Testing the Markets (Telescope)

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markets
Ross Freeman, principal in the Pioneer Group, Topeka, which developed the Buffalo Apartment complex in Belleville in the former Republic County Middle School stands with local manager Gina Strnad outside of the historic building. Freeman, who graduated from high school from the building, said he has been surprised in the disparity in local rental rates in Belleville and Marysville, compared to larger communities like Salina and Topeka. 

By Deb Hadachek Belleville Telescope editor

There’s a difference between affordable housing and low income housing.

But most people aren’t aware they aren’t one in the same, says Craig Reed of Perry Reed Properties, Lincoln NE, which manages the new Buffalo Apartments in Belleville. That confusion has led some people to believe their income is too high to move into the new housing complex which opened last year, he says.

Affordable housing is housing deemed affordable to those with a median household income. Low income housing often refers to units in which residents qualify for rent subsidies.

“This is the first affordable housing unit in this community,” Reed says. The 56 Buffalo Apartments are a mix of 75 percent affordable and 25 percent market-rate rents, he says.

“Most people we saw at a recent open house who are retired would qualify to live here,” Reed says. “It doesn’t matter if you own property, it doesn’t matter if you have a million dollars in the bank. It’s the rate of return that determines your income.”

Reed recently visited Belleville with developer and Belleville native Ross Freeman of the Pioneer Group, and local manager Gina Strnad. All the apartments—which includes remodeled classrooms inside the former Republic County Middle School, apartments that face K ST, and townhouses on the north side of the property—are substantially finished. The $8 million project was financed with housing tax credits and federal historic tax credits that were syndicated by WNC located in Irvine, California and state historic tax credits that were purchased by Historic Preservation Partners located in Topeka.

As part of the tax credit financing, 75 percent of the apartments must be rented as affordable housing for 15 years.

Reed says 40 percent of the apartments are occupied.

Freeman said he is interested in the demographics of the new renters.

“At lunch I visited with one resident who moved here from Connecticut, the people across the table from me were from Colorado and Wyoming, and there was a resident who moved from Oregon,” he said.

“Most of the rentals have not been job-related,” Reed adds. A typical resident is retired and has moved to Belleville to be closer to family, he said.

markets130% of income

Republic County Economic Development director Luke Mahin says housing is a critical factor in job and population growth in rural areas.

National statistics recommend that families expend about 30 percent of their income before taxes on housing. CBS Moneywatch says most people spend between 30 and 35 percent of their pre-tax income on rent and utilities.

“Those who buy homes (in Republic County) are probably spending close to 30 percent of household income on housing but those who rent are probably spending somewhere like 10-20 percent, in my assumption,” Mahin says.

According to the US Census Bureau, the median household income in Republic County is $40,538. Using national percentages, households with that income could expect to pay $1,013 to $1,182 each month for rent and utilities.

Most Republic County residents pay far less than that amount for housing.

Affordable rents range from $340 to $475 for one or two bedroom apartments at Buffalo Apartments to $495 for a three bedroom town home, said Strnad. To be eligible for the affordable rate, income levels start at $24,160 for a single person. A family of four earning $34,500 would qualify for affordable rent, or a family of six with an income of $40,020.

“That is their income at move-in,” Reed says. “If their income increases, they could be moved to a market-rate rent whenever a similar marketrate apartment becomes available, but no one ever has to move to a different apartment—or move out.”

Most comparable properties in Belleville rent for $350 to $375 per month, Freeman says.

The 15 market rate units in Buffalo Apartments rent from $555 to $725. Strnad said a few market rate apartments are available.

The median rental rate in Kansas in 2012 was $771 per month, according to a market study prepared for Republic County in 2013. The same study said that the average rent in Republic County is $391 per month.

Market rate apartments

“It is interesting to see the demand of market rate rentals going up and our community seeing the sticker shock for what a new rental should cost,” Mahin says.

“The national home ownership percentage is 63.4% and Republic County is around 78.3% so we’ve traditionally been a rural place where housing was cheaper just to buy a starter home than rent for long term then save to buy.

“There are communities that are having good luck developing homes but it’s a Catch-22 when the new homes show up next to existing homes and the property values start raising, which we know many people don’t like,” Mahin adds.

“Right now our housing market benefits the buyers’ market, considering you can find a home you like, but doesn’t do any favors to the sellers unless they updated their home quite a bit.”

Siteplan

Rent issue

Freeman says with the information he has today, Pioneer Group may have opted to build fewer apartments in Belleville.

“One issue that really surprised me here—and we had the same problem in Marysville—is that people here are accustomed to paying very low rent,” Freeman says.

“A market study did not take that into consideration, even given the median adjustment for income in Republic County.”

Pioneer Group has 17 similar properties and 1,300 units across Kansas, and Belleville and Marysville are the two smallest communities where the company has undertaken projects funded by tax credits designed to turn historic properties into affordable housing. Perry Reed Properties, which took over management of Buffalo Apartments in January, manages 70 properties in nine states.

Low income rates

Reed says many people confuse the Buffalo Apartments for low-income properties for the elderly. Those projects fall under the Department of Housing and Urban Development, and offer rent subsidies to low-income residents.

HUD says that families who pay more than 30 percent of their income for housing are considered income burdened, and some 12 million Americans spend 50 percent of their income on housing.

NACO County Explorer