The state of Kansas is about to invest nearly $200 million in rural housing as part of a broad initiative to foster economic development in areas without enough homes to support a robust work force.
The Kansas Legislature this week passed a bill worth roughly $120 million in tax credits to jump start the housing market in rural Kansas plus more than another $65 million that’s earmarked in the state budget for constructing new homes.
The bill passed 109-12 in the House and 34-3 in the Senate with three members passing on the bill.
The package of incentives is believed to be one of the most significant housing investments in state history, especially at a time when some cities and counties throughout the state have so few homes available that they’re struggling to attract employers.
“This is a big deal. It’s a game changer,” said Republican state Sen. Rob Olson of Olathe and the bill’s primary sponsor.
“This will create jobs building in those towns and communities, but it’s also going to give housing for people that need it,” he said.
The package of tax credits sent to the governor include:
- Creates a $13 million a year tax credit in small counties for 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 a county from 25,000, to 75,000 people.
- Creates a tax credit starting in 2023 for qualified low-income housing projects located in Kansas and determined by the Kansas Housing Resources Corp. The amount of the Kansas tax credit would be the same as the federal tax credit amount. The tax credit would be non-refundable and could be carried forward for 10 years. Any portion of the tax credit that is not claimed during that time would be lost. It’s estimated to cost about $42 million over two years.
- Loan guarantees covering gaps between construction cost and the appraisal of single-family homes in small counties. It only applies to costs exceeding the appraised value by 80% to 125%. The maximum of each loan guarantee is $100,000 with total loan guarantees of $2 million for the entire life of the program. Counties with less than 10,000 are eligible. This provision is intended to make it easier to borrow money and build houses in rural areas. 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.
- Provides a 10% tax credit for restoration and preservation of structures at least 50 years old that cost more than $25,000. All credits under the law would be limited to $10 million. It is estimated to cost $30 million over three years.
The entire package was pushed by a coalition of roughly 20 groups from across Kansas, including the Kansas Bankers, Association, the Farm Bureau, the Livestock Association, the League of Kansas Municipalities and the Kansas Association of Realtors.
Representatives of those groups appeared before various committees throughout the session, asking lawmakers to help boost housing in rural areas that are seeing economic development but with a lack of rooftops for their employees.
“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. said in an interview earlier this year.
“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.
At one point, Democratic Gov. Laura Kelly got behind the effort.
“Kansas is seeing historic economic growth, and we have to ensure we have long-term, sustainable funding to provide affordable housing for our workforce,” Kelly said in announcing her support for putting $50 million into the budget for housing.
“A shortage of quality, affordable housing is a barrier to economic growth and development throughout the state – and particularly in rural Kansas,” she said.
“To continue to attract business, and the workforce needed to fill jobs, we must develop more affordable housing opportunities throughout the state.”
Last week, the governor announced the start of a new program for developers to address housing needs across the state.
The program, available in communities with populations up to 10,000, offers a no-interest loan of up to $25,000 and require a 20% match.
Loans are available to private developers, non-profit organizations, or local governments.
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.
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.
