Improving Economic Outcomes in Rural Communities
Rural communities are grappling with a shortage of market-rate housing that is having a ripple effect on their economic health.
A lack of quality housing for those in the 18–to 30-year-old age range is being acutely felt even in communities that are experiencing economic growth. Large employers require a sustainable pipeline of talent. But without sufficient housing options, younger people are forced to choose between commuting long distances or finding employment elsewhere. Many of them are choosing the latter.
To be sure, communities across the board—large and small, rural and urban—are dealing with a housing shortfall. But rural communities must tackle challenges that aren’t shared by their suburban and urban counterparts: namely, a lack of feasibility. Lower market rents, high construction costs, limited equity, and debt options, and the lack of sound infrastructure make for a thin business case for developers.
At Miller-Valentine, we have been studying how communities and developers can come together to overcome these challenges. We are finding that collaboration between municipalities, businesses, and developers put quality market-rate multifamily housing within reach of a younger workforce. The key? Using local resources and economic tools to make development projects more feasible.
Balancing the Cost vs. Value Equation
From a developer’s perspective, every new project is a flowchart of checkpoints for feasibility. Each step of the process presents a go/no-go decision:
- Are suitable sites available?
- Can all entitlements be secured?
- Is there enough demand in the market?
- Can the market support a profitable rental rate?
- Will project costs exceed potential value?
- Is there local equity partners will to invest in the project?
- Are economic resources or mechanisms available to offset these costs?
- Is there an exit strategy?
As developers work through each step of the process, the risk of a financial loss is compounded. But when communities share in the upfront costs with developers, the venture becomes more attractive.
Based on our research and experience, we have identified four key areas where community leaders can apply their unique capabilities and tools to improve feasibility by reducing risk and defraying upfront expenses:
- Site selection and acquisition. Local leaders know their community better than anyone. By assisting with site selection, due diligence, and acquisition, they can shave time and costs from the process.
- When community leaders partner with developers throughout the zoning and planning phase, it leads to better outcomes and a faster schedule.
- Economic development tools. For multifamily developments in rural areas, it is not unusual for the appraisal to reveal a divide between cost and value. Community leaders can step in with economic incentives—such as tax abatements, tax increment financing, and sales tax exemptions—to close that gap.
- Investor packages and pursuit. If these tools are not enough to adequately improve feasibility, then community leaders and developers can seek out community-based equity investors. These investors may be local companies, foundations, and even individuals who are vested in the success of their communities.
What This Looks Like in Action
Miller-Valentine is partnering with civic and business leaders in rural Ohio to bring multifamily development to the market. The primary driver is to improve the ability of local employers to attract and retain the younger talent that is needed to fuel their growth. The community works closely with our team throughout site selection and the entitlement process to streamline these procedures. Incentive packages are defraying costs. And the team has identified a number of local equity partners to invest in the project, including large area employers and local community-minded investors.
The housing dilemma is a pressing challenge for rural communities. Investing in quality, market-rate housing stock to serve a younger workforce is one pathway forward. Under most circumstances, the process takes 12 to 24 months to move from idea to groundbreaking. But that’s a short timeline compared to the long-term payoff for economic growth and community health.
Interested in learning how you can bring high-quality market-rate housing to your community? Email Dave Dickerson today or CALL TOLL-FREE: 877-684-7687 | [email protected]