The Onawa and CHAT Report

The Onawa and CHAT Report Black Hills Energy A Community Housing Assessment Team Study Amy Haase, AICP March 10, 2014

Population Change Onawa, 1960-2010 3,500 3,000 3,176 3,154 3,283 2,936 3,091 2,998 2,500 2,000 1,500 1,000 500-1960 1970 1980 1990 2000 2010 Source: US Census, 2013 Onawa s population has experienced small fluctuations over the past 40 years with an overall population decline of 178 persons. The 1970s and 1990s were the best decades for growth at approximately 0.5% annually.

Population Change by Decade Onawa, 1960-2010 Decennial Population Change % Growth During Decade Annual Growth Rate 1960-1970 -22-0.7% - 1970-1980 129 4.1% 0.4% 1980-1990 -347-10.6% - 1990-2000 155 5.3% 0.5% 2000-2010 -93-3.0% - 1960-2010 -178-5.6% - Source: U.S. Census Onawa s population has experienced small fluctuations over the past 40 years with an overall population decline of 178 persons. The 1970s and 1990s were the best decades for growth at approximately 0.5% annually.

Population Change by Age Cohort Onawa, 2000-2010 2000 2010 Change Under 15 572 18.5% 577 19.2% 5.00 15-19 198 6.4% 177 5.9% -21.00 20-24 124 4.0% 126 4.2% 2.00 25-34 326 10.5% 304 10.1% -22.00 35-44 429 13.9% 320 10.7% -109.00 45-54 345 11.2% 435 14.5% 90.00 55-64 311 10.1% 338 11.3% 27.00 65-74 330 10.7% 311 10.4% -19.00 75-84 288 9.3% 266 8.9% -22.00 85 and Over 168 5.4% 144 4.8% -24.00 Median 42.3 44.8 Source: U.S. Census

Population Change by Age Cohort Onawa, 2000-2010 2010 Predicted 2010 Actual Variance % Variance Under 15 463 577 114 24.7% 15-19 197 177-20 -10.3% 20-24 193 126-67 -34.6% 25-34 319 304-15 -4.8% 35-44 322 320-2 -0.8% 45-54 419 435 16 3.8% 55-64 323 338 15 4.5% 65-74 265 311 46 17.2% 75-84 225 266 41 18.1% 85 and Over 172 144-28 -16.1% Total 2,899 2,998 99 3.4% Source: U.S. Census; RDG Planning & Design Natural population change would have predicted population loss greater than the 3.5% migration actually experienced.

Construction, 2004-2013 5 5 5 4 3 3 3 3 2 1 1 1 1 1 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 New Home Permits

2020 Population Projection Onawa 2010 Population 2015 Forecast 2020 Forecast 2025 Forecast Natural Population Change 2,998 2,889 2,808 2,754 3.5% Migration 2,998 2,933 2,894 2,882 8% Migration 2,998 3,005 3,037 3,098 0.5% Annual Growth Rate 2,933 3,007 3,083 Source: RDG Planning & Design Several alternative growth scenarios are used to forecast 2020 population. Natural population change projects a 2025 population of 2,754. Adding recent migration rates (3.5%/decade) suggests a 2025 population of 2,882. The 3.5% migration has likely continued since 2010; however, implementation of strategic housing policies may generate a 0.5% annual growth rate resulting in a 2025 population of 3,083 (similar to the city s 2000 population).

Occupancy Changes, Onawa Number 2000 2010 % of Occupied Units Number % of Occupied Units Owner-Occupied 970 73% 884 66% Renter-Occupied 359 27% 461 34% Total Vacant 123 174 Vacancy rate 8.5% 11.5% Total 1,452 1,519 Source: U.S. Census; RDG Planning & Design Similar to most communities the percentage of renter occupied units increased during the last decade. A growing vacancy rate may indicate declining housing quality and an inability to fill the lowest quality units in the city.

The Demand Projection Process Use population forecast, recent construction activity and assumptions about people per household to generate a ten-year overall housing demand. Consider the distribution of household income in a community. Match income ranges with affordability price points, based on housing costs equal to 30% of adjusted gross income. Define price breakouts for new housing demand, based on the assumption that new construction should ideally be affordable to the existing household income distribution.

Development Projection, Onawa 2013 2014-2019 2020-2025 Total Population at End of Period 2,959 3,007 3,083 HH Population at End of Period 2,897 2,944 3,018 Average PPH 2.18 2.18 2.18 HH Demand at End of Period Projected Vacancy Rate Unit Needs at End of Period Replacement Need Cumulative Need During Period Average Annual Construction Source: RDG Planning & Design 1,329 1,350 1,385 11.45% 10.55% 9.80% 1,501 1,510 1,535 17 18 35 32 48 80 5 8 7 Housing demand calculation is based on: Household size remaining stable. A declining vacancy rate Average annual loss of 3 existing units per year, or about 35 over 12 years.

Income Distributions and Housing Affordability Ranges Income Range % of City HH* Median % of HH s HH s income range Affordable Range for Owner Units # of Owner Units Affordable Range of Renter Units # of Renter Units Total Affordable Units Balance $0-25,000 69.00% 28.10% 378 $0-50,000 200 $0-400 89 289-89 $25,000-49,999 70-137% 37.40% 503 $50,000-74,999 138-206% 13.61% 183 $75-99,999 207-275% 9.37% 126 $100-150,000 276-412% 11.00% 148 Households (HH); Source: U.S. Census, 2010; ACS 2011; RDG Planning & Design $50,000-99,999 481 $400-800 330 811 308 $100,000-149,999 115 $800-1250 33 148-35 $150,000-200,000 33 $200- $300,000 55 $1250-1500 0 33-93 $1500-2000 9 64-84 $150,000+ Over 412% 0.52% 7 $300,000+ 0 $2000+ 0 0-7 Median Income: $36,395 This pattern (surplus of lower cost units, deficit of higher cost units) is typical of small rural towns with both aging housing stock and population.

Comparative Regional Affordability City Median HH Income Median House Value Value/Income Ratio Onawa $36,395 $80,400 2.21 Missouri Valley $44,474 $89,700 Sergeant Bluff $82,188 $181,200 2.20 Sloan $58,000 $107,300 1.85 Decatur, NE $31,719 $60,800 Source: American Community Survey 2012, RDG Planning and Design 2.02 1.92 An affordable, self-sustaining housing market, with adequate value to revenues to support new market-rate construction, typically has a V/I ratio between 2.5 and 3. Markets with ratios below 2.0 are undervalued relative to income. Markets with ratios above 3.0 exhibit significant affordability issues.

Housing Development Program, Onawa 2014-2019 2020-2025 Total Total Need 32 48 80 Total Owner Occupied 16 24 40 Affordable Low:60-100,000 4 6 9 Affordable Moderate: 100-130,000 5 8 13 Moderate Market: 130-200,000 4 7 11 High Market: Over $200,000 3 4 7 Total Renter Occupied 16 24 40 Low: Less than 450 7 11 18 Affordable: 450-700 4 6 10 Market: Over $700 5 7 11 Source: RDG Planning & Design This analysis assumes a split of 50% owner-occupied and 50% rental units. Most new construction will likely cost more than $130,000, causing demand for lower-cost units to be met by existing housing. A demand exists for an additional 11 rental units priced below $700.

Housing Resources Location Community Assets Strong Agricultural Economy Surrounding Development Projects Educational System Healthy Home Initiative Existing Programs

Housing Resources Location Community Assets Strong Agricultural Economy Surrounding Development Projects Educational System Healthy Home Initiative Existing Programs Onawa s location along Interstate 29 and only being 30 minutes south of Sioux City makes it a logical small town retreat close to major regional services and jobs.

Housing Resources Location Community Assets Strong Agricultural Economy Surrounding Development Projects Educational System Healthy Home Initiative Existing Programs Onawa has more businesses and services, like the hospital, then other communities south of Sioux City along I-29.

Housing Resources Location Community Assets Strong Agricultural Economy Surrounding Development Projects Educational System Healthy Home Initiative Existing Programs The strong agricultural economy gives Onawa some of the resources necessary to support major initiatives, strengthens the employment base, and gives young households an incentive to return to the region.

Housing Resources Location Community Assets Strong Agricultural Economy Surrounding Development Projects Educational System Healthy Home Initiative Existing Programs Major regional development projects, including the expansion of CF Industries, will produce substantial short and long-term employment.

Housing Resources Location Community Assets Strong Agricultural Economy Surrounding Development Projects Educational System Healthy Home Initiative Existing Programs Onawa complements other resources with a quality school system, housed in excellent facilities. The small classes sizes and quality of services should be attractive to young families.

Housing Resources Location Community Assets Strong Agricultural Economy Surrounding Development Projects Educational System Healthy Home Initiative Existing Programs Initiatives by the city and county to ensure good quality housing is essential to strengthening the image of the city as a safe place to invest housing dollars in addition to providing safe, quality housing to all residents.

Housing Resources Location Community Assets Strong Agricultural Economy Surrounding Development Projects Educational System Healthy Home Initiative Existing Programs The city s budgeting for demolition and abatement combined with SIMPCO programs provides a basis for funding housing rehab and demolition. SIMPCO offers an organizational structure for the implementation of additional strategies.

Housing Issues Demand for Scarce Products Rental Quality and Quantity Market Economics Lack of Developable Lots Lack of builders Property Maintenance Land Cost perception Community Marketing Senior Housing Market Housing Conservation

Housing Issues Demand for Scarce Products Rental Quality and Quantity Market Economics Lack of Developable Lots Lack of builders Property Maintenance Land Cost perception Community Marketing Senior Housing Market Housing Conservation The greatest demand in Onawa appears to be quality rental units and gateway housing for households making between $50,000 and $70,000. These are often difficult products to bring to market in rural communities.

Housing Issues Demand for Scarce Products Rental Quality and Quantity Market Economics Lack of Developable Lots Lack of builders Property Maintenance Land Cost perception Community Marketing Senior Housing Market Housing Conservation Very few new rentals have been constructed in the past 20 years. Most new rentals are generated from the conversion of small single-family homes; many of which have seen very little investment put into them.

Housing Issues Demand for Scarce Products Rental Quality and Quantity Market Economics Lack of Developable Lots Lack of builders Property Maintenance Land Cost perception Community Marketing Senior Housing Market Housing Conservation Tight supply in rural markets does not typically produce higher prices, making it difficult to support or absorb new construction. On the other hand, Onawa has demonstrated an ability to support rents needed to make some new projects feasible.

Housing Issues Demand for Scarce Products Rental Quality and Quantity Market Economics Lack of Developable Lots Lack of builders Property Maintenance Land Cost perception Community Marketing Senior Housing Market Housing Conservation Despite both open land contiguous to the city and possible infill or even redevelopment sites, Onawa has very few improved lots that could accommodate new construction now.

Housing Issues Demand for Scarce Products Rental Quality and Quantity Market Economics Lack of Developable Lots Lack of builders Property Maintenance Land Cost perception Community Marketing Senior Housing Market Housing Conservation New infrastructure cost is high and affects feasibility in rural markets. Private developers simply cannot afford the financing costs and low profit of subdivision development in a market with relatively slow absorption.

Housing Issues Demand for Scarce Products Rental Quality and Quantity Market Economics Lack of Developable Lots Lack of builders Property Maintenance Land Cost perception Community Marketing Senior Housing Market Housing Conservation In addition to a lack of developable lots the city has few contractors that are doing new home construction or that have the crews necessary to take on larger, often time sensitive projects.

Housing Issues Demand for Scarce Products Rental Quality and Quantity Market Economics Lack of Developable Lots Lack of builders Property Maintenance Land Cost perception Community Marketing Senior Housing Market Housing Conservation Property maintenance and the overall image of the community is essential to growing the housing market. Property maintenance issues effect everyone s home values and makes it even more difficult to sell the community to builders and potential new home owners.

Housing Issues Demand for Scarce Products Rental Quality and Quantity Market Economics Lack of Developable Lots Lack of builders Property Maintenance Land Cost perception Community Marketing Senior Housing Market Housing Conservation Some potential sites have been discounted because of perceptions that land cost is unreasonably high. Agricultural land prices are at an all time high but the cost of raw land is a relatively small component of the cost of a new house. At $20,000/acre, the public improvement and utility costs of new lots are often much higher than land cost at urban densities.

Housing Issues Demand for Scarce Products Rental Quality and Quantity Market Economics Lack of Developable Lots Lack of builders Property Maintenance Land Cost perception Community Marketing Senior Housing Market Housing Conservation Onawa has many positive assets but does not market those assets to the region. While housing issues are being addressed the city will need to simultaneously market itself to potential families and new buyers.

Housing Issues Demand for Scarce Products Rental Quality and Quantity Market Economics Lack of Developable Lots Lack of builders Property Maintenance Land Cost perception Community Marketing Senior Housing Market Housing Conservation Onawa s array of services and community assets create a natural demand for senior living. While some demand will grow for assisted living units there is an existing demand for townhome style units for seniors. This transition will also free up good entry level homes for new families looking to move to the community.

Housing Issues Demand for Scarce Products Rental Quality and Quantity Market Economics Lack of Developable Lots Lack of builders Property Maintenance Land Cost perception Community Marketing Senior Housing Market Housing Conservation In rural markets where new construction requires significant community action to make projects feasible, conserving and utilizing housing already on the ground becomes especially critical.

Onawa Strategic Objectives Onawa s location and community services position it for growth in the coming years. Yet, new residents need housing that meets their needs. This includes young professionals entering the housing market for the first time, young families looking for appropriate ownership options, and seniors looking for services within a small town atmosphere.

Onawa Strategic Objectives A housing strategy for Onawa should: Attract young households with available and affordable housing and community assets. Welcome new residents with quality gateway housing and opportunities for community engagement Improve overall housing quality. Produce economic opportunity and encourage entrepreneurial activity. Share risks to meet needs that the private market cannot satisfy alone.

Onawa Housing Partnership 1 Onawa should create a public/private housing partnership to meet important community housing needs. Onawa and possibly all of Monona County should develop a partnership that leverages both private and public dollars. The city and county may consider development of a non-profit housing corporation but may also choose to work closely with SIMPCO. A position within Economic Development may need to be formed to foster and expand programs. Other critical components are: A consortium of lenders to provide interim financing and other support to development efforts. A local Housing Trust Fund (WICIRHTF).

Onawa Housing Partnership 1 Lending Consortium. - A lending consortium is a cooperative venture among lending institutions active in the Onawa market. This consortium helps spread the financial exposure of housing projects. - It can provide short term financing or patient financing for builders or contractors in the community to provide interim financing for projects. - It can also attract the support of other agencies like the Federal Home Loan Bank. - With local banks coming together they may also want to consider providing credit education. Many potential buyers need to address credit issues before applying for a loan and need assistance with this process.

Onawa Housing Partnership 1 The partnership should identify and execute specific project focuses that the private sector by itself is unlikely to pursue. These may include: Gateway housing development affordable single-family development with financing packages designed to be affordable to new residents to the city. These may use redevelopment sites, infill sites within Onawa, or partnering with builders or the city to create new lots. Gateway housing may also involve developing new prototypes, such as manufactured units and small core homes that are designed to grow with households. Infill development on sites within the city, including new housing forms. If a non-profit development corporation is formed infill housing would be a first step to providing quality entry level housing. USDA Rural Development programs may apply to infill development sites in Onawa. If appraisals are below construction cost, CDBG funds can help bridge this gap through deferred payment or conditional loans.

Onawa Housing Partnership 1 Acquisition/rehab/resale, where houses are acquired and sold in a rehabilitated or turnkey state to owner-occupants. Onawa is fortunate to have a relationship with SIMPCO and this could be expanded to include a program to conserve the city s existing housing stock and leverage new investment in the community. Rental housing demand in Onawa crosses several income ranges. Funding sources such as the lending consortium and housing trust fund can be used to develop new inventory. Tax Increment Financing, CDBG/HOME funds, and tax abatement can also help create affordable multi-family housing. The housing partnership and lending consortium should be active participants in mulit-family housing finance by distributing the risk of projects across several lenders.

Redevelopment Initiatives 2 Onawa should establish a focus and strategic redevelopment program that targets specific areas of the city to build value and incentives private market investment. Housing assessment and vacant lot inventory. This process should begin with an assessment of existing housing and available lots to identify potential redevelopment areas. Lot consolidation should be done where applicable. The traditional lots within Onawa are often not wide enough to support a wider ranch style home. To meet the needs to this market and utilize existing infrastructure lots should be consolidated where possible. Small lot units should be encouraged where lots cannot be consolidated. A growing number of millennials are interested in a wide range of units that are close to services. Small lot developments are often very attractive to this market and provide an affordable housing unit for young buyers.

Redevelopment Initiatives 2

Rehabilitation & Property Maintenance 3 Onawa should implement a comprehensive approach to rehabilitation that broadens the reach and effectiveness of rehabilitation efforts, & reduces the amount of substandard housing. Owners Assistance. SIMPCO s existing programs could be expanded to provide an even greater level of funding. These programs should include emergency repair programs, direct rehabilitation loans, and energy efficiency loans. Rental Rehabilitation. Again SIMPCO has an existing program that should be reinforced with added code enforcement and the Healthy Homes initiative.

Land Development 4 In addition to infill lots the city should partner with a private developer or development corporation to complete a new subdivision. Strategic Development Plan. A strategic development plan should clearly define the method and cost of infrastructure necessary to support a mix of housing. Project Design. A public development should include a quality design that creates a distinctive place with public areas, pathways, and a mix of housing types.

Land Development 4 Potential sites may also exist around Blue Lake. A close cost benefit analysis should be completed before annexation. These may be appropriate larger lot units.

Land Development 4 Development Financing Public front-end financing of infrastructure reduces the private sector s front-end risk while providing a safe investment of public funds that will ultimately pay dividends. Several options exist for payback, each with different advantages and disadvantages. Infrastructure investments for a share of costs. The public share might be 50% of construction cost, with the balance recovered through purchase price of the house. Repayment is derived from the added property taxes created by new development. Special assessments. Here, all costs are paid through assessments on properties, usually paid back over a 10-year period. Costs to homeowners are often high. A rebate or joint participation program may reduce these costs to moderate-income buyers.

Land Development 4 Subordinated payments. Here, the city front-ends a portion of public improvements, repaid over a longer period through a second mortgage on property. This reduces payments over special assessments by extending the loan term and reducing the principal. Deferred payment. The city finances the infrastructure as a participatory deferred loan. The infrastructure loan is paid back upon sale of the house. The repayment represents the same percentage of the sale proceeds that the initial infrastructure loan made up of the original price. Grants from the Federal Home Loan Bank, TIF, state-administered Federal programs such as CDBG or HOME, or USDA RD programs can assist with infrastructure financing. Tax Abatement. For residential housing, the program involves 100% abatement of taxes up to $75,000 of assessed value for 5 years. The infrastructure cost can then be rolled into the price of the house while controlling the monthly cost to the home owner.

Innovative Development 4 The County should explore innovative housing types that can either explore new territory or create potential economic development possibilities. Three of these products are expandable small houses, manufactured homes, and pinwheel plan senior townhomes. Small Houses: This housing type is based on building a high quality small house with a utility core and basic living spaces that is designed to expand along with a growing household. The core home could be in the range of 800 square feet, buildable in the range of $100,000. Manufactured Homes: Modular or manufactured homes are not new products to the Onawa region. Developing a local industry that builds these units could create jobs and find a receptive regional market in western Kansas. Pinwheel Plans: This concept provides four unit clusters of single-level units, radiating from a utility core. These plans are popular with seniors and economical to build because of their efficiency.

Rental Development 5 While most of Onawa s housing is owner-occupied, rental housing is an existing and increasing need. The mortgage crisis, bringing with it tighter underwriting standards, an end (at least temporarily) to creative financing, and more nervousness about homeownership as a longterm investment, is putting more people in the rental market. A countywide housing program should identify and work with quality rental developers to increase the supply of quality rental housing within market demands. Techniques that can encourage affordable rental development include land purchases, with investment into rental projects as equity; tax credits for low and moderate income development; assistance through tax increment financing; and interim financing through the lenders consortium.

Senior Housing 6 The demand for additional senior housing continues to grow as the number of seniors grows. Providing adequate housing for this market attracts new residents and opens existing housing to new young home buyers. Innovative approaches to the demand for senior housing should be taken to meet market demands. This may include a variety of services and styles. The housing partnership may also consider purchasing the seniors existing housing unit using the sale to fund monthly costs in the new unit and a quality rehab house for the partnership to resale to a young family.

The Onawa and CHAT Report Black Hills Energy A Community Housing Assessment Team Study Amy Haase, AICP March 10, 2014