Presentation Transcript

1. Pursuing Innovative Housing Solutions in the BakkenHarold Hunt, PhDReal Estate Center @ Texas A&MCollege Station, Texashhunt@tamu.edu

2. The 6 Bakken Counties with the Most Drilling and Their 2012 Population Estimates (27k) (8k) (16k) (8k) (8k) (27k) Source: Minneapolis Federal Reserve & 2012 U.S. Census Population Estimates
3. Closest Distance to a Large Metro Area Fargo (26k) 400 mi. + Billings (162k) Minneapolis/St. Paul (3.3 mil.) Sioux Falls (167k) Omaha (890k) Cheyenne (92k)
4. Thoughts from Bakken Area Developers
5. Thoughts from Bakken Area Developers Developer #1: First considered RV/Cabin housing combination Changed to all cabins after resistance to RVs Cities shortening permit times & demanding higher quality Found residents wanting to buy & leave rentals Want families there; thinking very long-term Added truck stop, office & hotel to control quality Equity money primarily from 1031 investors No debt financing available
6. Thoughts from Bakken Area Developers Developer #2: Wanted western theme cabins on 1.3-acre lots Higher than avg. quality, landscaping, private wells, septic County kept demanding changes before approval (1) Sewage treat. plant, (2) paved roads, (3) 2-acre lots Developers will only build what pencils out Felt that govt. entities are: Demanding too much permanent infrastructure & housing Driving the cost of housing up over the $276k FHA limit Lacking a clear vision of their housing needs
7. Thoughts from Bakken Area Developers Developer #3: Truly “affordable” housing (govt. subsidized) can’t work Median household incomes are too high Need “right-priced” homes (under the $276k FHA limit) Built duplexes (sell for $230kper side) Built townhomes($199k to $220kper unit) Utilities gouging developers for hook-ups Cities & local lenders too wary after previous busts Need more permanent infrastructure from cities Rule of thumb: Developers expect a profit by year 3
8. Thoughts from Bakken Area Developers Developer #4 “Brainstorm” Session: Develop a MH subdivision for future S.F. homes 1-acre lots, heavy landscaping, paved roads & sewage plant Use “high quality” manufacturedhousing Make MH housing rental units but hold land ownership under one ownerfor later removal & redevelopment for S.F. Use a HOA to provide strong property monitoring & upkeep MH or modular housing mitigates labor shortage problem A problem with MH: it was stigmatized early on The current fear: MH structures and neighborhoods won’t hold up
9. Visions of Manufactured and Modular Housing & Their Developments Differ Widely
10. Visions of Manufactured and Modular Housing & Their Developments Differ Widely
11. “Trailer Parks” Can Be As Upscale As You Like From a recent news article: “Paradise Cove in Malibu is a trailer park inhabited by actors Pamela Anderson, Minnie Driver and Matthew McConaughey, where homes fetch up to $2.5 mil. and come with marble floors. “If your budget won’t stretch to that, there are communities like Parrish Manor in Raleigh, NC, which is more like a health retreat – there’s a football field, a community garden, playgrounds, a walking trail, picnic area and sports programs for children. There is even a car maintenance shed.” Source: BBC News Sept. 2013
12. Thoughts from Bakken Area Real Estate Brokers
13. Thoughts from Bakken Area Brokers Brokers: Moving away from traditional to extended-stayhotels Cities want higher quality in new housing Need to monitor new housing density carefully See demand shift from rental to ownership Convinced drilling will continue for many decades Credit getting restored; seeing some lease/purchasing Man-campsnot desirable (little privacy; want their families) Cities need families for teenage service labor Some paying $1,100/mo. for RV space plus utilities Paying $2.50 to $3.00 per SF per month for apartments
14. Thoughts from Bakken Area Brokers Brokers: Households making <$90kqualify for govt. programs Biggest group displaced has been senior citizens Need more “entry level” S.F. housing (around $250k) Believe higher quality developments will survive best in a downturn Accurate data for housing demand is impossible Developers using studies to attract equity investors Citiesrarely question need for new housing developments Municipalities can’t compare fee structures across cities Often undercharging for taps, permits, etc. to cover actual costs
15. The Takeaways
16. Takeaways Areas where these parties agree: “Perception” is this is a long-term play Market shows increasing desire to purchase housing Market shows decreasing desire to rent housing The “market” is driving demand for higher quality housing as much as cities are Housing development primarily being financed through equity funds, (thus increasing housing cost) Need more lenders to take a chance on housing develop.
17. Takeaways Areas where these parties disagree: What is the optimal housing density for cities? Are municipalities being unreasonable in their demands during the permitting process? Are cities striking the right balance between “quality of life” spending and “hard infrastructure” spending? Is using manufactured/modular housing today a good idea for the long-term viability of a community? If so, what is the correct ownership model for the land? For the unit?
18. REAL ESTATE CENTER at TEXAS A&M UNIVERSITY Mays School of Business http://recenter.tamu.edu