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Housing Crisis Threatens To Stifle Rural Kansas Towns Hoping To Grow

A for sale sign posted outside a home in Hays.
David Condos / Kansas News Service
A for sale sign posted outside a home in Hays.

Even as demand for rural housing grows, a shortage of lumber, labor and lending means developers are often priced out of building new affordable homes in small towns.

HAYS, Kansas — On the east edge of town, an empty sidewalk flanked by dirt and gravel curls around a bend into the shape of a cul-de-sac. Soon, it will lead to the front doors of three dozen new homes — the first houses in Hays built to sell for $225,000 or less in the past several years.

Doug Williams, who heads the local housing and economic development coalition Grow Hays, expects the first homebuyers to move in by the end of this year. And in his view, it’s not a moment too soon. Nor is it enough.

“We have what I would deem an extreme undersupply of housing,” Williams said. “And we've been fighting that for going on nine to 10 months now.”

In the space of one year from late 2019 to late 2020, Grow Hays’ housing report found that the number of homes for sale in the northwest Kansas town plummeted from 101 to 50. And it keeps dropping.

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

Fueled by historically low mortgage rates and years of underbuilt housing supply, the American housing market has become increasingly strained. Nationwide, the housing deficit has grown more than 50% over the past two years and now stands nearly 4 million homes short of estimated demand.

In rural areas where lending, labor and materials are already harder to come by, the housing crunch puts towns like Hays in a bind.

Population forecasts from Wichita State University estimate that some western Kansas counties will lose more than 50% of their residents over the next 50 years. And if a town like Hays hopes to avoid that fate, Williams said finding ways to provide more quality, affordable housing options should be the priority.

But the town of roughly 21,000 people still has work left to do to reach that goal. Williams said he routinely hears stories from real estate agents about potential buyers who can’t get a bid in before a home has already sold. If they do make an offer quickly enough, bidding wars often run the price well above the asking price.

“I've never seen anything quite like this before.”

The future site of a new affordable housing development in Hays.
David Condos / Kansas News Service
The future site of a new affordable housing development in Hays.

Supply and Demand

Several factors converged to create the current strain on housing markets in rural areas. Robert Dietz, chief economist with the National Association of Home Builders, said that housing was underbuilt pretty much everywhere from 2012 to 2019.

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

Dietz described the barriers that keep new homes from being built as “the five Ls”: labor, land, lending, laws and lumber. He said that for rural areas, finding land and friendly development laws usually aren’t a problem. But the other three factors can be even more challenging for small towns than big cities.

In rural markets, developers often get financing to acquire land from smaller local lenders. Dietz said those banks and mortgage companies have become more wary of taking big risks since the Great Recession. So, the loans are harder to come by and often have tighter lending conditions such as higher rates.

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

Shortages of skilled construction workers also hamper rural markets. Dietz said there’s a “geographic mismatch” that finds construction workers in larger metropolitan areas when the greatest need for their skills falls in outer suburbs and rural markets. And the lack of affordable housing in those lower-density markets makes it even more difficult for those workers to move there.

Finally, the recent jump in lumber prices has eaten up much of the margin rural developers had left when building affordable homes. Dietz said the 9% tariffs on lumber imported from Canada are intended to make U.S. lumber more attractive to American builders. But domestic lumber production hasn’t been able to make up the shortfall, sending prices soaring.

Lumber costs have climbed more than 300% over the past year, adding roughly $36,000 to the price of a typical single-family home. While single-family home building was up 12% last year, lumber production grew only 3%.

And lumber’s not the only thing builders are having trouble getting a hold of. In a recent home builders association’s survey of builders, 94% said lumber was in short supply and 95% had trouble getting appliances.

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

But even amid shortages of financing, workers and materials, the housing boom has rolled on. Dietz said markets are growing everywhere, but are expanding especially quickly in outer suburbs and rural areas. He attributes the trend largely to people working from home more.

To seize the moment, those outlying areas will be competing with each other to draw new residents with the best housing options.

“There's a race on right now between all communities in the United States,” Dietz said, “(to see) what communities are able to add housing to their local market.”

A graphic promoting the listening session in Colby that was part of the statewide housing needs assessment.
Kansas Housing Resources Corporation's Twitter
A graphic promoting the listening session in Colby that was part of the statewide housing needs assessment.

Taking stock

Kansas doesn’t have current, comprehensive 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 were meeting with folks in Wyandotte and Johnson County or in southwest Kansas, we're hearing a lot of the same themes over and over again,” said Emily Sharp, a spokesperson for the housing group.

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

And just because the home prices are generally lower in rural markets, that doesn’t mean new houses cost less to build there — it’s often the opposite. Sharp said that the logistics of transporting materials and labor to remote places, paired with the lower wages in small towns, have created a situation where building new affordable homes in rural areas can ultimately be cost-prohibitive.

“We’re hearing about situations where folks could maybe have a contract on a single-family home that cost $200,000 to build,” Sharp said, “but it may only appraise for $150,000.”

In Hays, the housing deficit is especially stark in that very price range. It’s what Doug Williams of Grow Hays described as the “sweet spot” — between $175,000 and $225,000 — where a lot of first-time homebuyers and young families are looking.

He hopes the new development being built on the town’s east side will help fill that gap when it opens later this year. But after originally committing to build some homes at the low end of that price range, the developers have now told Williams that’s no longer financially feasible.

“They are saying they cannot build a $175,000 house in Hays right now,” Williams said, “because of the price of materials.”

David Condos covers western Kansas for High Plains Public Radio and the Kansas News Service. You can follow him on Twitter @davidcondos.

The Kansas News Service is a collaboration of KCUR, Kansas Public Radio, KMUW and High Plains Public Radio focused on health, the social determinants of health and their connection to public policy.

Kansas News Service stories and photos may be republished by news media at no cost with proper attribution and a link to ksnewsservice.org.

David Condos is High Plains Public Radio's western Kansas reporter. Based in Hays, he covers issues that shape rural communities across the Great Plains — from water and climate change to agriculture and immigration. His work reaches audiences across Kansas through the Kansas News Service, a statewide collaboration of public radio stations.