The big squeeze: High costs and labor shortages hinder home building in western ND
WILLISTON, N.D. – A shortage of qualified workers and escalating construction costs are preventing Williston-area developers from preparing for what one local newspaper headline termed an imminent “housing-shortage tsunami.”
A statewide housing needs assessment completed in 2016 by North Dakota State University predicts a population growth of 68 percent for the Divide, Williams and McKenzie tri-county area by 2029. That’s 23,000 more residents for Williston, based on a best-guess estimate of a current population of 34,000.
As Mark Schneider, the city’s development services director, sees it, the study projects a need for 500 additional homes or other dwellings annually. Lending credence to the number, Schneider said Williston’s 2018 school enrollment is up by 400 students, to 4,500.
Apartment occupancy is already at 95 percent, he said.
There’s solid evidence Williston’s economy is growing again, following the 2015-16 slump. In early September, Job Service North Dakota’s Williston office listed 1,717 job openings, the highest monthly number for the year.
Paula Hickel, center manager, said the number suggests 4,000 actual job openings in the area. One-third of the listings are related to energy and construction. The Bakken set a new record this summer with 14,778 producing oil-and-gas wells, half of them in the tri-county area.
Real-estate listings for Williston for the year ending Aug. 31 showed 588 residential properties were sold, a figure surpassing any previous similar period.
Right now, there’s a dearth of new, single-family homes in the $225,000 to $340,000 range, the range most young homebuyers are seeking, said Denise Pippin, Realtor and lifelong resident of Williston. The lending limit for Federal Housing Administration-insured loans (which have attractive terms and rates) for Williams County is $330,050.
In late August, out of the 161 homes listed, only 19 were new, and the only two homes within the “sweet spot” range were modular homes.
Millennials are the majority of the home buyers in Williston area, said Pippin. “They’re making six-figure salaries, and they’re looking for new, three-bedroom, two-bathroom homes in nice neighborhoods, with open floor plans, high ceilings, good-sized yards and three-car garages, or at least an oversized double,” she said.
Western Area Homebuilders Association President Mike Dolbec, whose Windsong Custom Homes has houses going up in both western North Dakota and eastern Montana, said numbers published by the National Builders Association indicate housing starts nationwide are at their highest rate since 2004.
The boom has driven up lumber costs by more than 60 percent and other building materials by double digits, Dolbec said.
And the rising costs have made it increasingly difficult for builders to produce the kinds of homes young buyers want at a price the buyers can afford or are able to finance. “My average costs for building a 1,700-sq. ft. ranch home from the beginning of 2017 to now, with the new ordinances and material and building costs, are $28,000 to $30,000 more for the exact same home,” he said.
Dolbec expects Windsong to reach the figure of 40 housing starts this year.
As homebuilders and energy companies compete for the same workforce, developer-builder Terry Olin, principal with Stropiq, Inc., doesn’t foresee building more than 20 houses in 2019. “Why do I say 20 instead of 200? Because I know we don’t have the manpower,” Olin said.
In early September, Stropiq was finishing off nine homes in its housing development called The Meadows.
“What we need to happen here to realize our full potential as a city is for the rest of the country to slow down on the building front while the oilfield remains vibrant,” Olin said.
Williston has 732 single-family lots ready for development and another 756 platted but not “shovel ready.” Whereas many cities pay for lot infrastructure and recoup the cost over time in the form of special assessments, Williston developers must shoulder those costs.
“The city is absolutely averse to special assessments,” Olin said.
“That’s a lesson they feel they were taught in the 1980s, when the boom was followed by a sudden bust, and nobody moved into the new neighborhoods to pay the assessments.”
The city spent 25 years paying off the infrastructure costs, he said.
“Infrastructure adds a minimum of $35,000 to the cost of producing a house,” he said. “That makes a big difference in who’s going to qualify for a loan.”
The Williston City Commission recently voted to move forward on two residential housing proposals, according to Schneider. One of the developers is bringing in an out-of-state crew to build 26 homes and 11 townhomes. The other, proposing to build 40 single-family homes, is recruiting in-state builders.
In an innovative move, the commission allowed one of the developers to sell fully developed portions of the property in order to fund remaining infrastructure improvement costs.
Williston is in the process of selecting an applicant to complete a comprehensive housing action plan, Schneider said. “One of the objectives of the plan is to help us define more options for housing incentives.”