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Housing shortages keeping Kansans out of a home on the range

An explosion in demand is creating opportunities for small towns and medium-sized cities across Kansas to expand their housing options. But with so few new houses having been built in recent decades in places with declining or stable populations, communities are having to try out creative approaches to deal with the challenges. However, being aggressive in tackling the problem could pay future dividends.

 

If Doug Williams wasn’t seeing it with his own eyes, he would be hard-pressed to believe it. House after house in Hays that have gone on the market have drawn multiple bids and sold in just a few days at well over the listing prices. Williams has worked in Hays real estate for decades, just like his father before him.

“We’ve never had a market quite like this,” he says, bewilderment in his voice.

Aside from typical ebbs and flows, he says, the housing market in Hays has always been pretty steady. But what’s happening now, he acknowledges, is nothing short of a buying frenzy.

Hays is not alone.

In fact, after decades-long lulls, small towns and medium-sized cities across Kansas – indeed, throughout the nation’s heartland – are facing an unprecedented surge in housing demand. National experts say it’s being driven at least partly by millennials, now the nation’s largest generation, becoming home buyers on a massive scale. 

“All of a sudden, it’s OK to live in rural America or small-town America again,” Colby city manager Tyson McGreer says. “For decades, it was a ‘You grew up here, but never came back here’ type of attitude. And now we’re really seeing a lot of younger people move back.”

It’s happening all over the state.

“We have people walking in here every day, asking for landlord lists and ‘Do you know of any houses for sale? Is there anywhere we can live?’” Humboldt city administrator Cole Herder says. 

“My heart goes out because these people are struggling to find a place to live.”

 

  • Colorado native Todd Baker, here lending his daughter a hand with her furniture, has taken a liking to the western Kansas town and purchased another house in Hays, where he and his wife, Stacie, may resettle.

 

Flocking to Small Towns

A variety of factors is fueling the surge in demand, officials say. The COVID pandemic forced companies to close and employees to work remotely – a trend that looks to continue in the post pandemic world.

That means lots of people can live wherever they want, and some are choosing to relocate where the cost of living is lower and the pace of life is closer to their liking.

Companies are looking for places where the cost of doing business is lower, bringing employees with them or adding them upon arrival in their new locations.

The deep partisan divide splitting the nation has some people looking for homes in places that more closely mirror their views.

And many are simply wanting to live where people get to deal with one another and not urban dilemmas.

That is a big reason Todd Baker and his wife are considering making Hays their new home. The natives of Colorado bought a house for their daughter to live in while she attended Fort Hays State University and were so impressed with what they’ve seen they’re buying another house and may eventually live there themselves. 

“We want to go to a more small-town feel, where it feels like community,” says Baker, who lives in a Denver suburb.

Baker, who works in insurance, calls himself “a relationship guy.”

“That’s how I built the insurance business,” he says. “That’s what we like to do.” He liked how the university was so inviting when they went on a school visit, and they had the same feel when looking around town.

“We build relationships with neighbors, make friends and have relationships with people that maybe do work on our house or I want to have service my car,” Baker says. “It’s more first-name basis. And in all honesty, what’s appealing to us with Hays is that virtually every person that we’re working with, like the contractors on the house, it’s been a referral. I haven’t gone online and try to search out a bunch of people.”

The Bakers are Republicans who like to hunt and spend time outdoors, and feel out of place in Colorado despite its obvious outdoor grandeur. 

As the state leans further left on the political spectrum, Baker says, they’re feeling more and more uncomfortable.

Many of the people moving to the Midwest have family roots to which they are returning – or they went to college in the nation’s heartland and loved the area so much they want to come back.

“It’s the boomerang crowd,” says Dan Carmody of Michigan-based Carmody Consulting, who led a two-day workshop in Hutchinson in August to help Kansas communities map out strategies to increase their housing stock in cost-effective ways.

The workshop drew representatives from 110 towns across the state.

“With the country kind of coming apart at the seams, I think there’s politically a sentiment that somehow small towns are safer,” Carmody says. Data over time doesn’t bear that out, he says, but there’s no denying the demand for housing outside of large metropolitan areas.

“I grew up in Nebraska, and they’re facing the same thing as everybody,” McGreer says. “All those small towns are just getting flooded with people moving out of the city for whatever reason. It definitely is interesting.”

 

A multitude of factors can hamper the attractiveness of a city like Hays to businesses looking to move or expand. A limited workforce is high on the list, says Doug Williams, executive director of Grow Hays. A lack of affordable housing can be pivotal too. “Housing is kinda the baseline. If you don’t have housing, not much else matters,” Williams told KSNW-TV this past spring.

An Answer on Main Street?

The trend is bringing urgency to communities after a long, slow decline in population that has been happening in rural America for the past century. Eighty of the state’s 105 counties lost population in the 2020 census, and the bulk of Kansas’ population growth is concentrated in the Wichita and Kansas City regions.

The adaptive challenge for communities is that while new housing is needed in parts of the state that haven’t experienced significant growth, or have even suffered losses in population, it often requires collaboration between the public and private sectors to get it built. A lack of affordable housing may even be a factor in population declines. But convincing residents that their community needs new housing, and that their local governments should play a role in building it, can be a tough sell. And to make such investments affordable, communities are having to get creative by looking at ways to get more housing out of existing infrastructure, such as the upper stories of downtown buildings.    

Having demand for housing significantly exceed supply comes with tremendous challenges. If those challenges aren’t addressed in the right way, officials say, this will go down as a rare opportunity lost.

The Great Recession of 2007-09 was triggered by a housing bubble that burst. 

“The home builders had really leveraged their souls to build houses that they didn’t have a market for” then, says Bill Murphy, deputy secretary of business development for the Kansas Department of Commerce. “But this is a different type of challenge for us. Home builders are much more reluctant to take risks. They were burned back in 2008 and 2009.”

What has developed recently, he says, is a perfect storm to create a bullish housing market rarely seen in recent history: a quickly rebounding economy, a disruption of the supply chain for building materials and a tightening labor market. After decades of almost flat population figures, Salina hopes to grow again thanks to expansions announced by two major employers.

As part of a plan that includes the acquisition of Great Plains Manufacturing, Kubota is moving production of compact track loaders from Japan to Salina, opening a new $53 million plant next year and adding 120 employees.

Schwan’s Co., which makes frozen foods, has announced plans to build a new 400,000-square-foot expansion of its pizza production plant in Salina, adding an estimated 225 jobs by 2023. More expansions and products produced by Schwan’s are anticipated.

“Very, very exciting,” says Lauren Driscoll, director of community and development services for the city of Salina.

Yet high materials costs, labor shortages and booming demand almost everywhere could potentially turn what sounds like a dream scenario into a nightmare for Salina.

“Holy cow, I need just shy of 1,000 housing units by 2025,” Driscoll says. “I don’t need just one developer or one product type. I really need them all. And I have some very distinct timelines in which I need them in order to meet this future demand.”

Salina officials are willing to entertain spurring homebuilding through industrial revenue bonds and the newly expanded Rural Housing Incentive District tax credits to help finance their projects, Driscoll says. Because of a bill passed in the Kansas Legislature this year, the tax credits can now be used to renovate for residential use the upper floors of buildings more than 25 years old and in downtown districts of cities with populations of 60,000 or less.

The credits can also be used to pay infrastructure costs on new streets in developments.

The tax credits cover the incremental increase in real property taxes created by the housing development project for as long as 25 years. They could play a significant role in easing the housing crisis for small towns and cities across the country, Carmody says.

“They don’t have the resources to extend the sewer lines and build new subdivisions,” he says. “We have an answer for that, and it’s right on Main Street.”

 

The city of Sterling needs housing of all kinds, says City Manager Craig Crossette. A limited number of apartments are under construction. Repurposing downtown buildings to living space, such as a project involving the historic Shay Building, is another option.

 

Alternatives to the Three-Bedroom House

Converting upper floors of downtown buildings into residential units is likely to appeal to college students who aren’t living on campus and to empty nesters looking to downsize, officials say. The new tax credits make such projects more economically feasible.

Those upper floors are “a bit of an untapped resource that makes sense to develop,” says Dave Wilson, who is a partner in Sterling Services on the first floor of a building he bought in downtown Sterling in 2005.

The second floor is undeveloped and has great potential, he says.

“It’s also where the greatest expense lies, and the greatest courage of investment,” he says. “It’s meaningful and helpful.”

In small towns, the appraised value of a property “many times falls short of construction costs, or even redevelopment cost,” Wilson says. “That’s a hard thing to overcome. That’s an irresponsible risk for any lending institution to take. So, either developers have to be philanthropic and really risk-tolerant, or else there has to be some other method of plugging that gap.”

That’s where tools such as the Rural Housing Incentive District tax credits come in, Wilson and Carmody say.

“That’s huge,” Carmody says of the new expansion of the tax credits, adding that they’re an effective way to overcome financial barriers. But making full use of the tool means winning over the people who play a make-or-break role in housing investment.

“You’ve got to educate appraisers and bankers along the way,” Carmody says.

In town after town in the Midwest, he says, developers or investors have had to take the financial risk of developing upper-floor residential units and demonstrate there was a demand for such living spaces before lending institutions would begin to back such projects.

“It does have a snowball effect,” Carmody says. Wilson says he’s still wrestling with whether to target short-term leases with college students or longer-term options with empty nesters or retirees when he develops the second floor.

Communities with an abundance of such development opportunities possess a golden opportunity and may not realize it, Carmody says.

The most common household type in America right now is a couple with no children at home, he says.

The second-most common household is a single person. Only 22% of households in America have school-age children, according to census data.

“A lot of people don’t want a three-bedroom house,” Carmody says. “There’s a lot of people, even in small towns, who want to be able to take advantage of two things. One is they will walk out their front door and do stuff, whether that’s get a cup of coffee at a shop across the street or go to the library. Even in a small town, it’s about amenities. And secondly, the (living) space is more interesting, usually, than a traditional mid-century ranch home.”

Beyond aesthetics, officials say, developing those spaces into living units makes economic sense.

“In many smaller cities – under 5,000-7,000, let’s say – the cost to build a home does not match how you’d need to price it for people in those cities to be able to afford them,” says Erik Sartorius, executive director of the League of Kansas Municipalities.

 

‘We Just Don’t Have Places for Them’ 

Like Salina and smaller towns such as Colby and Humboldt, Sterling needs housing options of all kinds.

Partnering with the Kansas Housing Resource Corp., the city broke ground on a 10-unit apartment complex this year. Barely two months after dirt moving began, the 10 units were already reserved.

“It’s the perfect testament to the housing demand here,” says Craig Crossette, Sterling’s city manager.

Another eight units are being built a few blocks from that complex, he says.

A couple of major local employers are growing dramatically, Crossette says, but many of their employees have to commute from neighboring communities because there’s no place for them to live in Sterling.

One local business has 70 employees, he says, but only 13 of them live in Sterling.

“We have a tremendous quality of life,” Crossette says. “It’s an affluent community with wonderful amenities, wonderful streets, parks, entertainment  … so they want to live here. We just don’t have places for them.

“One of the highest priorities on my list of things to do has been attracting homebuilders and trying to work with employers to understand what types of housing we need, and then just aggressively pursuing residential development projects.”

There’s no single solution for the housing crisis in Kansas, Murphy and other officials say. What will work in one town won’t succeed in another. Instead, a multifaceted approach is needed. The housing resource corporation is one pillar of the state’s response.

“They really understand what the challenges are, where the opportunities are and where we need additional resources,” Murphy says of the nonprofit public corporation that serves as the primary administrator of federal housing programs for the state of Kansas.

The entity is working on a statewide housing study, the first in 30 years. One area of need already obvious is the lack of affordable new housing under construction.

The corporation provided a grant to help St. John build several new houses over the next few years, dubbed net-zero residences because the solar panels on them generate more electricity than the homes use. The first house, which has three bedrooms, two bathrooms and 1,100 square feet of space, was completed this summer.

As part of the grant terms, Stafford County Economic Development must own the houses for at least 20 years and rent them for $500 to $550 a month. If the homes were to be sold, they would be worth between $135,000 and $150,000.

“We’re still struggling with finding contractors that can replicate it at the price point we want, but we’re getting there,” says Carolyn Dunn, executive director of Stafford County Economic Development.

The goal, Dunn says, is to have these houses replicated in small towns all over the state, because the need for them is everywhere.

“We’ve got to find ways that we can create more housing that is affordable,” she says.

This first net-zero house has little curb appeal – “It looks like a shed,” Dunn says, because the focus was on keeping the home affordable. The money was spent on the living space rather than the outside, she says. That meant trade-offs such as a detached garage and a slab foundation instead of a basement.

But the house has a living room large enough to comfortably accommodate 20 people, she says, so occupants could host a holiday dinner.

The average age of a house in Stafford County is 90 years old, Dunn says, and 80% of the housing inventory was built 60 years ago or longer. Almost no new houses were built in the 1990s or 2000s.

“It’s kind of this paradox that people think that,‘Well, we don’t need housing because the population is declining.’ But I think that the housing is a part of the population decline,” Dunn says.

One example of that occurred in Marion, where Tammy Ensey hired someone from Topeka to manage the Historic Elgin Hotel, which she owns with her husband.

“He could never find an appropriate place for him to live,” so he ultimately didn’t take the job,  Ensey says. “Housing is a huge issue out here – or lack thereof. We can recruit someone, but then we can’t house them. So that’s a challenge.”

The Department of Commerce is creating a position for a housing specialist who would identify developers for projects, look at best practices and new techniques for home building, and “navigate those resources and really put our best foot forward,” Murphy says.

Rural Housing Incentive Districts figure to be a significant catalyst in easing the housing crunch, he says. 

Hays used the Rural Housing Incentive District tax credits to offset infrastructure costs on a 75-unit housing development on the east edge of town. Another developer is converting an old  schoolhouse in Hays into 12 apartment units. 

“The Emporias, the Hayses, the Great Bends are those perfectly sized cities that can make these investments in their upper-story downtowns and really do a good job of helping retain the talent that is going to be critical to their long-term abilities to compete for future economic development projects,” Murphy says.

Colby used Rural Housing Incentive District tax credits to help offset infrastructure costs on two different housing developments, McGreer said. One local developer is preparing to build two-and three-bedroom duplexes primarily catering to young couples or retirees, and another has built a number of senior-living residences that allowed retirees to move out of their larger homes and free up existing housing stock. The city just approved a new 30-lot development for single-family homes, using Rural Housing Incentive District credits, which “is probably the single largest tool we’re using to add housing stock,” McGreer says.

Hays is also making concerted efforts to build living spaces for empty nesters, Williams says, so they can move out of their existing homes and free up more housing stock. 

“We know there are a lot of retirees trapped in their existing homes because they don’t have an appropriate choice” to relocate, Williams says.

Hays and Colby officials would like to attract more retirees because their hospitals make them a regional medical hub.

“Housing is where it all starts,” Williams says. 

“If you don’t have that, you can’t even play the game.”

It doesn’t matter how many people or businesses may want to relocate or expand in your community, he says, if you don’t have a place for workers to live.

Allen County is looking at ways to bring an Iowa project to Kansas. Rural Housing 360 is a public-private partnership that brings cities, lenders, contractors and home buyers together to build affordable housing on empty lots. Rapidly growing businesses may be willing to help collaborate in hatching housing solutions so more employees can move closer to their work, says Herder, the Humboldt administrator.

 

Time to be Aggressive

Yet housing access alone isn’t enough for rural communities to take advantage of the urban exodus, local and state officials say. Child care has to be readily available too.

In fact, Murphy says, it’s one of the driving factors in the decision on whether to expand or locate in a given state.

A recently released study conducted by the Kansas Sampler Foundation and the state’s Office of Rural Prosperity found that the lack of quality child care is keeping young people in rural Kansas from taking jobs or even having children – and may be pushing them away from rural Kansas.

Residents of Hays are known to drive 30 miles one way to access child care, Williams says.

“That’s simply unacceptable,” he says.

The study recommends the creation of a state-level grassroots support division that would make navigating government agencies less challenging. 

Paid training for “local champions” and support for a paid grant-writing position focusing on rural communities are more solutions suggested in the report.

For a surge in housing demand to be more than a flash in the pan, local and state officials say, communities need to offer amenities that will keep newcomers around.

Humboldt, for example, has a couple of new clothing boutiques and a confectionary shop “that should be in Crown Center (in Kansas City) or in Branson,” Herder says.

Colby has built a new community center, added walking paths, improved its baseball diamonds and swimming pool, and updated its Villa High Park.

“Colby, just in general, is busy,” says contractor Mike Woofter, a lifelong resident of northwest Kansas. “There’s just a lot going on for a small town. We’ve got a pretty progressive hometown in a good area.”

It’s important, Herder and Crossette say, for communities to involve their residents in shaping the vision of what they want their towns to look like and offer in the years to come. If the residents feel like they have a voice in what’s happening, they’ll be more likely to support the costs necessary to achieve that goal.

“If you don’t have community involvement and not everyone is involved, I don’t think you stand a chance” of successfully addressing the housing challenge, says Jonathon Goering, director of economic development for Thrive Allen County.

That kind of local buy-in is vital if Kansas communities are to make the most of what’s happening right now, Woofter says. 

“I don’t think that rural Americans can sit on their hands, because if you don’t get with it, you get bypassed again.”

 

Discussion Guide
  1. What makes providing high quality affordable housing in rural areas different from providing it in urban and suburban parts of the state?
  2. What information, if any, do you think local leaders need in order for them to help solve the housing needs of rural and mid-sized cities in Kansas?
  3. What attitudes or perceptions represent a barrier to progress on this issue that could be addressed through leadership?

 

Cover of Journal about Father Kapaun

A version of this article appears in the Fall 2021 issue of The Journal, a publication of the Kansas Leadership Center. To learn more about KLC, visit http://kansasleadershipcenter.org. Order your copy of the magazine at the KLC Store or subscribe to the print edition.

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