Cost-Burdened Households On The Rise In Rural America

March 25, 2019

Bad news headlines

Rural America is facing a housing cost crunch. According to real estate experts, the housing affordability problem that’s been plaguing major cities in the U.S. is moving into rural America.

Approximately 25% of the nation’s most rural counties have seen an increase in the number of households spending over 50% of their income on housing. Fortunately, residents in these counties haven’t yet had to choose between necessities because of their housing costs compared to other areas in the United States.

A recent Stateline analysis of the American Community Survey found that the counties of Bronx, New York and Norfolk, Virginia both fell into the same cost-burdened real estate category. Both counties experienced a 2-point increase in real estate costs

Stateline compared the most recent economic recovery area (2013-2017) with the early years of the Great Recession (2006-2010). The number of severely cost-burdened households has fallen in expensive areas since the Great Recession including Cape Cod, MA; Key West, FL; San Francisco, CA; Seattle, WA; and Manhattan, NY.

However, losses of high-paying jobs have hit many rural areas. Coal-dependent counties in Virginia, Tennessee, and Kentucky saw a major decline.

Other rural areas in the U.S. are seeing issues with affordable housing because new workers coming into the area are opting for rental housing over home buying. This has caused rental market prices to go up because of the limited supply of apartments available.

“Sometimes all it takes is just one new business facility in one of these communities,” said Corianne Scally. Scally is a research associate studying affordable housing at the Urban Institute. “All of a sudden you need more labor on hand to start up that plant, you’re stretching the ability of the rental housing base to accommodate new people, and you see prices increase.”

Irion County, Texas has experienced exactly that. The county’s fracking and wind firms have brought new workers, causing energy jobs to triple to 187 between 2010 and 2016 with average wages of over $63,000.

The unemployment rate in the county, which has a population of 1,516, dropped from 5.3% to 3.2% in six years. But the average rent for an apartment jumped by 44%.

Some of these price jumps are caused by renovations. With 35% of remodeling jobs involving the whole home, there are a lot of expenses property owners need to account for. Bathroom additions have an 86.4% ROI and metal roofs, which have a minimum of 25% recycled content, have an 86% ROI. Most homes throughout Texas have also been built with a slab foundation in the last 50 years.

But even with these upgrades, the majority of price increases have been caused by the low inventory in the real estate market. That inventory is expected to decline even more because of a new wind farm under construction.

The wind farm is both a blessing and a curse. While the new farm will increase housing prices, it’s also expected to bring 300 new temporary jobs. Irion County has already seen one of the largest cost-burden increases from 4% of households during the Great Recession to 13% of households today.

Irion County’s situation is mirrored in rural areas in Iowa, Idaho, Georgia, and Virginia. In Norton, VA, many people have been struggling to make a living because the boom in fracking has made natural gas cheaper than coal.

Between 2010 and 2017, the median rent remained unchanged at $550, but the average household income dropped from $34,000 to $27,000.

“We never had a downturn here like other places. Our economic peak was probably around 2010,” said Fred Ramey, the Norton City Manager. “Then we lost a lot of coal jobs, probably a thousand in this area, and those jobs were paying $50,000 to $80,000 and the rest of the local economy was not able to absorb all those jobs.”

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