Kansas housing shortage leaves all ‘in the same boat’
By Stan Finger,
2024-09-16
South View is such a new neighborhood that the houses at the end of one street at the edge of Salina are still sporting their pale-yellow base coat, their yards bare dirt. Schilling Road down at the corner is merely rutted gravel.
Little more than a mile to the west, on the other side of Interstate 135, Magnolia Village is not even that far along. A sign and some earth-moving equipment are camped in what used to be a cornfield, the gray stalks hugging rich soil, behind a Menards and a Fairfield Inn.
They are two of the housing projects in various stages of development in Salina, where officials are scrambling to meet surging demand for housing thanks to local businesses expanding their workforces.
South View Estates in Salina is being built by a development group that received a moderate income housing grant. The townhomes and single-family houses are priced between $179,000 and $204,000. Credit: Jeff Tuttle
And Salina’s just one of many Kansas communities grappling with a need for housing they have rarely seen before – if ever.
“Kansas has been a magnet for economic development lately,” says Jeri Hammerschmidt, a senior housing specialist for First Step Builders in Independence. “Everybody wants to come here. We’ve got the highways and the railways and all of that. But you can’t really recruit these things unless you have your housing and you have your day care, right?”
The annual report of the Kansas Housing Resources Corporation (KHRC) shows the agency funded 61 housing developments across the state in 2023, creating 3,234 new homes in 38 counties. Twenty-five developments fell under the “affordable housing” definition and the rest were moderate income, meaning the residents earn too much to qualify for federal housing assistance, yet struggle to afford market rate homes.
But that is a pittance compared with what is needed. A comprehensive housing-needs study released in 2022 by the KHRC showed nearly 43,000 housing units are needed across the state by 2028 – a number that does not include the needs in Kansas City or Wichita, or in Shawnee, Sedgwick and Douglas counties.
“Every city manager conference, every League (of Kansas Municipalities) training that I go to, it sounds like across the state it’s the same, and it doesn’t matter if you’re in Wichita or if you’re in Colby,” says Ron Alexander, the city administrator in Colby. “Everybody’s in the same boat for housing right now.”
Sipping alphabet soup
The Journal has explored how numerous cities around the state are grappling with housing shortages, including several towns that were featured in a 2021 story about the surge in demand .
The results are generally positive, though officials in multiple cities say there are significant obstacles to overcome if Kansas is to make the most of this era of growth and opportunity.
Kansas needs to significantly increase the size of both its development capacity and its construction workforce, officials say, and embrace a variety of ways to do that. The state also needs to downscale the incentives available for housing projects.
“Nearly every multimillion-dollar housing project benefits from some combination of the alphabet soup of incentive offerings,” Atchison developer Justin Pregont told a legislative committee in February, referring to such tools as Tax Increment Financing, or TIFs; industrial revenue bonds, or IRBs; Rural Housing Incentive Districts, or RHID; Middle Income Housing grants, or MIH; Kansas Housing Investor Tax Credits, or KHITC; and Low-Income Housing Tax Credits, or LIHTC.
Atchison’s Central School, built in 1938 as a neighborhood elementary, has been redeveloped by Justin Pregont – a Central alum – as an apartment building. Pregont’s Kansas projects also include the 1913 Apartments in Atchison and the Frontier Apartments in Hays. Credit: Jeff Tuttle
“The places where those kinds of incentives are most needed, small/rural communities, are the same places where they are least likely to be used, in part because the pathway to accessing the incentive is too expensive to make sense for small projects,” he testified to the committee.
There is nothing wrong with developers in Wichita building large apartment projects and making a reasonable return on investment, Pregont told the committee. “But we ought to find a way to make incentives and resources more available to the side-hustling plumber working their tail off on nights and weekends to self-develop their first spec house.”
“I think, for the most part, our local policymakers and state policymakers get it,” says Renee Duxler, president and chief executive officer of the Salina Area Chamber of Commerce. “These are the investments we do have to make, or we are going to miss that opportunity” for Kansas communities to thrive.
‘Scratching and clawing’
Salina and Colby, among other cities, have utilized incentive programs to help subsidize projects. In Hays, the nonprofit Heart of America Development Corp. invested $2.5 million to help launch the Tallgrass Addition on the east side of town, which sold 54 homes even before they went on the market. Local banks partnered to create a line of credit for Heart of America to cover development costs that exceeded the cash they had available.
Several other projects are completed or on the way, says Doug Williams, executive director of Grow Hays. Construction is about to begin on The Grove, north of the Hays Medical Center campus. It will feature 50 patio homes, eight duplexes and 72 apartments. Loft apartments are being built on upper floors in several downtown buildings, Williams says, and two new apartment complexes are on the way.
Colby just broke ground for a development that will be home to nine duplexes and is clearing a large downtown lot it will offer for free to a developer willing to build a market rate three-story apartment complex. Houses continue to go up in a development that has 30 lots.
“We’re excited about some of the momentum we’re picking up on housing right now,” Alexander says. “I’ve been scratching and clawing trying to get that figured out.”
When he accepted a job in Hays, Nick Cain was struggling to find an apartment that did not carry the scars of being rented by college students – until he discovered Frontier Apartments downtown.
When Nick Cain moved to Hays, he was happy to find space in the Frontier Apartments, which once housed St. Joseph Catholic School. (That’s St. Joseph Catholic Church across the street.) Amenities include an elevator, premium cabinetry and countertops, and stainless steel appliances. Credit: Jeff Tuttle
The Frontier building used to be St. Joseph Catholic School, a three-story limestone structure built in 1907. With the help of rural-housing and historic-preservation tax grants, Pregont purchased the building and transformed the three floors into 12 apartments.
“It’s a great use of that property,” Williams says. “It was sitting there empty with no real use in sight.”
Cain says he has been pleased by his move to Hays from a small college town on the East Coast.
“There is a very nice community feel” to Hays, “while at the same time, there’s enough to do that you’re not seeing the same three people over again,” he says.
He also likes that, no matter where he is in town, he can look up and spot where he lives because, even at just three stories, The Frontier towers above the Hays cityscape.
Beyond the slumlord model
While developers could probably sell single-family homes as fast as they can build them in Hays these days, Williams says, officials are focusing on filling gaps in the housing spectrum.
“We are taking the position from our urbanization standpoint that ‘If you build it, they will come,’ so we’re trying to build as much housing as we can,” Williams says. “We believe that we’ve got job opportunities as well as a quality of life that people are looking for.”
Filling housing gaps and preserving historic buildings have been Pregont’s focus since he launched Pomeroy Development several years ago. His company has converted three historic buildings in downtown Atchison into apartments and is also involved with projects under development in Great Bend and Hutchinson.
“It’s been the most rewarding and also the most anxiety-ridden thing that I’ve ever done … trying to take these projects on and make them happen,” Pregont says. “Development is just a math equation. If somebody is not developing, it is because they don’t perceive the profit on the back end to be worth the risk and the time and the effort to get through it.”
Pregont prioritizes historic preservation, walkability, community development and helping to revitalize smaller communities such as his native Atchison. During the 10-plus years he worked in city government, he recognized the need – and the opportunity – for the kinds of developments he wanted to do.
“There was a section of the market that’s not being served very well, even in rural places,” he says.
In too many smaller towns and cities, he says, “the only model was the slumlord” – someone who would buy a property and spend only what was absolutely necessary so people could live there. Pregont wants his properties to be so nice people move there because they love it, not because they have no other choice.
Making the math work
Bob and Betty Albers moved to 1913 Apartments in Atchison four years ago after downsizing and really enjoy their new home.
“They were very nicely decorated,” Betty says. “It’s close to everything. We’re within two or three blocks of walking distance to several businesses. There’s a grocery store right across the street.”
Most importantly, she says, the building requires access codes to enter, so she feels secure.
“I regret moving because I don’t have any grass to mow anymore or leaves to rake anymore,” Bob jokes.
Phyllis Walton moved into the Central School apartments in Atchison a year ago and loves it. When friends come to visit, they can’t believe she lives in what used to be the kindergarten room.
“When I go to a larger city, I think ‘Now I know why I like to live in Atchison,’” Walton says. “You know almost every person. There’s not a lot of traffic. You’re not afraid to walk around at night. I just love it.”
The math for such projects would not work if not for tax credits and subsidies, Pregont said. It is vital for that funding to continue – and even be increased – if the state is going to make the most of the opportunity it now has, he says.
Brandon Winn has several projects underway in Sterling, where he graduated from Sterling College and where his wife grew up. With the help of another Sterling native, he created an investment group to finance numerous projects in the city.
The classrooms at Atchison Central School (where generations of locals attended classes and Phyllis Walton now lives) have been converted to apartments. The project was cited in June by the Kansas Preservation Alliance with an Award of Excellence, which noted, in part: “The gymnasium was retained as a communal area. … Many of the historic finishes were retained, including glazed tile walls in corridors and stair halls, terrazzo stairs and historic railings.” Credit: Jeff Tuttle
The classrooms at Atchison Central School (where generations of locals attended classes and Phyllis Walton now lives) have been converted to apartments. The project was cited in June by the Kansas Preservation Alliance with an Award of Excellence, which noted, in part: “The gymnasium was retained as a communal area. … Many of the historic finishes were retained, including glazed tile walls in corridors and stair halls, terrazzo stairs and historic railings.”
Winn’s investment group purchased a brick building dating back to the 1800s that originally was a hospital before eventually becoming a gas station and a mechanic shop. Winn plans to install eight urban lofts upstairs and a restaurant on the ground floor. His business also created a cul-de-sac and is building houses along it.
Eight duplexes have sprouted like mushrooms in a wheat field on the east edge of town, put up by another developer, and more housing units are planned next to them.
Winn is also a real estate agent and he has been busy since the pandemic selling to people relocating to Sterling from Colorado and the West Coast.
“They’re coming for a change of pace,” Winn says. “The business world is flattened out, … There’s not as much reason for a brick-and-mortar location anymore. I think if COVID taught us anything, a lot of business can be done out of somebody’s living room now.”
With Sterling College’s student housing overflowing and local businesses growing, the demand for rental properties is huge, Winn says. KMW Limited, a local manufacturer of front-end loaders, backhoes and other equipment, just announced plans to expand and hire 250 people, doubling in size.
“If you own a rental house, it’s taken in a day,” Winn says.
Owners of about a half-dozen buildings downtown “are watching our project pretty closely” to see how well it does, Winn says. If it performs as expected, more loft apartments are likely to be developed downtown.
Looking for alternatives
While Sterling is bustling with housing activity, a town with similar demographics in another part of the state – Humboldt – is struggling to get new housing projects off the ground despite the intense need.
“It feels like we haven’t made much progress” over the past few years, Humboldt City Administrator Cole Herder says.
While there have been a few modular homes brought in and placed on foundations on open lots, he says, the demand for housing far outstrips what is available. Local manufacturer B&W Trailer Hitches has grown to about 700 employees, Herder says, and has workers commuting from as far as 60 miles away.
“We’ve had houses under contract before I even know they’re for sale,” Herder says.
The city’s most consistent source of new housing has been the building trades program that has been in the high school curriculum for decades now. Students are taught how to build a house, and their “project” is sold at the end of the school year.
But the program only provides one house a year, so Herder is exploring alternatives. Applications for Moderate Income Housing grants from the state were rejected, he says, and he does not know why.
Contractors in the area have so many projects lined up elsewhere, he says, it is often months before they can get to Humboldt for relatively modest rehabilitation or remodeling work in existing houses.
A housing development is going up just east of town, Herder says, and it is creating a potential dilemma for the city.
“For us to go out and annex and build streets and infrastructure, it’s very costly,” he says. “So you’ve got to have some pretty good assurances that those lots are going to be filled for those specials (assessments to pay for the infrastructure) to get paid off.”
More than a decade ago, Humboldt officials were invited to the Hutchinson Correctional Facility to learn more about a program in which inmates were taught to build cabins for state parks. That program was poised to transition to single-family homes whose shells would be constructed at the prison in two pieces and then transported to their eventual location. The pieces would be attached and a garage added, with a total price tag of around $120,000.
Under pressure from developers, then-Gov. Sam Brownback shut down the program after the contract for park cabins was fulfilled. But “the climate is different now,” Herder says, and he would like to see that program revived.
“I’d sign up for the first one,” he says. “There’s just so many wins on that deal.”
Not only would desperately needed houses be built and offered at an affordable price, he says, but prisoners would learn skills that they could put to use once they are released.
Former prisoners are among the audience targeted by a fledgling Salina nonprofit organization that wants to expand the local construction and maintenance workforce by connecting people who are willing to apprentice with local businesses.
The Build A Pro Foundation is also focusing on attracting youths, veterans, those with diverse abilities and immigrants, though co-founder Amanda Jarvis says the last two groups on that list are “more aspirational for now.”
Through apprenticeship, she says, “we get employers who are invested in growing and partnering with us in workforce development. We get apprentices who are looking to invest in a long-term career.
“We’re addressing the issue of growing talent. We’re not increasing the population, but we’re upscaling what we already have.”
But developing a workforce will not matter much if there are not places for the people to live, Duxler says. And without childcare options nearby, families will look elsewhere.
“There’s a lot of different factors to this puzzle,” Duxler says. “There’s not a silver bullet to solve our housing crisis. There are a lot of different things that we are doing and have been doing that I think are definitely moving the ball forward.”
For all that has been done, however, officials say, in many ways it is still just the beginning.
“The truth of the matter is: We should have been working on this 10 years ago with this kind of diligence,” Alexander says of cities around the state. “But you don’t always see everything that’s coming ahead.”
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