Housing crisis in rural Kansas stifles hopes for growth

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HAYS – East of town, an empty sidewalk flanked by dirt and gravel wraps around a cul-de-sac bend. Soon it will lead to the front doors of three dozen new homes – the first homes built in Hays to sell for $ 225,000 or less in recent years.

Doug Williams, who heads the local Grow Hays housing and economic development coalition, expects first-time homebuyers to move in by the end of this year. And in his opinion, it is not a moment too soon. It is not enough either.

“We have what I consider a extreme housing shortage“Williams said.” And we’ve been fighting this for nine to ten months now. “

In the space of a year, from late 2019 to late 2020, the Grow Hays housing report found that the number of homes for sale in the northwestern Kansas city increased from 101 to 50. And it continues to drop.

“I checked this morning,” he said, “and it was 41.”

Fueled by historically low mortgage rates and years of under-construction in the housing supply, the US housing market has become increasingly tight. Nationally, the housing deficit has grown by more than 50% over the past two years and is now nearly 4 million homes below estimated demand.

In rural areas where loans, labor and materials are already harder to come by, the housing crisis is putting cities like Hays in a bind.

The Wichita State University population forecast estimates that some counties in western Kansas will lose more than 50% of their residents over the next 50 years. And while a city like Hays is hoping to avoid that fate, Williams said finding ways to provide more affordable, quality housing options should be the top priority.

But the city of about 21,000 residents still has work to do to achieve this goal. Williams said he regularly hears stories from realtors about potential buyers who can’t make an offer until a home has already sold. If they bid fast enough, bidding wars often drive the price way above the asking price.

“I’ve never seen anything like it before.”

Underbuilt housing in rural America over the past decade

Several factors have converged to create the current strain on housing markets in rural areas. Robert Dietz, chief economist for the National Association of Home Builders, said homes were under-built everywhere from 2012 to 2019.

“So when the demand for housing took off in 2020 and there wasn’t a lot of extra capacity,” Dietz said, “the price skyrocketed”.

Dietz described the barriers that prevent new homes from being built as “the five Ls”: labor, land, loans, laws and lumber. He said that for rural areas, finding favorable land and development laws is usually not a problem. But the other three factors can be even more difficult for small towns than for big cities.

The future site of a new affordable housing development in Hays.

In rural markets, developers often obtain finance to acquire land from small local lenders. Dietz said those banks and mortgage companies have become more reluctant to take big risks since the Great Recession. Thus, loans are more difficult to obtain and often have more stringent loan terms, such as higher rates.

“The finance component,” said Dietz, “is kind of a headwind, especially in smaller markets where you don’t have access to Wall Street.”

Shortages of skilled construction workers also hamper rural markets. Dietz said there is a “geographic mismatch” that finds construction workers in large metropolitan areas when their skills greatest need is in suburbs and rural markets. And the lack of affordable housing in these low-density markets makes it even more difficult for these workers to settle there.

Finally, the recent increase in lumber prices has eaten away much of the margin left to rural developers in the construction of affordable housing. Dietz said the 9% tariffs on lumber imported from Canada are intended to make U.S. lumber more attractive to U.S. builders. But domestic timber production has not been able to fill the deficit, causing prices to soar.

Lumber costs have climbed over 300% in the past year, adding about $ 36,000 to the price of a typical single-family home. While single-family home construction was up 12% last year, lumber production only increased 3%.

And wood isn’t the only thing builders struggle to grasp. In a recent Home Builders Association survey of builders, 94% said wood was scarce and 95% struggled to get hold of appliances.

“We don’t have enough raw materials,” said Dietz, “(and) wood is the ultimate example right now. “

But even amid shortages of finance, workers and materials, the real estate boom continued. Dietz said markets are growing everywhere, but they are growing particularly rapidly in the outer suburbs and rural areas. He attributes the trend largely to people working more from home.

To seize the opportunity, these outlying areas will compete to attract new residents with the best housing options.

“There is a race right now among all the communities in the United States,” said Dietz, “(to see) which communities are capable of adding housing to their local market.”

A graphic promoting the Colby Listening Session that was part of the Statewide Housing Needs Assessment.

Housing needs assessment will be first in 30 years

Kansas does not have current and complete data on its housing stock.

The Kansas Housing Resources Corporation and the Kansas Office of Rural Prosperity are compiling the state’s first housing needs assessment in nearly 30 years, including an online survey and nine listening sessions across the state.

“Whether we meet people from Wyandotte and Johnson County or southwestern Kansas, we hear the same themes over and over again,” said Emily Sharp, spokesperson for the housing group.

These themes include a lack of senior and moderate income housing, an aging housing stock, and a shortage of skilled workers.

And just because house prices are generally lower in rural markets doesn’t mean new homes are cheaper to build there, it is often the opposite. Sharp said the logistics of transporting materials and labor to remote locations, coupled with lower wages in small towns, has created a situation where building new affordable homes in rural areas can ultimately be prohibitive.

“We hear about situations where people might be able to get a contract for a single-family home that costs $ 200,000 to build,” Sharp said, “but it can only be evaluated for $ 150,000.”

In Hays, the housing deficit is particularly glaring in this same price range. This is what Doug Williams of Grow Hays described as “the perfect place” – between $ 175,000 and $ 225,000 – that many first-time buyers and young families are looking for.

He hopes the new development being built on the east side of town will help fill that gap when it opens later this year. But after initially committing to building homes in the lower end of that price bracket, the developers have now told Williams it is no longer financially feasible.

“They say they can’t build a $ 175,000 house in Hays right now,” Williams said, “because of the cost of the materials.”

David Condos covers western Kansas for High Plains Public Radio and the Kansas News Service.

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