Rural Iowa's lack of affordable housing creates barrier for new business

July 31, 2020

The Gazette, John Steppe

On Debi Durham’s desk, she has $25 million worth of rural housing grant proposals she doesn’t have the money to approve.

“And those were all rural,” said Durham, director of the Iowa Economic Development Authority and the Iowa Finance Authority, in an Economic Recovery Advisory Board meeting July 24. “The smallest of communities.”

The same high demand resulting in a pile of proposals Durham can’t grant also is impeding businesses from further development in rural Iowa.

“Housing is vital for economic development growth,” Lisa Kremer, executive director of Buchanan County Economic Development Commission, told The Gazette on Tuesday. “You’re going to have a business with jobs, you’re going to have people filling those jobs and those people need a place to live.”

Rural housing is more complicated than simply building a house in a metropolitan area such as Cedar Rapids or Iowa City, experts said. Home values in rural areas are lower than in urban areas.

In June, the median sale price for a single-family detached house in Buchanan County — where its largest city’s population has hovered around 6,000 — was less than half ($144,000) of the median sales price in Johnson County ($315,450).

“A development company is not going to go into an area and lose money on a project,” said Joe Murphy, executive director of Iowa Business Council. “They’re just not going to do that because if they continue to do that, they won’t be a company for much longer.”

The situation has attracted the attention of many business leaders in the state.

In fact, the Iowa Business Council, which includes executives from 22 Iowa businesses, has made it a signature issue, Murphy said.

“We really see it as the key to future economic success,” Murphy said. “We need to think about housing as a strategy or a tactic to revitalize our rural communities across the state.”

Randy Edeker, CEO, president and board chairman of Hy-Vee and a member of the IBC, described the rural housing issue as a “big, big deal” and a “key part of the infrastructure.”

The grocery chain’s largest warehouse in Iowa is in Lucas County and has employees commuting from several other counties.

“There is no housing in Lucas County,” Edeker said in the July 24 meeting for Gov. Reynolds’ Economic Recovery Advisory Board. “We’ve been taking it on ourselves the last few years to remodel homes.”

Relying on employees to make commutes like that is unsustainable, Murphy said.

“A 45-minute commute might be the norm in New England, but that’s not the norm here in Iowa,” Murphy said.

Iowa also has turned to prison labor to help address some of this gap. The Homes for Iowa program at the Newton Correctional Facility, started in 2019 as a not-for-profit entity, is seeking to build 18 homes in 2020 and 36 homes in 2021, according to a news release of its groundbreaking.

There are some funding limitations, though. Beth Townsend, director of Iowa Workforce Development, said the program needs to build a fence around the building area to include more prisoners in the program and consequently increase production.

“We just need to scale this program on a much larger scale because it is working,” Townsend said in the Economic Recovery Advisory Board meeting.

“It’s a really, really successful model.”

The Economic Recovery Advisory Board already has plenty of ideas, ranging from changing how the state incentivizes local housing to converting old boxcars into tiny homes.

Edeker, Hy-Vee’s CEO, said there’s plenty of interest from businesses in working on some of these projects.

“I think there’s companies that would love to partner around this type of movement and build houses,” Edeker said. “There’s a lot of opportunity. ... It would serve all of us to get that done.”

Murphy, from Iowa Business Council, said expanding the IEDA’s Workforce Housing Tax Credit and Iowa Finance Authority’s State Housing Trust Fund is key to solving this issue.

“If we had our say, we would have a massive injection of dollars into both of those programs to help spur economic development,” Murphy said. “You’re providing a bridge, you’re providing incentives for developers to go into those local communities.”

If this issue isn’t addressed soon, Murphy anticipates businesses either having to move out of the state or potentially even close their doors.

“It continues to have a drain on the local economy,” Murphy said. “If those employers can’t get employees as a result of not enough housing in their area, then No. 1 they would then likely move to a larger area. Or they might not be able to move, and then they’d have to close up shop.”

It’s unclear how long it’ll take to get back to where rural housing needs to be, Murphy said.

“I don’t know if you can put a timeline arc on it,” Murphy said. “We know it’s going to be a long-term push. ... It’s not going to be solved in one or two years.”

But he’s optimistic considering the discussions in the Empower Rural Initiative and the Economic Recovery Advisory Board.

“This is not a Republican versus Democratic issue,” Murphy said. “We can come together and solve this. It might cost some money, but it’s the right thing to do and it’s the important thing to do.”

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