When I was graduated from high school, in 1971, I just couldn’t wait to get out of small town Mt Sterling, Kentucky, and move to what passed for a big city, Lexington. After stops in Hampton, Virginia and the suburbs of Wilmington, Delaware, it was 2002 before I finally realized how good I had things in a small town, and we bought a house in Jim Thorpe, Pennsylvania, population 4,659.
In 2014, we bought our retirement home, a small farm in rural Estill County, Kentucky.
OK, OK, maybe our place isn’t quite like Green Acres, but we have 7.92 acres, 500 feet of frontage on the Kentucky River, and we bought it for the ridiculously low price of $75,000. The house is a bit of a fixer-upper, but yes, it is being fixed up! We have one neighboring family, who mostly keep to themselves.
Life is good.
From The Wall Street Journal:
Want to Move to the Countryside?
The pandemic offers a unique opportunity to fix the housing crisis plaguing rural America.
By Kerry Thomson | December 25, 2020 | 2:58 PM EST
With the Covid-19 pandemic has come the rise of remote work, and rural America is having a moment. Searches on RedFin and Zillow show upticks in interest in rural areas, as more Americans determine to flee the cities for greener pastures.
Finding a house in rural America, however, may be easier said than done. Consider Orange County, Ind.—population 19,840 in 2010—which is in many ways a model for rural America. It has a thriving arts community, a local food co-op and a farmers’ market, interesting ecological and natural features such as the Rise at Orangeville natural spring and Hoosier National Forest, and a rich history, with a name deriving from the Dutch Protestant House of Orange.
And it has wide open spaces—too wide open. There simply isn’t enough housing for the people who want to live there. This counterintuitive housing shortage is having a devastating effect on rural America’s economy.
At first glance, Orange County’s housing shortage doesn’t make sense. One would think building in rural America would be easy. There is plenty of cheap land; zoning rules are generally less restrictive; and employers are struggling to fill job openings. Yet the housing crunch is an enormous struggle. In 2017 there were a mere 79,000 single-family home starts in all of “nonmetropolitan” America, compared with 223,800 in 2005.
One explanation is the unwillingness of banks to extend loans to contractors or developers looking to build housing where there are no comparison properties nearby. And given the relatively small, sometimes stagnant housing markets in rural areas, there are often few such “comps.” Without them, there can be no loans. Without loans, there can be no building.
It isn’t often that we see a huge error in economic thinking in the Journal, but this is one of those times.
The second issue is a lack of investors who see adequate potential return on investment in rural areas. The average home value in Orange County is a little over $100,000. In Bloomington, 50 miles away, the average price is more than twice that. It isn’t hard for contractors to figure out where they can earn a bigger return.
Finally, there is a lack of skilled labor. In the fallout of the 2007-09 financial crisis, which crippled the construction industry, 2.2 million construction workers out of roughly 5.3 million left the industry and never returned. This is a national problem, but given the higher potential return on investment for construction in urban areas, rural areas are lower on the list of destinations for contractors.
On its face, this makes sense, but dig deeper, and you can see the mistakes. Some of those 2.2 million construction workers are still out there, and would be willing to return to work if there was work for them. Twelve years is a long time, and some of those workers have passed retirement age, but a lot of them are still out there.
More, with the huge number of unemployed, there will be many who would happily take a try in the construction industry, if given a chance. Yes, they are mostly unskilled in the construction trades, but the only way to get those skills is to start working, and learn your way up from the bottom. That’s how I did it!
The Journal article simply assumes that there are no construction companies in small towns or rural areas, but that isn’t the case by any means. A lot of the construction companies in small towns and rural areas are small, and not currently very profitable, but given the opportunities to grow, most would certainly take advantage of them.
The housing shortage aggravates many of rural America’s other crises. One is the aging and dwindling population—a trend that could potentially reverse as people find greater flexibility through remote work and the pandemic diminishes the appeal of coastal cities. Who wouldn’t want to live in an affordable community where you know your neighbors and maybe have a national forest as a backyard? But talented young professionals—the type who start businesses that hire people and offer upward earning potential—aren’t going to relocate to rural areas if they can’t find a place to live.
What the Journal article is suggesting is that there is a potential demand for housing in small towns and rural areas. If there is an actual demand, two things will happen: prices will rise, as competition in a reduced supply market pushes prices higher, and those higher prices will spur a greater profitability in construction in those areas.
Kerry Thomson, Executive Director, Center for Rural Engagement, from her LinkedIn profile.
Kerry Thomson, the article author and executive director of the Center for Rural Engagement at Indiana University, Bloomington, draws the conclusion that government need to push things, but she has missed the point. If there really is a demand for more small town and rural housing, that demand will push everything that is needed. And if she is incorrect, and that demand really isn’t there, then the government programs she is pushing will be just another pointless government expenditure. She wants the government to push things by “offering a time-limited expansion of rural-specific loan guarantees to banks and lenders. This would provide an incentive to lend to builders in rural areas.”
More, what Miss Thomson wants to do is, in effect, apply large city thinking to small towns and rural counties. She wants to provide those areas with “local government zoning and planning information” and “a tax model to help communities determine the cost and benefit of new homes, among other resources.” She would add governmental costs to building projects, as planning and zoning commissions require review and approval of construction projects, and add layers of inspections that we normally do not see in small towns and rural areas, things which raise costs, and prices, but do not add value to homes.
New design prototypes could also offer answers. A project to design a prototype for cost-effective, modestly sized homes that appeal to both young professionals and older residents is being piloted in southern Indiana. The homes appeal to both young and old because they are moderately sized and modern, with open floor plans and energy-efficient design features.
One of the great things about small towns is their diversity of housing design. What Miss Thomson has proposed sounds awfully cookie-cutter to me! I spent the better part of a year, through the winter, pouring basements and garage slabs in a subdivision called Quail Hollow, outside of Wright-Patterson Air Force Base. The whole subdivision was a project by Ryan Homes, and there were five floor plans, each of which could be reversed, from which buyers could choose. A huge, cookie cutter subdivision, and yes, it’s experiences like that which influence me today.
Housing, the author wrote, is one of the most serious issues in rural areas, but she sees it as the “driver” of many of rural America’s problems. In that, she has it all wrong. The primary problem in rural America is the lack of good jobs! What is needed is for manufacturers and entrepreneurs to choose to build their projects in less densely populated areas. That’s not only direct employment, but such creates subsidiary jobs as well. Decent jobs attract decent people, and decent jobs provide the money for people to fix up their existing homes as well as build and buy new ones.
Putting a manufacturing plant in an area of low population density is not so easy. Cherokee County, NC had 4 plants at one time, but only one is still open. There was no reliable work force to be had. Sure they could hire all day as there was no shortage of applicants, but getting them to come to work regularly was a different issue.