NWA cities working to expand housing supply to accommodate region’s growth

The growth in Northwest Arkansas continues.

Following the release of census data in August that showed Fayetteville now the second-largest city in the state, an article released by online media company Visual Capitalist ranked the Northwest Arkansas metro area as the sixth fastest-growing metropolitan area in the country.

It seems all but certain that the growth will only continue in Northwest Arkansas in the coming decade. However, what’s less specific is if the region will have the housing supply to accommodate it.

“We haven’t produced enough housing to meet the number of people coming into Northwest Arkansas,” said Mervin Jebaraj, director of the Center for Business and Economic Research in the Sam M. Walton College of Business at the University of Arkansas. “When I look on the horizon, I don’t see as much building as is necessary to hold prices stable or reduce prices. That requires an increase in supply, which requires a major change in the way we do housing in Northwest Arkansas.”

Increasing that supply requires a multifaceted approach centered on analytics, zoning policies and other barriers to housing development, in addition to strategic city planning and forming more public-private partnerships.

And, it requires greater overall coordination at a regional level, something lacking in Northwest Arkansas, though recent efforts have been launched to address the need.

THE TRUE COST
A study by the Walton Family Foundation (WFF) in 2019 projected that nearly 80,000 families would move to Northwest Arkansas’ four major cities — Bentonville, Fayetteville, Rogers and Springdale — by 2040. To accommodate that growth, approximately half of the new homes built in the region must serve workforce households, defined as a family of four earning between $33,000 and $78,000, and low-income households, defined as a family of four earning less than $33,000.

Another recent WFF study assessed housing policy in Northwest Arkansas and outlined numerous challenges and threats to curb the rise of housing prices in the region — most notably, the continued development of low-density single-family housing, high land costs and lack of land capacity in currently zoned areas.

Recommendations to create more affordable housing included:

• Forming stronger regional partnerships.
• Educating local leadership and the community on the importance of affordable housing.
• Reforming zoning codes to encourage the development of affordable housing.

While single-family homes are the bedrock of most housing markets, they come at a cost for a growing metropolitan area, especially those built in suburban sprawl subdivisions farther and farther away from the city’s center. Not only are single-family units inefficient for addressing housing supply needs, but they also put more significant strain on towns that have to create and maintain infrastructure to support them.

“There are impacts to the city’s fiscal resilience,” said Jonathan Curth, development services director for the city of Fayetteville. “Every time one of those subdivisions are built, the city takes on the water, sewer and streets. Whereas downtown, you may have 40-50 people living on a quarter-mile of water, sewer and street. [In subdivisions] you’ve got maybe four homes. But you still have to maintain them both to the same degree.”

It also creates an additional financial strain on those homeowners. A recent trend in city planning focuses not just on housing but on its interconnected relationship with transportation, which can carry additional costs for those living farther away from amenities or their place of employment.

“It seems great in the short term if you can find a $200,000 house. But in the long-term, you run into the issue of transportation costs,” Curth said, adding that the price of the house is “not the true cost of housing, because many people who qualify for homes have to live farther away. Suddenly they have to pay more on gas, more on car payments — just all these additional transportation costs.”

And growth in the region’s peripheral towns can also cause problems when residents don’t spend money in their cities of residence. And when sales tax revenue doesn’t grow in proportion to the town itself, it puts financial strain on the town.

“If you could just draw a line around an area and say, ‘This is all the land we have to work with for residential and development in Northwest Arkansas,’ and retain the rest of Benton and Washington counties for farming and wilderness … There are many benefits to that,” said John McCurdy, director of community development for the city of Rogers. “Because it reduces the long-term cost of sustaining those towns. You don’t want these towns going bankrupt.”

“That’s why it’s a regional conversation,” McCurdy added. “As Rogers, I have no voice in these smaller towns. But I think it’s morally incumbent on us to think about what we do as cities. We can’t just say no to urbanization because we don’t want to have that density and push it out into the county. Because if we do that, it hurts all of us.”

GROWING PAINS
In many ways, the housing crunch is part of broader growing pains for the region due to the urbanization of an area with a high quality of life where people want to live.

“There doesn’t seem to be any end to the demand. Right now, if you build it, they’re going to buy it,” McCurdy said. “Part of this is just growing pains. This area is just growing. At some point, we’re going to have to recognize it’s going to get more expensive to live here.”

Still, cities have tools at their disposal to guide growth, including strategically planning for greater population density in places where they can readily access transportation, as well as “neighborhood centers” that act as small-scale city centers with a gas station, restaurants and office space.

“A lot of livable cities develop this way, where there’s a neighborhood bar, and you’re close to a bodega,” McCurdy said. “These are policy-based, passive approaches to encouraging the development of more housing stock that is patterned around density centers.”

Cities are also incentivizing affordable housing developers by “cutting through red tape” and exempting such housing projects from paying additional costs such as permit fees.

But far and away, the most helpful tool cities have at their disposal to influence housing supply is zoning properties. Rogers, for its part, has transitioned to a form-based code that allows for mixed development and “virtually unlimited density in those main parts of our town,” according to McCurdy.

While “a large amount” of Fayetteville is still zoned for single-family development, Curth said the city council “has taken a favorable view of requests to rezone properties to allow for much higher densities and a mix of housing types.”

“I think we could be more proactive by targeting certain areas where we know there’s going to be growth and encouraging a mix of housing types where we currently see single-family zoning,” Curth said.

REGIONAL APPROACH
A main takeaway from the recent WFF report was to take “a regional approach” to expanding and diversifying housing in Northwest Arkansas, an approach that has been lacking in the region historically. That effort focuses in part on identifying and breaking down municipal barriers in the area to development.

“If you’re a developer in Northwest Arkansas, in many respects, the city limit line doesn’t apply to you,” said Jeremy Pate, senior program officer with the Walton Family Foundation. “You’re developing projects where the need is and where the market demand is. So understanding generally what are those municipal regulations and how do they impact developers’ ability to produce housing is a critical thing.”

As an example, Pate cited the differences in fees and review cycles for construction projects across different cities in the region.

“Not that they all have to be the same, but there can be some more coordination between a lot of those communities,” he said. “So those are the types of things this study brings to the surface — zoning, parking regulations, are there fees that can be waived for specifically housing affordability that affects low- to moderate-income individuals.”

But the shift to accommodate the region’s explosive growth also requires a change in mindset.

“We’re in this painful, awkward growth stage,” McCurdy said. “We’re like tweens, where we’re transitioning from big town to little city. And it’s just a different paradigm that’s going to rub people the wrong way and lament the ‘good old days’ and all that. We’re evolving culturally toward an acceptance where people would rather live in that kind of urban, multifamily environment than in a McMansion in a subdivision. And that’s something our folks aren’t used to.”