(Updated to correct details for tax credits for housing development).
These should be good times for Norton County.
It’s got four companies ready to invest $6 million in expansions, adding about three dozen jobs. Plus, area businesses have posted another 185 job openings.
All welcome news in this northwest Kansas county with a population of 5,459.
But there’s a catch.
The county has so few homes available that it’s not only struggling to attract employees to fill existing openings, but fighting to meet the demands of new development.
It’s a problem facing all parts of the state, especially western Kansas, which has prompted a broad coalition of business and government interests to ask the Legislature for a one-time $50 million appropriation to help solve a rural housing shortage.
“We’ve got economic growth sitting here staring us in the face,” said Mike Posson, executive director for Norton City/County Economic Development.
“I’ve got four manufacturers who are investing their own private capital to grow their capacity,” he said.
“How are they going to grow their capacity without more workforce?” he said. “They’re having challenges recruiting workforce because we don’t have more housing.”
For instance, in early December, Norton County had about 186 job openings with just about 14 homes on the market, Posson said. There are now fewer than 10 homes up for sale.
“I can’t fill 186 jobs when I’ve got five to 10 houses on the market,” he said.
And so it is across Kansas where there’s a shrinking inventory of homes and what housing the state does have was built before 1960.
A recent assessment of Kansas housing needs was blunt in characterizing the issue Kansas faces if it wants to recruit business.
“A shortage of quality, affordable housing is an undeniable barrier to economic growth
and development in any community, and particularly in rural communities in Kansas,” the study said.
“Simply put, additional housing is needed to support workforce needs and to retain
Kansas’ best and brightest,” the study reported.
Indeed, what was not much of an issue in the past is more of a factor in how businesses choose to locate, said Randy Speaker, a specialist at the Department of Commerce.
“More and more of the companies are bringing up housing. They know they can’t get as good of workers if they can’t house them.
“Nobody wants to drive two hours to work,” he said.
Now, there’s an effort underway in the Legislature to get a one-time appropriation of $50 million that would go to the Kansas Housing Resources Corporation to allocate to one of several programs for rural housing.
The goal would be to put that money into programs for down-payment assistance, weatherization of homes as well as programs for building infrastructure needed to support housing and the corporation’s moderate-income housing program.
A broad coalition of organizations representing hospitals, bankers, builders, farmers, realtors, utility companies and municipalities is lobbying the Legislature for money that would be earmarked for rural areas of the state.
Representatives of the coalition has appeared before various legislative committees asking for the appropriation, which has already been tucked into the state Agriculture Department’s budget.
They have also made a request for the money from the task force that’s parceling out more than $1 billion in federal COVID-19 relief funds, although there are concerns that there could be limits on how that money could be used.
It’s an issue that’s going to get serious consideration, said Republican state Rep. Troy Waymaster, chair of the House Appropriations Committee.
“There’s a dire need for rural housing,” Waymaster said. “In rural areas of the state, it’s very difficult to construct new homes or have a developer go in and construct new homes because the cost to build far exceeds the appraised value when its completed.
“There needs to be assistance on the state level so we can have suitable housing in rural areas of the state,” he said.
The $50 million, along with a package of housing bills offering financial incentives, are intended to help boost housing in rural areas that are seeing economic development but with a lack of rooftops for their employees.
The proposal would augment another $20 million that Gov. Laura Kelly has proposed putting into the development of moderate-income housing.
“The growth is coming or it’s already here,” said Farm Bureau lobbyist Allie Devine, who is coordinating the effort seeking the $50 million.
“We’re going to have to attract workers, and they’re going to have to have a place to live,” she said. “To do that, we’re going to have to have housing.”
Rural Kansas has been beneficiary of the state setting new records for investment – more than $3 billion in all according to the Commerce Department.
The question how is can the state best provide the homes needed to meet the job force demands of new development.
“We do have opportunity to grow jobs. Everybody’s got jobs open,” said Clare Gustin, vice president of member services and external affairs for Sunflower Electric Power Corp.
“We have to get housing built so that we can take advantage of the economic opportunities that are there,” said Gustin, one of the coordinators of the effort to secure the funding.
Indeed, the coalition points to several examples where housing is a must in rural Kansas.
Among them is Hilmar Cheese Co.’s decision to locate in Dodge City, an investment of $460 million that will bring with it 250 jobs.
The project is expected to bring an additional 750 jobs with the dairies that will serve the cheese producer with 90,000 cows.
The dairy suppliers are expected to need between 25 and 100 housing units in the surrounding counties.
“Those communities are going to have to address their housing needs, and that’s going to be a huge challenge for them,” said Joann Knight, executive director of Dodge City/Ford County Development Corp.
“If we don’t get some solid long-term infrastructure and a housing system for them, it’s going to be temporary housing, it’s going to be mobile homes, it’s going to be campers and things like that, which aren’t a long-term fix,” Knight recently told the House agriculture budget committee.
The housing issue is a statewide problem.
In January, the St. Louis Federal Reserve reported that Kansas had almost 3,100 active housing listings, down from about 11,300 in 2017.
Other data from the Kansas Association of Realtors shows that as of January, there was less than a month of housing inventory left in Kansas assuming that no new homes were built and given the current sales rate.
Five years ago, the state had 5.1 months of housing inventory left assuming the sales rates at that time and that no new homes were built.
The issue is pronounced in western Kansas, but the fallout is felt statewide.
Consider:
- The 2008 recession drove a lot of homebuilders out of work, many who have not returned to those jobs later even as the economy bounced back. It’s been estimated that open construction industry jobs average between 300,000 to 400,000 each month. The Home Builders Institute, a nonprofit partner of the National Home Builders Association, reported that the country needs another 2.2 million construction workers over the next three years to keep up with demand.
- Appraisals in rural areas make it difficult to borrow money. A new home built in a rural area can be appraised at less than the cost of construction because there are no comparable sales. As a result, there’s a gap between a loan for the home and the cost of construction, meaning the home buyer needs cash to make up the difference.
- Building materials are rising in cost. In January, prices increased 20.3% year over year and have risen 28.7% since January 2020, according to the National Home Builders Association. Lumber increased 25.4% in January following a 21.3% increase the month before. Since hitting a low last September, lumber prices have increased 73.9%.
Lt. Gov. David Toland, who doubles as commerce secretary, couldn’t comment on the merits of the $50 million rural housing proposal.
However, he said housing needs to command the state’s attention.
“We have a dramatic shortage of housing in rural, suburban and urban places across Kansas,” Toland said.
“It is acute, and we have to act decisively this year to get more rooftops into production so that we can continue to have the dramatic growth that we’ve seen in the state’s economy the last two or three years.
“We can’t sustain this without more human beings in the state of Kansas.”
The issue moves beyond financing. There are several bills that are winding their way through the Legislature that would address housing. Among them:
- A bill creating a $2 million loan guarantee fund that would make up the difference between the cost of building new homes and the appraisals in counties of less than 10,000.
- A bill creating an $18 million a year tax credit for housing for small counties and low-income housing. Developers would qualify for up to a $35,000 tax credit for construction of not more than 40 housing units per year in a county of not more than 8,000. The $35,000 credit is limited to each unit. The tax credit would be up to $32,000 for each unit in a county with a population of between 8,000 and 25,000. Tax credits would be limited to $30,000 per unit for all other eligible projects.
- A bill putting $20 million a year into the state’s moderate income housing program administered by the Kansas Housing Resource Corp. The bill calls for putting not less than $3 million for loans and grants to counties – or cities in those counties – with a population of not more than 8,000. It also calls spending no less than $3 million for loans and grants to cities and counties with a population between 8,000 and 25,000.
Mark Tomb, vice president of government affairs for the Kansas Association of Realtors, said the bills would help answer the state’s housing needs.
“Our big take is that it has become a limitation for economic development – having enough housing for the workforce and the future workforce,” he said.
“We need to plan to have those segments of the market addressed, or otherwise people won’t come here.”
