A Home Of One's Own In Fayetteville?

City, Developers Agree Cooperation Is Answer To Encouraging Middle Class Housing Market

Last updated Saturday, May 5, 2007 8:27 PM CDT in News

By Dug Begley
The Morning News

"That's an unfilled portion of the housing market in Northwest Arkansas inside the cities," he said.

Broyles is one of the first developers to aggressively target housing in the $120,000 range for new developments, committing to the city that 5 percent of the homes in his new developments will be so-called affordable housing. Other developers, such as Rausch Coleman Homes, also are building homes for less than $150,000.

Add to the increased land cost other charges associated with developing in Fayetteville, such as impact fees for sewer, water, police and fire, and development of moderately priced housing is a challenge.

"The way I figure it is the lot price -- the price of the land, cost for Fayetteville and impact fees -- and then times five," Broyles said.

For example, if he pays $20,000 for the lot and $7,000 in development fees, Broyles would need to build a home on the land he can sell for $135,000. He said construction prices in the area are now about $100 per square foot for residential construction.

Paul Justus, planner with the Northwest Arkansas Regional Planning Commission, said construction prices vary. He said some Fayetteville homes built recently cost $70 or $76 per square foot.

"But building costs have been going up," Justus said.

He said he also agreed with Broyles' opinion land prices are the chief hurdle. Midsized lots inside the city, already primed for development because they have the necessary sewer and electric lines, can easily sell for more than $130,000. That's just the land.

"I think builders are right when they say they have to sell homes for more money because of the price of the land," he said.

Numerous factors beyond building costs can fluctuate housing prices, Broyles said. Premiums can be paid for certain amenities or proximity to schools and cultural offerings, though that is often reflected in the land price. Broyles also said developers usually expect a profit of 10 percent to 15 percent of the home price.

A Man's Castle

Broyles said his definition of attainable housing applies to residences people can own.

"There's not much of that available for the regular worker," Broyles said. His focus is providing homes for families that want to own a detached home with a yard.

"Right now there isn't much out there to buy," Broyles said.

Eric Colston said he and his wife, Anna, know the market's limits. The two bought a house in the Wedington Woods subdivision, just west of Fayetteville, in February for $164,000.

"We needed three bedrooms at a minimum," Colston said.

Finding that much house for the right price eliminated a lot of possibilities in Fayetteville.

"I was OK with that," Colston said. "I didn't want to live so close to the action, and we wanted to have space."

Realtor George Faucette with Faucette Real Estate in Fayetteville said few homes in the city are being sold in the $120,000 to $150,000 range.

"Availability is a problem," Faucette said. "And as you move down in the price ranges, you have more buyers."

It makes for a situation where houses in the sub-$150,000 price range in good condition go quickly, Faucette said.

Stewart and Stephanie Stidham have been looking for a house in Fayetteville since they married in September. Stewart looked on his own before calling Karen Willems, a Realtor with Harris McHaney Realtors.

"Finding an affordable house that's not super tiny was the hard part," Stewart said. "There was nothing out there."

"All we could find were new cookie-cutter houses," Stephanie added. "We wanted an established neighborhood. We drove by a ton of houses and ruled them out."

Willems found them a three-bedroom, two-bath brick house on Seminole Court in east Fayetteville for $140,000. It will be the couple's first house.

"It needs a little work, but it's a great house for Fayetteville," Stephanie said.

Renter's Market

Many houses don't come on the housing market, and if they do they are purchased as investments, Pate said. The elephant in the room, he said, is rental housing dominates Fayetteville's housing landscape. Apartments and rental houses prevail, Pate said, but are an important part of providing a place to live for students and many wage earners who can't afford to buy. Rental prices in Fayetteville vary, but one bedroom apartments can be leased for $400 a month in many areas of the city.

At a recent planning seminar in Hot Springs, Pate said, Fayetteville planners asked whether apartments should be considered as affordable housing.

"The answer was 'It's housing,'" Pate said.

The situation complicates encouraging ownership, Pate admitted, but remains critical to Fayetteville's attempts to keep working class people inside city limits. Apartments play a big role, as do the developers of rental units.

"Jim Lindsey probably provides more affordable housing than anybody in the city," Pate said, referring to the well-known developer whose company rents more than 4,400 apartments in Fayetteville.

The popularity of rental property does create a dearth in home ownership, especially close to the University of Arkansas campus, Pate said. The demand for apartments also creates a cycle that eliminates homes from the area, though it contains an up-side.

For example, Pate explained, two downtown houses next to one another are separated into two apartments each. After years of rental use, the two homes are purchased by a single owner, who decides to tear down both houses to make way for an eight-unit apartment building. The destruction of the two homes eliminates two residences that might have been purchased for owner-occupied uses.

"But now you've got eight residences where you had four," Pate said. "More affordable housing on the same amount of space."

GIVE AND TAKE

Fayetteville's City Plan 2025, which guides planners in zoning and land use laws, emphasizes density downtown as a way to provide affordable housing. Pate said other initiatives are also under way to encourage builders to construct affordable houses.

"There is some enabling legislation we are trying to push at the state level," Pate noted. "Like inclusionary zoning."

Inclusionary zoning would require developers to set aside a percentage of homes in proposed subdivisions for sale at a rate determined as affordable. State Rep. Lindsley Smith of Fayetteville proposed allowing inclusionary zoning during this year's General Assembly session, but the bill failed to pass a House committee.

Pate said the city will try again for inclusionary zoning in 2009, as well as a proposal for transfer of development rights, which would allow landowners in "sending zones" to keep land undeveloped by selling increased density rights to developers in "receiving zones." The proposal would allow open land to stay pristine, and give developers waivers to some city zoning laws and increase residential density downtown.

The city has already made some concessions to developers in order to encourage lower-priced housing. Broyles recently won approval from the city's street committee to help align Weir and Salem roads in northwest Fayetteville to help developers. Broyles' Holcomb Heights development is planned for the intersection of the two roads. Fayetteville will cost share in aligning the roads to make for easier driving.

"This is what we have been working to kinda get going for a long time," said Fayetteville City Council member Bobby Ferrell, a member of the street committee. "This is the day we have been waiting for to start this."

City council members on the street committee supported Broyles' cost share on April 16. Another agreement with developer Charlie Sloan to widen Dot Tipton Road but not build it completely to city standards was also approved.

Pate said cost sharing with developers has some advantages, but must not be a quid pro quo relationship. Pate said Broyles won approval for Holcomb Heights from the city council before asking for the cost share.

"I think we need to be real careful about that," Pate said. "If the approval is conditional on the cost share and it only benefits the development."

Broyles said he did not see the cost share as a "quid pro quo," but said cooperation is the best way to combat gaps in the city's housing market.

"When the city is calling in and talking to developers, we think that's good," Broyles said.

The Morning News' J.T. Wampler contributed to this report.

Rentals Trump

Most residences in Fayetteville are rented rather than owned. A breakdown of the most recent numbers, in 2005 for Fayetteville and 2000 for Springdale, Rogers and Bentonville:

Fayetteville Springdale Rogers Bentonville

Total Occupied Housing Units 29,142 16,149 14,005 7,548

Owner-occupied units 12,035 41 percent 9,748 60 percent 8,855 63 percent 4,661 62 percent

Renter-occupied units 17,107 58 percent 6,401 39 percent 5,150 36 percent 2,797 37 percent

Source: U.S. Census Bureau

House Term Limits

By federal standards, used by the Department of Housing and Urban Development, the terms affordable housing and attainable housing have different meanings.

Affordable housing -- Housing that costs no more than 30 percent of a household's monthly income. Commonly used in conjunction with the national poverty level, to determine eligibility for certain housing programs. Term applies to both owned and rented residences.

Attainable housing -- Housing priced at or below 70 percent of the average sale price of a single-family, detached home in the county. Applies only to owned housing, and varies based on land values in each community. Does not take into consideration average wages of workers in the county.

Source: Staff report

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