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Ballooning housing costs in Northwest Arkansas require regional approach, study says

by Doug Thompson | September 10, 2021 at 7:35 a.m.
Construction is shown, Monday, August 30, 2021 at the Promenade Commons in Bentonville. The sale price of single-family homes in Benton and Washington counties soared during the first half of 2021 and apartment vacancy rates tightened up, according to the most recent Arvest Bank Skyline Report.(NWA Democrat-Gazette/Charlie Kaijo)

Northwest Arkansas as a whole faces sharply rising housing costs, but each city in the region has unique aspects to this shared problem, a study released Thursday by the Walton Family Foundation says.

Cooperation between the region's cities is needed to make housing prices affordable, the study says.

The foundation commissioned a research team led by Smart Growth America, a Washington-based nonprofit group, to examine how the region's housing capacity, market conditions and zoning policies affect supply and prices.

The average sale price for a home in Benton or Washington county rose 44% in the last five years, according to another survey, the Arvest Bank Skyline Report. The latest version of that report was released Aug. 31. The average home price jumped 16.2% from January to June when compared to home prices from January 2020 to June 2020, the Arvest report found.

High land costs are a leading factor driving the shortage in reasonably priced housing throughout the region, the foundation study found. It also cited a lack of adequate financial tools and incentives, limited current capacity for building housing and a lack of widespread experience in building anything but single-family, detached housing.

The study also detailed the challenges faced by cities in the region.

Accommodating the students

In Fayetteville, for instance, the obvious housing market pressure on prices comes from students, the study said.

The University of Arkansas "does not have sufficient housing on campus to accommodate the student population, creating significant pressure on the private rental market in the downtown and university areas. In addition, it is very difficult to build multifamily projects in these areas because the per square foot costs to build are high," it said. "Rents are the highest rents in the region, by far, with downtown rents unaffordable for much of the population."

Fayetteville's zoning ordinance allows for a variety of housing types, "but developers tend to build single-family detached and duplexes. City staff speculate that this may be, at least in part, because single-family and duplex homes are exempt from stormwater and historic preservation requirements. They also suggest that current parking minimums are excessive, discouraging multiunit developments and contributing to the high cost of housing," the report said.

Jonathan Curth, Fayetteville development services director, said the report is right. The city recognized the problem before the study came out and changed the stormwater and other requirements three months ago, he said.

Exempting single-family homes and duplexes from stormwater requirements "created a path of least resistance for builders," Curth said. "They didn't have to hire landscape engineers for those projects."

The city adopted a "permeability" standard for all construction, limiting the water runoff from any project on a consistent basis.

As for housing students, the city has done what it can to approve apartment housing close to the university campus in what was once single-family residential or commercial zones, Curth said. The city also needs to collaborate more with the university to see if the school will build more on-campus housing, he said.

Rent rising in Springdale

Both Curth and Mayor Doug Sprouse of Springdale brought up the "political cost" of changing housing patterns. Owners of single-family homes tend to oppose multifamily projects and mixed-use developments that include both residences and businesses.

"You can overcome it, but it's there," Sprouse said.

Fayetteville has the highest rents in the region, but Springdale is where rents are rising the fastest, the study found.

The report praised Springdale's city government and community efforts to spur multiuse development downtown.

"In areas outside of the downtown, which are still governed by a conventional zoning code, limits on building heights and densities are driving up the cost of housing. Lot size minimums and limits on the number of units per acre constrains developers' ability to provide the more affordable units needed by much of the current and future population.

"In older parts of Springdale and at the edge of the city, limits on stormwater and sewer capacity restrict the city's ability to approve higher densities, even if the zoning were to allow it. Also, because the school district looks for inexpensive large tracts of land, new schools are generally located on the city's edge, where families tend to follow."

"I don't disagree with any of that," Sprouse said.

The city hopes the success of downtown development will lower resistance to the same sort of multiuse projects in the rest of the town, he said.

"These paradigms take time to shift," he said.

Having successes to point to will help, he said. Also, both the city and developers gained valuable experience planning, permitting, approving and constructing multiuse projects with the downtown development, Sprouse said.

The study also said of Springdale: "While it currently has lower rents for the region, and is perceived as an affordable place to live, the future of Springdale is most likely to be continued sprawling development and residents who commute to other communities. Demand will increase, causing rents to rise."

Housing options needed

In Rogers, city staff have ambitious plans for encouraging a wider range of housing options, but those plans are running ahead of public acceptance of them, the study found.

"Today there are almost no multifamily developments in the downtown area and current residents -- including some elected leaders -- oppose any new multifamily and rental development because of the negative perceptions they have of the people who will live there.

"Corporate developers in the area compete to build 'the biggest and brightest,' and direct philanthropic support to housing for the very low-income residents. As a result, no 'missing middle' housing is being developed" in Rogers, according to the study.

"One major challenge the city faces is a complicated zoning system that specifies areas for rental units," it said of Rogers. A city spokesman said no one on city staff had seen the report before Thursday and, therefore, had no comment.

Housing prices in general, whether to rent or to own, are rising faster in Bentonville than anywhere else in the region, the study found.

"As incomes increase, older, more affordable units are replaced by fewer, larger and more expensive units, exacerbating the housing shortage for low and moderate-income households. While auxiliary dwelling units are allowed in the city, most are rented as short-term rentals for visitors, rather than adding to the affordable housing stock."

The city has a plan to develop a wider variety of housing options, the study said.

"However, there is a disconnect between the vision as laid out in the community plan and the planning commission and city council's responses to project proposals for multifamily projects, which they are hesitant to approve."

A call to Bentonville's city administration wasn't returned Thursday.

The report makes similar summaries of issues in the region's smaller cities.

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