a new rush of buyers, buoyed by the prospect of a lower monthly payment, might compound the existing challenges.

“Ironically, that pushes up the prices because of the demand and supply strains that we’re seeing,” Cohen said.

According to the Bankrate study, a typical single-family house was one that sold at the statewide median sale price of $435,900, which is far higher than some other states. The median income in Greater Hartford was $79,579 and statewide was $83,572, according to DataHaven.

Home building has been constrained in Connecticut – and throughout much of the Northeast – because of the lack of available land suited for residential development. That is particularly the case in and around metropolitan areas, Cohen said. Much of the easily developable land has already been sold and developed.

Rising homeowners insurance rates, increasing property taxes in many towns and cities and the cost of home upkeep also are putting the pressure on homeownership, experts say.

At the same time, rising apartment rental rates are making it tougher to save for a down payment. Depending on the community and the size of the apartment, rates can vary widely. But the prices are often high for renters at various income levels, whether they are recent college graduates or 45 years old trying to find an affordable apartment.

The legislature, Ritter said, could take further steps toward transit-oriented development “and give people the ability to build a little more by the train station or the bus station.”

Electricity

For decades, Connecticut residents have been complaining loudly about the high costs of electricity.

The price of electricity has been an ongoing problem in Connecticut. Here, the energy committee co-chairs, Sen. Norm Needleman and Rep. Jonathan Steinberg, on screen, were flanked by Rep. Bill Buckbee, at left, and Sen. Ryan Fazio of Greenwich, right.

One of the major complaints recently has centered around the “public benefit charges” that are being paid over a 10-month period to cover a deal crafted by the legislature for purchasing power from the Millstone nuclear plant and also paying unpaid bills for customers who avoided shutoffs for four years due to the coronavirus pandemic.

Republicans have called for permanently removing the public charges from the electric bills and instead having them paid through the $26 billion annual state budget. They have also called for using unallocated federal coronavirus money to help cover “the costs associated with electric vehicle charging programs and provide additional rate relief to ratepayers to the maximum extent possible as funds allow.”

But Democrats who control the state House of Representatives and Senate rejected a special session, saying that legislators could work on the difficult issues during the next regular session that starts on Jan. 8.

There are multiple factors for high energy costs. Put simply, energy is expensive in Connecticut and slightly less so elsewhere in New England because of a limited energy supply and a lot of demand. Less significant, Connecticut energy prices are a little higher compared to other New England states because of the costs of various programs that the state forces the electric utilities to carry out and bill to customers. Connecticut also requires electric utilities to buy power at above market rates from the Millstone nuclear power station in order to keep the station operating.

There are a variety of reasons for the weak energy supply in Connecticut and the region but it boils down mostly to having no indigenous energy sources and opposition to importing energy from elsewhere. Unlike some other places, there is no natural gas, no coal, no oil and no hydro-electric power.

Natural gas accounts for about half the energy use in Connecticut and New England. But there is now pressure from environmentalists to turn away from natural gas. The last proposed gas-generated electric plant in Killingly has died. Environmental pressure in New York has blocked pipelines that would deliver natural gas from the Pennsylvania shale lands to Connecticut and Massachusetts. One industry estimate is that pipeline opposition in New York adds $1 billion a year to New England energy bills.

Another problem is that it is difficult to build energy infrastructure that would increase energy supply in Connecticut and New England. Permitting takes decades and environmental opposition often blocks projects.

In addition to generation costs, New England also has the country’s highest electricity transmission costs. But there is debate about who is responsible.

Power generators point to the electric utilities. Connecticut, like the rest of New England, underwent deregulation that forced electric utilities to drop out of the power generation business and focus solely on distributing electricity to homes and businesses. That left the expansion and improvement of networks of poles and wires as the only place the utilities can increase revenue. Congress added incentives two decades ago when it prioritized expansion of transmission and distribution with a law that guarantees rates of return on utility investment in network expansion.

In order to keep the Millstone nuclear power station in Waterford operating, the state signed a contract with the station that requires regulated electric utilities to buy electricity from Millstone even when less expensive sources of supply are available. The utilities pass the cost of the power purchases to customers without profiting.

Customers also are responsible for the public benefits portion of bills. It covers the cost of clean energy programs such as subsidies for the installation of residential electric car charging equipment and electric meters that can track peak power usage and contributions to a fund that helps pay the bills of people who cannot afford the state’s high energy costs.

Rather than fund the public benefit programs through taxes, as government programs are normally financed, the legislature instructed the regulated utilities to carry out the programs and bill their costs, at no profit, to ratepayers.

Along with other factors, that helps contribute to the high cost of electricity for customers.

Groceries

With grocery prices skyrocketing, state Attorney General William Tong launched an investigation in April into whether major grocery retailers have engaged in price gouging.

Tong’s spokeswoman, Elizabeth Benton, said the office has sought information from major grocers and “are engaged in active conversations regarding pricing factors” that drive up costs.

“We’re particularly concerned by the ‘shrinkflation’ trend, where costs stay the same, or go up, but the amount of food you’re getting in each package goes down,” Benton said. “This is likely both a legal and a legislative issue, and we’re looking at potential ways to strengthen our state laws regarding both shrinkflation and price gouging generally.”

Some lawmakers have pledged to push an amendment that would give Tong increased authority to conduct price-gouging inquiries and potentially have as much power as attorneys general in New York and Massachusetts. Currently, Tong has the power to deal with retailers but not suppliers who are higher up in the food chain.

Even top state officials, including Tong himself, are impacted by inflation.

“Two things really bother me, and that’s the price of nuts and the price of eggs,” Tong said earlier this year. “I eat a lot of nuts. If you like almonds, like I do, they’re super expensive. And the price of almonds are ever going up. I’m also a big fan of soft-boiled and hard-boiled eggs.”

Tong added, “The cost, not even organic eggs, but basic eggs in the supermarket sometimes are several dollars higher than they used to be. And that really hits all of us, all families here in Connecticut. Nuts, eggs, things that all of us depend on every single day to live.”

When egg prices spiked sharply during the coronavirus pandemic, New York state took the lead by filing a lawsuit in August 2020 against a major egg producer for price-gouging. The producer denied the charges. Similar lawsuits were filed against an egg producer in Texas and major food chains in California.

“We were unable to take action in Connecticut because our price-gouging statute still limits us to the immediate retailer,” Tong said. “We don’t have the ability to go up the chain to producers and manufacturers, the big guys, the top of the supply chain.”

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