Rural Iowa has a housing crisis. Here's how a handful of communities are solving it
New is not always better and both Stanton, population 600, and Mt. Pleasant, population 8,300, have found their new residents are snapping up restored homes and apartments at a rapid rate. Brian Powers/The Register
The need for housing in southwest Iowa is so acute that each new obituary reads like a real estate listing.
"The joke is that good homes sell at the funeral home," said Manning City Clerk Dawn Meyer.
This story of Iowans desperately looking for suitable housing is hardly unique to Manning.
At the inaugural Iowa Rural Development Summit in 2016, organizers heard the same complaint over and over: There just is not enough housing outside of Iowa's booming metropolitan areas.
The problem is widespread, affecting small communities in every corner of the state. And it runs deep.
"It's owner-occupied housing. It's new construction. It's rehab of existing homes. It's multi-unit rentals. It's affordable housing. It's senior housing," said Bill Menner, director of the Iowa Rural Development Council. "Communities are struggling with every one of those elements."
Demand is so great that many Iowa communities have already taken matters into their own hands, offering creative financing or incentives for new homes and renovations. And one Des Moines-area builder is considering an entire division devoted to building new homes in rural Iowa.
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It can seem counter-intuitive. After all, Iowa's rural communities, like many across the heartland, have suffered decades of population loss. New data released by the Census Bureau underscore the bleeding: More than half of all Iowans now live in 10 counties, all of them in metropolitan areas.
Yet demand for housing in rural Iowa has only increased.
Many businesses and industries in small towns are looking to hire, Menner said. But the people left in small communities increasingly hold on to their homes, which forces any new hires to commute from farther distances.
"What we know is that the employers in town are saying we can't get people to fill our jobs, and the people who are interested will have to live 50 miles away while they look for a house," Menner said.
Iowa's 'chicken and egg' housing struggle
While apartment complexes and subdivisions continue to pop up in Iowa's metro areas, rural Iowa has largely missed out on that momentum. Many communities go years without seeing a single new housing unit come online.
In fact, nearly 150 Iowa towns have seen no new hosing built since at least 2010, according to U.S. Census figures.
Developers and contractors, busy building in places like Des Moines and Cedar Rapids, are often wary of the inherent risk involved in rural communities where populations are declining. And with significantly lower home values in rural areas, new construction might cost more than it can bring at sale.
The same holds true for fixer-uppers.
"I might find a house for $120,000, but boy it could use $20,000 or $30,000 of work put into it because grandma hadn't done anything to it since 1990," said Amy Haase, a principal with RDG's urban planning group who does housing research for small towns across the region. "And then if I put that kind of money into it, I better be committed to staying in it for a while."
Those dynamics have created an ultra-tight market in many communities. Desirable listings move at a rapid pace, and that demand has started to show in real estate prices.
For instance, prices for homes in southeast Iowa shot up 7.8 percent in 2017, according to the Iowa Association of Realtors. Muscatine sales saw a nearly 10 percent price increase. In comparison, average home sale prices rose 5 percent in the Des Moines metro area.
On a recent March day, Oskaloosa had only 39 listings, one of the shallowest pools Realtor Karen Converse has seen in 10 years on the job.
"I’d say we always had about 100 listings on average. It's a significant difference," she said. "We need listings."
With growing need, many communities are taking action on their own. Iowa governments, nonprofits and economic development groups are ramping up housing incentives or digging in themselves and building new homes or refurbishing old ones.
"We just recognized that we had to do something or we wouldn’t be here," said Mickey Anderson, who leads a foundation in Stanton that has built spec homes since the 1980s.
In an interview with the Des Moines Register, Iowa Gov. Kim Reynolds said housing is key to rural Iowa's long-term viability. Sustainable economic development strategies in small communities require jobs, skilled workers to fill those jobs and homes to house them, she said.
"It is almost like a chicken and egg (situation)," Reynolds said. "We need people and they need housing. So which do you put in first?"
'We have to think of it in new and different ways'
Rising housing demand seems to contradict the well-known narrative of depopulation across the rural Midwest.
For decades, residents have fled small towns for homes in metropolitan areas. In 1950, 36 percent of Americans lived in rural areas, according to census figures. By 2000, that had shrunk to 21 percent.
Some 70 percent of Iowa's counties are losing population, while urban areas continue to mushroom.
But experts say a big part of Iowa's housing problem can be blamed on a mismatch between the existing inventory and the types of homes in demand.
Much of Iowa's housing stock is old: More than a quarter of Iowa's nearly 1.4 million housing units were built in 1939 or earlier. Nationally, that rate is 13 percent, according to the U.S. Census Bureau.
And household sizes have shrunk over the years, so even communities with no growth need more homes to house the same population. In 1950, the census counted 3.25 people per Iowa household. By 2016, that number was down to 2.43.
Plus, seniors in rural communities have fewer opportunities to move into low-maintenance townhomes and retirement communities, keeping their houses off the market longer compared to cities and suburbs.
Rural communities that need new housing often struggle against unfavorable economics.
There's a "big gap" between the wages in rural areas and the mortgage payments needed to cover the cost of new construction, said Sue Cosner, vice president of community initiatives at the Iowa Area Development Group, which represents rural electric and telecommunications companies.
Some developers are working on ways to streamline supply chains and decrease the cost to build. And cities, counties, economic development groups, nonprofits, rural utilities and even employers are all exploring new ways to invest in rural housing. That's particularly true in communities where employers want to expand, but see no place to house their workforce.
"I think cities and employers are looking at it differently and are willing to come to the table," Cosner said. "We have to think about it in new and different ways."
Zach Mannheimer, community planner with McClure Engineering Co., urges communities to approach housing the same way they do economic development: aggressively.
That means offering tax abatements for new home construction, revolving loan funds or other incentives to help tear down blighted homes, refurbish old ones or build new ones.
"To me, this is a no-brainer," he said. "If you want to grow your community and have more population and economic development, you've got to put your money where your mouth is."
Mannheimer previously founded the Des Moines Social Club before turning his attention to improving the vitality of rural communities. He says rural communities must invest so they can offer the housing and amenities desired by today's families, who increasingly can work from anywhere.
"These communities either need to decide to take bold action and try to grow their community, or their community is going to witness significant decline," he said. "We’re at a tipping point right now, and these communities have to take action."
Untapped rural market could be 'unbelievable'
In Manning, locals worried over the lack of home inventory decided to approach builders directly. A housing study showed the community of 1,500 needed six new housing units annually to keep up with demand.
After recruiting Ankeny's Classic Builders to visit, five people committed to purchasing new homes, affording the builder enough volume to take the risk.
Dawn Meyer, the city clerk, was among those who purchased a new homes. She previously lived in a $75,000 home, the only place in town she could find. Her new home cost about $250,000, and her old home was occupied just two days after closing.
"These new homes are opening up a variety of homes," Meyer said.
To Seth Moulton, owner of Classic Builders, this highlights the untapped potential in the rural market.
"These people are sitting on what a lot of people would call a little nest egg," he said. "They would absolutely build a nice home for themselves that they deserve if the opportunity presented itself."
Collectively, he thinks rural Iowa's market might rival the booming one in the Des Moines metro, where his company builds up to 200 homes a year. He's considering expanding his business to create one team that focuses entirely on rural housing.
"If you combined them all, it would be unbelievable,'" he said. "I think we could build 60 to 80 homes a year if we had a division only trying to take care of rural Iowa. And those numbers could be way low."
That kind of a pace would rank a developer among the largest builders in the Des Moines area, he said.
'Sometimes you feel a little taken for granted'
Moulton cautions that rising rural home prices will only exacerbate housing access problems. He recalled a conversation with a rural resident who sold his home for $30,000 more than he thought it would be worth.
"That’s not a good thing," he said. "It should not be going up because you have no houses."
Moulton would like to see changes in state development incentives, which he says authorities have funneled into booming places like downtown Des Moines while largely bypassing rural development.
"In essence, they’re taking rural taxpayer money and putting it toward programs in downtown Des Moines," he said. "And they're taking the rural area talent and going to downtown Des Moines."
The state has set aside a portion of its workforce housing tax credit program for rural projects. But that incentive is currently suspended because demand has outstripped available funds.
Shane Tiernan, a banker in Conrad, wishes the state offered more funding for rural housing development.
"Sometimes you feel a little taken for granted," he said, "but there are still a lot of people in the state of Iowa that live in rural communities."
Lack of housing has been a challenge since he arrived in Conrad, population 1,073, more than three decades ago.
Local organizations have partnered with the city to develop lots, spurring the construction of dozens of homes over the years. Downtown building owners secured grant funding to develop four upper-story apartments. And now Conrad's Main Street organization will look to develop another 30 or so lots and create a new equity capital investment program to aid small business startups.
This sort of do-it-yourself attitude is what it takes to survive, said Tiernan, president of the local Main Street program.
"You have to have a dedicated group of volunteers in the community," he said, "who are committed to not let their community become another statistic of rural Iowa decline."
3 ways Iowa communities are addressing their housing shortages
Stanton neighbors band together to invest in new homes, rehabilitations
The tidy brick ranch on Frankfort Street doesn't seem like anything special, with its hulking Chevrolet Silverado parked in the driveway and Easter decorations adorning the lawn.
But this three-bedroom home was the start of something big in the tiny town of Stanton, where community members have again and again invested in housing to keep their town alive.
The Stanton Industrial Foundation has built or refurbished 24 homes — more than one-10th of the city's 209 owner-occupied homes, according to U.S. Census figures.
The foundation was originally organized to help rebuild the local restaurant, which burned in 1970. Since then, the volunteer group has focused on housing. Heavily.
Driving around the quiet streets of his southwest Iowa town, Mickey Anderson points to the small subdivisions the foundation built and the brightly painted homes it saved from the wrecking ball.
Now, private developers are putting up homes on both ends of town.
That's allowed the foundation to largely turn its focus to refurbishing older homes on infill lots too small for most new builds. It also purchased a downtown building with plans of renovating the former Masonic Lodge space upstairs into updated apartments.
The housing initiative has been accompanied by quality of life investments, including a walking trail, a local daycare and the Viking Center, a multipurpose complex paid for by private donations. It houses a preschool, the city library, a community center and a wellness center.
Stanton has held onto its local school district amid a wave of school consolidations. That, paired with quality child care and preschool, is a huge draw in the bedroom community in which residents often commute to jobs in nearby Corning and Red Oak.
To Anderson and the other locals who volunteer their time, these efforts aren't just about creating a quaint community. They help protect property values and ensure Stanton's long-term viability.
"People like to see progress. And if you're in a town that didn't have progress, I think people would lose their enthusiasm," Anderson said.
Conni Delinger, a Californian, fell in love with the small town and its Swedish heritage during a summer 2016 road trip across the country. But she had trouble finding a home to rent or buy.
"There is nothing to rent," she said.
She ended up with two fixer-uppers: The home that initially caught her eye on Main Street became available after she bought another house a few blocks away. She's fixing it up and expects it will go fast.
"In a heartbeat," she said.
Forest City investors build apartments to fill need for rentals
A housing study in Forest City, population 4,043, showed strong demand for many types of new housing, particularly rentals. The city hadn't seen a new market rate apartment complex in more than 25 years, said Beth Bilyeu, executive director of Forest City Economic Development.
"If we want our businesses to expand here more, we need to increase our workforce," she said. "But if we increase our workforce, we need good places for them to live and rent."
City leaders were especially concerned about retaining Winnebago Industries, the iconic maker of RVs.
Young professionals are often interested in renting, but Forest City's rental market moves fast. Vacancies typically last days, not weeks, Bilyeu said.
"If you have a place that’s vacant for a month, you’re probably painting it," she said. "And I’d say you could go to a lot of rural areas where that’s true."
So the town's economic development group decided to lead the charge on a new market-rate apartment complex.
The group solicited investors from around north Iowa and raised nearly $1.2 million. Combined with a new workforce housing loan from the Iowa Finance Authority and workforce housing tax credits, the group financed a $4 million, 24-unit apartment building.
"When you’re in a rural area, you understand the need to do things yourself more," Bilyeu said.
The apartments range from one to three bedrooms and go from about $750 to $1,150 per month.
Forest City leaders have also pushed new single family home construction by providing infrastructure incentives for new subdivisions, which now house dozens of new homes.
Bilyeu thinks some of this building might have happened without intervention. But she believes the city's housing shortage would be much more severe without it.
"I’ve had a couple developers say to me, I can go to Waukee, build this, have it rented before I'm done and have little or no risk to get this return," she said. "It's just riskier."
Creating New York-style lofts in downtown Mount Pleasant
People tell Ryan Chabal that his home resembles the pricey lofts found in New York City and elsewhere.
Sunlight from six giant arched windows flood the granite counter tops and the shiny, new appliances in his open-concept apartment.
The restoration of his 160-year-old building features dark laminate floors, crisp white walls and updated fixtures worthy of an HGTV special.
But Chabal's loft doesn't overlook a buzzing city skyline. It affords him views of the quaint town square in southeast Iowa's Mount Pleasant, population 8,600.
He loves the apartment's finishes and the view. He can walk to the nearby Mount Pleasant Middle School, where he teaches special education. And there's plenty to do just outside his front door: bars, restaurants and the local movie theater are all within walking distance.
"Sometimes it's dangerous living close to all that stuff," said Chabal, 25. "You spend a lot of money."
Hobart Historic Preservation built 19 new apartments out of the largely vacant top three floors of the historic Brazelton Hotel in Mount Pleasant. They are among 60 new units that have been refurbished downtown since 2002, said Lisa Oetken, Main Street director. In total, she estimates the town square area has about 125 apartments.
"And we still have some buildings that have not touched their upstairs," she said.
These upper-story apartments are growing in popularity across Iowa: The state has issued grant funding toward 648 upper story housing units over the last eight years, according to the Iowa Economic Development Authority.
It's often easier — and cheaper — to build new units on top of well maintained downtown storefronts than it is to create new freestanding apartment complexes.
"You’ve got the four walls and the roof. If you can start there, you'll have a less expensive build-out," said Tim Waddell, the authority's division administrator for community development.
Plus, downtown apartments can do more than alleviate housing shortages. They increase property valuations. And many of those investments are paired with Main Street grants that help to revive downtown strips and town squares across the state.
"I think what business owners and these communities themselves are recognizing is that it doesn't have to just be Des Moines that does this," Waddell said. "It revitalizes their downtown because it brings it to life after hours."
When Kevin Perron opened Sound Advice 20 years ago, he basically had his pick of empty storefronts around the town square. Now, his electronics and cellphone store is surrounded by boutiques, restaurants and gift shops. And he's noticed increased foot traffic from all the downtown dwellers, who range from college students to empty-nesters.
"It definitely has changed the feel of downtown to me," he said.
Iowa Rural Development Summit
Housing is expected to be one of the top issues discussed at the second Iowa Rural Development Summit, which is scheduled for April 5 and 6 in Grinnell.
The Iowa Rural Development Council's event will focus on rural place, rural people, rural leadership and rural housing. The group expects representatives from more than 60 communities to attend along with dozens of service providers, nonprofits and rural experts.
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