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Housing market in Grand Forks presents complex problems

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Gregory Kelly explains his family's trouble finding housing in Grand Forks, N.D. on June 10, 2016. (Meg Oliphant/Grand Forks Herald)2 / 4
Gregory and Oksana Kelly explain their trouble finding housing in Grand Forks, N.D. on June 10, 2015. (Meg Oliphant/Grand Forks Herald)3 / 4
Photos of the Kelly family are displayed at their home in Grand Forks, N.D. (Meg Oliphant/Grand Forks Herald)4 / 4

When Gregory Kelly moved to Grand Forks last year, he imagined his home looking differently.

He, his wife and their three children all live in a mobile home in the city's south end. It's a cramped housing plan of last resort for Kelly, a journeyman painter at UND; he looked for single-family homes as well as apartments, but nothing seemed within his reach. The apartments he looked at had pet restrictions, he said, and the homes he wanted to buy—within the $100,000 to $200,000 price range—didn't fit what he was looking for.

The Kelly family poses for a portrait at their home in Grand Forks, N.D. on June 10, 2016. (Meg Oliphant/Grand Forks Herald)

"It was frustrating. From what I saw in the market, a lot of the homes weren't worth what they were asking," he said, recalling homes seemingly too ramshackle for him to buy. "I just looked at the exterior, and thought, 'I've got to paint this now. I've got to fix this.'"

Kelly isn’t alone.

According to Grand Forks housing experts, there’s a shortage of the kind of homes that Kelly wants to buy, and City Council President Dana Sande said he and other local leaders are investigating ways Grand Forks can deal with the market more effectively, aiming to report back to the city within the near future. A parallel effort by city staff is likely to result in a report out as soon as July, likely inlcuding Sande and others’ research as well as some of the staff’s own work.

All of it has implications for city policy moving forward.

“On the one side, we’re looking at anecdotal information from people who are actually building, and on the other side, we’re trying to paint a picture of what the market is like in Grand Forks and what’s going on,” Sande said of his own work.

Kelly’s story is one that Kimberly Efta, a Realtor with RE/MAX Grand, knows well. She said a number of starter homes are either on the small side or need to be fixed before buyers can move in. The better starter homes, she said, often earn multiple offers from buyers -- sometimes as many as five or six.

“I have a few buyers, and they want to be in Grand Forks or East Grand Forks. And they’re at a certain price point, and we can’t find anyting with no work to be done before they move into the house,” Efta said. “Usually the floor plan is not the greatest, or there’s structural issues -- there could be issues with the foundation, or the roof, or stuff like that.”

One case in particular stands out. Efta said she worked with a woman who recently bought a home through a voucher program administered by the Grand Forks Housing Authority, Efta said, but it was a trying and lengthy process. The woman finally purchased a home, the fourth that she made an offer for, because prior homes kept failing inspections before she could move in. Even this home, Efta said, needs painting and window work.

In April 2015, Kelly moved to Grand Forks and planned for his family to follow a few months after. He recalls looking for a home more and more frantically as the effort to find a home seemed futile.

“It would become almost a tearjerker, looking for homes. It was frustrating,” Kelly said. “I never thought about that seriously, that housing would be so difficult.”

Historical crunch

Grand Forks has long had an expensive housing market. City Engineer Al Grasser, a plainspoken public official whose department is deeply involved with the city’s infrastructure, recalls moving to the city in 1984 from Alexandria, Minn. He soon realized that his former home would have been far more expensive in Grand Forks.

“In my career, I think we’ve done three or four affordable housing studies,” Grasser said. “They seem to find that there’s a combination of things that go into it.”

Oksana Kelly visits her sons, Brandon, 13, and Dalston, 11, as they spend time in their room.

This part of the country, Grasser said, has soil that’s great for growing potatoes, but less friendly to construction, particularly given the amount of clay in the ground. It’s also a long ways from where most gravel and similar building materials are shipped from, further driving up costs.

But Grasser pointed out that those are regional problems, applying to Fargo and other nearby places. Many officials -- in the housing sector and with the city -- said a significant factor is supply and demand.

City Administrator Todd Feland said much of the present-day housing crunch traces back to the 1997 flood. In the devastation that followed, the city became directly involved in the housing market, paying contractors to develop homes on the west side of the city. And as the city’s push for more housing tapered across the 2000s, he said, private construction didn’t fully fill in the gaps it left behind.

Part of that, Feland said, can be attributed to downsizing at Grand Forks Air Force Base. With the institution’s future unclear, people were less likely to invest in building homes; but meanwhile, Grasser pointed out, employers like UND, the State Mill and local retailers continued to grow.

In late 2006, Greg Hoover, director of the Grand Forks Urban Development office, said a lack of affordable housing was a “well-known fact” of living in the city. Fair market rent for a two-bedroom apartment in Grand Forks County was pegged at $576, according to a report from the National Low Income Housing Coalition, which was the second-highest in the state, behind only Cass County. In order to afford it, the coalition said it would cost a wage of about $11.08 an hour -- more than 20 percent beyond the average Grand Forks renter’s wage of $8.71 at the time.

By 2012, when Mayor Mike Brown called for an commission to investigate the housing problem, the issue had already begun to balloon. Grasser recalls apartment vacancy rates reaching a high plateau. At first, he thought the high rates were temporary. Then they just seemed to hover.

“Eventually, it was just like – wow,” Grasser said. “It’s just persistent.”

Apartment boom

Brown’s “blue ribbon” commission on housing took a look into the problem and came up with a 60-page report outlining the crunch. The report found that the median home price divided by the median household income was 3.59, higher than Fargo, Minneapolis and Omaha. Anything higher than 3.0 raises concerns about affordability, the report states.

In the years since, apartment growth has surged, said Brad Gengler, director of the city’s Planning and Community Development department. Records show the city issued permits for 830 units in 2013, a sudden jump upwards from less than 300 the year prior and a spike that continued in 2014 before returning to lower levels in 2015.

“That’s the one that has left everybody scratching their heads, in terms of what’s driving it, who’s living here,” Gengler said. He added that the 2016 year still has as many as 300 more apartment units “on the drawing board” that could be added to this year’s totals beyond what’s already been approved. He stressed that that doesn’t mean the problem is solved, though.

“I think there’s still much work to be done just with housing in general,” he said.

That’s something that Emily Wright, executive director of the Grand Forks Community Land Trust, can corroborate. The average Grand Forks home she considers “affordable” for a household earning $70,000 or less -- about $210,000 -- is about 90 years old. Meanwhile, when it comes to apartments, vacancy rates are rising, but rents remain expensive, she said.

Books and a photo of Gregory and Oksana Kelly, who were married in the Ukraine, are displayed at their home in Grand Forks, N.D.

City leaders say it’s a problem they’re already beginning to address. City Administrator Todd Feland said the city pays for partial costs of infrastructure development, like a portion  of stormwater holding ponds and pumping stations, and may defer a portions of special assessments -- the fees for infrastructure passed along to property owners -- for a period of time. What’s more, he said, city infrastructure development to the west has been funded by a Bank of North Dakota loan, under a program that can trace part of its inspiration to city efforts.

City Finance Director Maureen Storstad said city fees associated with development have been cut by 3 percent in the aftermath of the housing report’s release.

The city isn’t the only one working on the problem. Wright said her land trust group has been hard at work since 2011, building homes and selling the structure -- not the property -- meaning that home buyers get a cheaper house, but can still invest in the home as it appreciates in value. They’ve sold seven homes, with more likely soon to be sold. A home refurbishing project is on the way.

The Grand Forks Housing Authority is working to do what they can as well. Wright, who also serves as the authority’s executive administrator, said the group continually offers programs like home and apartment vouchers and manages affordable housing throughout the community.

“I think we’ve always been doing it,” Wright said of fighting the housing crunch. “The biggest thing is that we provide housing assistance to over 2,000 families every single day. That’s important all the time, it’s just more critical in times when affordability is an issue.”

Next steps

Plenty of city leaders and housing experts have their own thoughts -- and have laid their own plans -- to help make the housing market better. A portion of city staff’s contribution to current research is a look at other markets around the midwest, including Fargo, Bismarck, Sioux Falls and other cities to determine “best practices” used to improve the housing market. It’s a nuanced issue, though, and it’s going to take a nuanced understanding to tackle it.

“To define  ‘problem’ is very difficult, because we have a lot of sectors in the (housing) market,” Gengler said, mentioning townhomes, affordable housing and the shifting economics of the market itself.

That’s more or less what Sande said about finding solutions. He explained that he and other local leaders’ research includes discussions with builders and developers as well as with city finance experts to track things like the cost of infrastructure -- an important component of understanding why the market might be expensive.

But Sande has said it’s been a more complex process than he expected. One question seems to lead to another, and it’s led him down paths he hadn’t expected.

“The intention wasn’t to be as thorough as we’re becoming,” Sande said. “It’s just that every time we ask a question, we get an answer that doesn’t necessarily make sense.”

For example, Sande said, he’s heard the housing market is bottlenecked by a lack of available builders. So he asked builders if they have the capacity to build more homes, and he heard that they do -- but they’re constrained by things like the added risk of building yet another home, or even an inability to get the credit to build more housing stock.

“That leads to another issue,” Sande said. “Do we have an issue with local lending capability?”

Feland, the city administrator, said the city report might recommend a higher portion of infrastructure be paid for by the city, or deferring special assessments on homes for longer periods of time -- perhaps as much as three to five years.

A new approach

As the research nears public release, experts from outside city government have their own sets of solutions. Wright said she sees two areas for improvement.

First, development should be centered more on smaller lots. Many of the current development plots, she said, skew far too large for an affordable price after development.

That’s closely related to her second recommendation: the city should focus on more infill development and redevelopment, creating homes on smaller lots that should be more affordable to someone trying to climb the rungs of the housing market.

Terry Hanson, executive director for the Grand Forks Housing Authority, said he favors the city taking a much more aggressive approach towards encouraging development.

“It’s more than one thing, more than one solution,” Hanson said. “I think that this would encourage developers to increase their volume and to try to put more supply on the market. To entice developers to do that, I think that the city needs to say that the city itself has to put an investment into infrastructure in order to meet the housing demand that we are experiencing.”

Adrianna Kelly, 15, sits with her dog, Alaska.

That investment, Hanson said, could including paying 100 percent of infrastructure costs, encouraging developers to build.

Sande said he’s not sure he likes that idea.

“In my opinion, there has to be some level of fairness across our city,” Sande said. “I don’t think that the people that have recently purchased homes, or the people who have purchased homes in the last 20 years and have had to pay a share of (infrastructure costs) are going to be happy paying someone else’s share.”

But Hanson said it’s important to solve the problem. With the Grand Sky aerospace park ready to take off and the Northern Plains Nitrogen fertilizer plant poised to bring a slew of jobs to the city, finding housing for workers becomes a make-or-break economic proposition for the city.

“In order to see (housing) come to fruition, you have to invest in the capital that will bring it there,” he said. “What’s the difference between the city putting in the infrastructure as opposed to the city putting in the Alerus Center? It’s a city investment for the long-term good of the community.”

Hanson said he’d even go so far as to subsidize the construction of affordably priced homes.

“I don’t believe the public would have the stomach for that,” Sande responded. “I do think the general public would be okay, possibly, with some creative financing, for example. Can we (delay) some infrastructure costs to incentivize builders to build more, and developers to develop more?”

Sande stressed that city leaders aren’t wizards, though. To a certain extent, he said the free market might be the one to solve the majority of the issue -- especially one that’s so hard to describe.

“It’s very difficult for us to say, we should do this, or we should do that, because it’s very difficult to say that any one thing is going to make a difference in the housing market,” he said. “I think we’re getting close to things changing. I’m hoping that perhaps some landowners will bring in some larger tracts of land, and builders will want to build more significant quantities of homes on smaller lots.”

No free ride

Part of the issue’s future could well be decided at the ballot box this Tuesday, where incumbent Mayor Mike Brown faces a challenge from City Council member Terry Bjerke.

Brown said any solution to housing problems has to be fair to those who have paid the costs the city placed on their properties to pay for nearby infrastructure.

“We’re not going to say, ‘Hey, we’re going to give you a deal because we’re hurting,’” Brown said. “It behooves us to (research solutions), but you can’t give anybody a free ride.”

The Kelly family, who faced trouble finding a starter home Grand Forks.

And though he said he’d be against fully funding infrastructure costs or subsidizing homes, Brown is open to the city paying an incrementally higher portion of infrastructure costs.

“If it’s a solution we need, I’m willing to take a chance,” he said.

Bjerke said he agrees with Brown’s “free ride” sentiment, noting the city simply can’t fund new south end development, for example, on the dime of taxpayers from around the city. But he added that he’s looking forward to shifting the way special assessments are handled by the city, suggesting a method by which special assessments might be funded by few extra cents on utility bills.

“Everybody drives on roads, everybody drinks water,” Bjerke said. “That’s not an increase, that’s a shift, because sooner or later you’re going to get a special. Eventually, every road has to get fixed.”

Bjerke’s plan, he said, also includes keeping taxes from rising and parsing city code to see what can be made easier or less expensive for developers.

Whatever the solution, it’s one that Kelly said he’s going to start looking at other places to live soon -- maybe in Mayville, or somewhere else where he can commute into Grand Forks.

“There’s not an issue with the home itself or the community,” he said, but he can’t see his family staying in their current situation perpetually. “You’re bumping into each other constantly.”

This post has been updated to more accurately reflect the average age of an "affordable" Grand Forks home.

Photos by Meg Oliphant/Grand Forks Herald

Sam Easter

Sam Easter is a City Government reporter for the Grand Forks Herald. You can reach him with story tips, comments and ideas at 701-330-3441.

(701) 780-1108