When it came to new home building in 2018, the numbers in Noble County were a little better and a little worse.
It’s a little better in that the number of new housing starts increased to 143, up from 113 in 2017. But it’s a little worse in terms of affordability, as the average cost of what was being built increased to about $223,000, up from around $200,000 the year before.
Noble County’s cities and towns continue to identify housing as an issue for their communities, but very few of the county’s 2018 building occurred within the municipal boundaries.
The brunt of the new housing was put up in the unincorporated county, with 85 starts in 2018 compared to 46 in 2017. As for the municipalities, Ligonier increased from 12 to 14, but every other community had the same or fewer new homes constructed than the year before.
If every new house was filled with a four-person family, the county population would increase 572 people — just a little over 1%.
As for affordability, what’s being built is clearly not being built for the average Noble County household.
The average cost of new housing starts in Noble County rose to $223,438.14.
The average cost was lowest in Albion in 2018 at $183,757 and highest, as usual, in lakeside Rome City at $246,700. Noble County, Kendallville, Ligonier and Avilla all had average new home costs upward of $200,000.
Every community had a higher average build price than in 2017. That’s good news for the property tax rolls, but not as great if you’re a young couple hoping to build new.
The median household income in Noble County is approximately $52,400, according to the U.S. Census Bureau. On that income, a $200,000-plus home would be out of reach for just about anyone except the most debt-free family and $40,000 in the bank to put a 20% down payment down.
Simply put, builders aren’t building homes in the price range that the average Noble County family can afford.
According to the Home Builder’s Association of Fort Wayne, of the 2019 housing starts — which does not include Noble County but does cover neighboring DeKalb County — zero of the 30 home builders tracked by the bureau are building at an average cost under $180,000.
While local leaders want “starter homes” in the $100,000-$150,000 range, the economics of home building don’t seem to support that today.
Kendallville Mayor Suzanne Handshoe said nowadays home builders low-end models start around $150,000, but that’s not the bottom-line cost to the buyer.
“I think that’s their starting point and then there’s the $30,000 lot, which is not affordable for most of the people in Kendallville,” she said.
According to the National Association of Home Builders, the average total cost per square foot for new construction, including lot costs, sellers fees and builder profit, is about $151 per square foot. So even a small 1,000-square-foot home would run $151,000 at market at that rate.
As such, a big part of the housing puzzle is working with the available stock of homes in Kendallville and rehabbing those to make them available and attractive to new buyers, Handshoe said.
But that presents a different problem. Many of the houses that could be flipped are occupied by older residents who may not have anywhere else to go, because senior-friendly housing is also in critically short supply.
Senior housing was part of the original plan for the former East Noble Middle School building, but school board members were strongly opposed to a residential component of any type in the school, so that plan was scrapped.
Even if people vacate older homes, then young buyers are potentially walking into fixer-upper situations and, often, young buyers don’t have a lot extra for costly repairs such as a new roof, new heating and cooling equipment or foundation repairs. A house listed at $90,000 might be significantly more expensive to actually own.
Some home loans do allow buyers to build repair costs into their mortgage, allowing them to pay them as part of their principal, Amy Ballard, Kendallville City Council member and banker noted.
“We have to rehab the houses we have and a lot of them have good structure that they can be rehabbed and sold to a family. That would be their starter home,” Handshoe said.
It may be the case that the new homes being built simply aren’t for first-time buyers.
In fact, most of the new home construction nationally is for “trade-up” buyers — older, more financially established homeowners who are looking to upgrade.
According to the National Association of Home Builder’s 2017 year-end data, 63% percent of housing starts were for trade-up homes, compared to just 37% going to first-time buyers.
Whether buyers have more money and are seeking more expensive homes or whether homes are more expensive forcing buyers to bring more money to the table is a chicken-egg question, but the end result regardless is simply that a new home is sharply more expensive than it had been just five years ago.
So how can communities create affordable new housing for residents? Unfortunately, there’s not a lot local government can do directly, although local leaders have a few ideas of things that could help.
Since home development deals happen between private developers and private landowners, Ligonier Mayor Patty Fisel said the city can only work as a mediator to try to get both sides to reach an agreement.
For example, Ligonier recently landed a new 60-home development from Granite Ridge and getting both sides to agree on a deal for the land was the first step.
“The problem was getting the landowner and the developer to agree on the price of the land,” Fisel said. “That was the sticking point. So the only thing I could do would be to continue to talk to the landowner and try to convince them how desperate we were for a need for his land.”
It’s a tough business though, Fisel said. The landowner wants a fair price for ground that could turn an income if farmed, while the developer needs a low enough price that it can cut the ground into affordable lots.
Communities need to work with interested developers before the first dollar exchanges hands. Fisel said meetings with Granite Ridge started very early to talk about possible developments and smooth out details to make sure a new subdivision would work for both sides.
“We can’t work with the developer after he’s come in and laid the entire thing out,” Fisel said. “We met with Granite Ridge before they even bought the property. I got my team in here and you have to do that.”
As far as influencing price, builders offer different models and they can be customized as they see fit. Part of the price calculation is on the buyer, as upgrading options raises the price, Fisel said.
From the government side, one of the only aspects governments could potentially influence is in the lot price. Albion Town Manager Stefen Wynn said he thinks a path to creating affordable housing could be in getting communities involved in helping with prep costs such as extending utilities to a residential site.
“There is a way to meet that price point but it has a lot to do with the town putting in that infrastructure,” Wynn said. “What we can do different is those developers had said that lot cost is $35,000. If we can find a way to reduce that $35,000, that $185,000 house now becomes affordable to someone living in our community.”
That method isn’t unheard of — communities frequently will pay to extend utilities or put in roads on industrial ground to help along new business development. The difference is, however, that those industrial projects typically happen in a tax-increment financing (TIF) district, where the community can borrow to pay for the work and pay it back with future tax revenue in the TIF district.
That option isn’t available for residential areas.
Fisel said while state law offers several mechanisms to help incentivize business, there are no levers to pull to help incentivize residential growth.
“Everyone says the government can’t subsidize a private owner,” Fisel said. “But is not an industry a private owner? I’m a private owner, so why can’t the city help me if I want to buy a new home?”
Handshoe disagrees that government should get financially involved in housing, but said part of the solution has to be working with individuals to not only help them skill up and raise their incomes, but also upgrade their financial literacy to put them on a path to home ownership.
The Community Learning Center at the former East Noble Middle School is being developed to play that kind of role for Kendallville and the larger area.
“We’re going to help lift people, how to budget, how to repair your credit,” Handshoe said. “Some of these young people just don’t know how. ... We have some teaching to do, some education.”