When we hit the road and talk with rural leaders in small towns, a topic that almost always comes up is rural housing. Recently the Star Tribune published an article that outlines how rural housing relates to workforce housing in Rosseau, MN. The article provides an excellent overview of opinions on why more housing isn’t being developed even when demand is seemingly obvious. You can view the article and the associated blog post, here and here.
The Star Tribune’s article looks very specifically how rent costs in small town Minnesota are making economic and housing growth more difficult, but the difficulties with small town housing don’t stop there. Issues arise and can span across many aspects of a community including assisted living facilities, development of the type of housing retirees demand, and repairing an aging housing stock for young families.
Many people link housing demand with population change, for example the idea that the more people in an area, the more housing needed. However, many communities discussing housing shortages have had relatively stable population levels. Therefore, we can conclude that there must be other factors that also determine housing demand.
Jim Russell is a geographer who studies the relationship between migration and economic development. He was a keynote speaker at our 2014 Symposium on Small Towns (you can find his presentation here). In this post under his column with Pacific Standard, Burgh Diaspora, he argues that income is a better indicator of housing demand. Because households are smaller, thus still taking up the same housing stock with less people living in each house, population change doesn’t impact housing demand as much as people assume. In response to the Star Tribune article, Mr. Russell writes another post that further explains his argument and its relation to rural housing issues.
Housing will be built where it is most profitable to do so, not where “demand” (in terms of number of households) is strongest. Real estate is most profitable in places where demand (in terms of wages) has the least geographic constraints. Manufacturing and other such tradable jobs usually found in rural areas are tied to the global demand for labor. That puts a cap on the cost of housing locals can afford. That’s true in the city, too. But unlike small towns, cities also sport significant populations of tradable jobs that are not tied to the local supply of labor (e.g. nuclear engineer). There’s the “rent gap.” Why sell square footage to a waitress when you could sell the unit to a software developer?
If Jim Russell’s explanation ties housing development to income and the labor market, what options are available to rural areas? It seems the Star Tribune article has pointed out at least one option; a combination of city and state dollars, local bank investment and a few individuals with roots in the community to take on the risk.
Written by Kelly Asche, who coordinates programming development at the Center for Small Towns