Photos by L.G. Patterson
When people think of affordable housing, they don’t usually think of housing for middle-class families looking for a starter home. However, this is a growing issue since purchasing or constructing a home poses financial challenges for families and local businesses, attributed to factors such as interest rates, land costs, building supply expenses, inflation, labor shortages and infrastructure challenges. Inside Columbia Publisher Emeritus Fred Parry hosted a CEO Roundtable luncheon with seven local leaders in the home building industry and real estate industry, to discuss these issues and how they affect the Columbia area. The Broadway Hotel sponsored the event with the hotel’s award-winning Chef Jeff Guinn catering the meal that complemented the conversation.
Infrastructure Challenges
Finding an affordable home to buy in Columbia is currently a difficult task, and it will only become more challenging. According to an article published by GOBankingRates, the average home in Columbia costs $271,245, but this number is only going to increase. In fact, according to the article, Columbia has the fastest projected growth rate of the 14 markets studied sitting at 6.4%. In just five years, this could elevate prices beyond the national average.
However, more affordable housing can’t be built if there are so many infrastructure challenges preventing the new builds. Jami Clevenger, the executive officer for the Home Builders Association of Columbia says a major contributing factor is that home prices are increasing due to infrastructure issues. “The counties around Boone County are going to benefit. If Boone County does not shift quickly, surrounding counties will getthe tax revenue that would come to our county if we had a healthy housing market. These counties will likely getmany of those first-time homebuyersthat we do not have homes for because of our challenges,” she says.
One of the challenges Jay Wilson with Weichert Realtors says he has dealt with is water meters and electric transformers. “We thought there were no problems and then all of a sudden, there was a major issue to get water meters and electric transformers,” Wilson says. RussAnderson, the president of Anderson Homes, has a similar issue and says having to wait for water meters not only hurts his business but the people looking for homes as well. “It takes four months to build and you’re waiting 12 months for a meter. I mean, you’re going to sit for eight months waiting for a water connection in your house and then you can’t rent it out and you can’t sell it,” Anderson says.
Kara Linnemeyer with Beacon Street Properties explains the challenges she has faced when trying to develop land to try and create affordable housing in the Columbia area. “We are having really insurmountable sewer challenges because of lack of capacity and the cost to create the capacity would make the price of that house so exorbitant that you would not buy the piece of land to develop it when you parse out all the numbers, which starts with the infrastructure that the city provides for sewer,” Linnemeyer says.
Anderson notes that, in the past, the city of Columbia used to fund a significant portion of infrastructure expansion and development; however, there has been a shift in this approach.“When you take infrastructure costs that were covered by the city through taxation, and you put it back on to developers, developers raise the price,”Anderson says. “It used to be $18,000to $20,000 a lot in development costs. Today you’re pushing $45,000a lot in development costs. So every single lot is $25,000 higher, which has nothing to do with the land cost but has to do with infrastructure costs.”Brian Toohey, CEO of the ColumbiaBoard of Realtors, says another factor challenging the housing market is boomers. “Since COVID-19, they’re pushing out first-time home buyers, because the ones who are downsizing will outbid the first-time home buyers and they’re paying with cash or they’re not having to finance as much,” Toohey says. “Every seller is going to take that deal over someone coming out with an FHA loan, and that is pushing up prices.”
As home prices experience a large increase, income levels are not keeping pace with the same intensity of growth. Toohey says the numbers aren’t matching up.“Housing prices have increased 50%in a five-year period, while incomes have not increased nearly as much.”According to AP News, wages and benefits for workers in the UnitedStates experienced the slowest rate of growth in the last quarter of the previous year. According to the government’s Employment CostIndex, compensation increased by0.9% in the October-December quarter, showing a slight decline from the 1.1% rise observed in the previous quarter. This combined with the increasing house prices leaves first-time home buyers in a tough spot when looking for a single-family home.
Unraveling Supply Chain Issues
As housing prices continue to pose a growing concern, the costs associated with constructing new homes are also on the rise, attributed to the impact of supply chain disruptions since the pandemic. Luckily, since COVID-19, these industries have seen improvements, but it is not where it once was. “It’s not back to pre-COVID-19 numbers, but everything’s gotten better,” Anderson says. “During COVID-19, we had houses that we had an $80,000 budget on lumber, and we spent $180,000 on lumber, I mean, literally double what you would normally spend. Luckily, home prices increased, and we were able to absorb that.” Despite the decrease in lumber prices, Anderson highlights prices for composite materials have not experienced the same decline.“Anything that we use a resin on or a composite material, anything with aluminum, prices are skyrocketing,” Anderson says. “We’ve had five drywall price increases on material alone in the last three years.”
Linnemeyer agrees, noting that while the lumber prices have come backdown all other materials won’t ever see that decrease again. “Anything else that gets a price increase it only gets a price increase. It doesn’t ever go back the other way,” she says. Orie Hemme, the president of the Home Builders Association of Columbia, acknowledges that the current state of the supply chain is an improvement compared to its condition two years ago. “You’re not waiting 16 weeks on cabinets.You’re waiting like six,” Hemme says. “Something that we’ve all done is just adapt to the way we are doing things. We are planning a lot further ahead now and ordering things a lot further ahead.”
While Blair Murphy, the co-owner of Johnston Paint and Decorating, says he was having a lot of difficulty with supply chain issues, he notes that it was less than his competitors. “We had a bit of a problem on flooring, but nothing super major,” Murphy says. “We were very fortunate because we do not rely on a common carrier.” Clevenger says this is a problem for not only builders but for home buyers as there are fewer homes on the market due to supply chain issues.“With less than 300 homes on the market, when we need over 500,” she says, “supply and demand is going to cause some major challenges for us.”
Navigating the Labor Shortage Landscape
Another hurdle is finding enough skilled and qualified individuals for home construction projects. For Hemme, this has been a real challenge. “As far as my subcontractors trying to find employees to hire, it’s miserable.Even for me, you know, personal employees, it’s miserable,” he says.“There are not enough quality, qualified people out there to hire to get work done.” Anderson says this low number of skilled trade workers is because, as a community, we are not doing enough to get young people interested in trade opportunities. “Everyone says go to college, go to college, go to college, right? But I know some people with degrees are making $50,000 a year in a mediocre job, and I’ve got a roofer who made $170,000 last year,” Anderson says. “There’s a lot of money in the trades if you understand the craft, you build a process for it and you do excellent work.”
But what’s the solution? Toohey notes it’s about providing the opportunity for students to understand the work and to get the right training. But that will take time before they are ready to join the workforce. “Ranken coming to Columbia will be fantastic, but it’s going to take five or six years before they have a supply chain,” Toohey says. Right now, Anderson says it’s just about communication, and spreading the word that college isn’t the right path for everyone. “It’s about saying, ‘Hey, if you don’t want to goto college, you don’t have to.’ You can have a great life outside of a four-year degree in business or psychology,”Anderson says. “But if everybody tells you you’re going to be a loser if you don’t go this route, that’s what the problem is.” Murphy agrees, saying even his daughters have expressed the only route has to be college. “I talked to my daughters who are 22 year sold and 18 years old and it is college, college, college, college. But I tell them it’s not for everyone. It wasn’t for me,” Murphy says. “It’s as if it’s an embarrassment to them to not go to college and to do other things.”
One advantageous factor is that, regardless of these challenges, individuals will always require a place to live, protecting trade work. “People have to have a place to live, so we’re going to have to have people who are building these houses. And I predicted this 10years ago, you will start seeing laborers making more money than people with eight-year degrees,” Anderson says.For now, it’s about inspiring young individuals to pursue careers in the trades, fostering a sustainable and skilled workforce for the future.
RAPIDFIRE: Final Thoughts
On Rising Home Values…
“According to the article published by GoBankingRates,Columbia’s home values are expected to grow 6.4% year-over-year, which is more than three times the national average of 1.7%. This is impressive, and I think it’s super exciting for our community that home values are going to grow so much. But it’s also really terrifying because our median income has little chance of growing at the same rate. If incomes cannot keep up with home values, who will be able to purchase homes in ten years?”
— Jami Clevenger, executive officer for the HomeBuilders Association of Columbia
On Vocational Training…
“We talk a lot about getting young people involved in construction trades. We’ve had this discussion a lot and there are lots of ideas. There’s a thing called Build MyFuture that we talk about all the time … the HBA is hungry to try to do something.”
— Orie Hemme, president of the Home BuildersAssociation of Columbia
On Selling Homes at Cost…
“We just have to do something, you know, so we’re selling three homes at cost this year. That’s it, right? Three houses and you say, how’s that going to impact Columbia as a whole in our housing crisis, well it probably won’t. But three houses is a start and hopefully next year we’ll have eight and then 10 and then 12. And if 10 people did the same thing then we would have 80 affordable homes a year.”
— Russ Anderson, president of Anderson Homes
On Giving Back…
“It was a struggle month to month in our family when I was a kid, and I’m going to give back and I’m going to help because people helped me, so now I’m ready to give back. We’ve already been giving back, but that’s my goal.”
— Blair Murphy, co-owner of Johnston Paint and Decorating
On Rising Insurance Lists…
“I think a wider issue that’s huge that is going to be starting to impact everything is insurance costs. So, insurance costs, especially for multi-family development, are going to make homeownership and rents even more unaffordable.”
— Brian Toohey, CEO of Columbia Board of Realtors
On Collaboration…
“We need to get everyone in one room — the HomeBuilder’s Association, realtors, material suppliers and council or commissioners — and brainstorm ideas to tackle these problems before they get too big.”Jay Wilson, Weichert Realtors
“The Central Missouri Development Council in the past when I first started with the HBA would have these kinds of discussions, and I think it drew some people in because it felt like a valuable meeting; and if we can get back to that and drive the realtors to come to those as well and our vendors, I think it would be an interesting concept.”
— Kara Linnemeyer, Beacon Street Properties, LLC
