McLean County is in the middle of a housing crisis. We have been hearing that for over a year now. So why at this point aren’t we seeing more construction? And particularly why aren’t we seeing more single family homes being constructed?
A review of permits for housing construction in July in Bloomington found four single family homes were permitted. Four. Just Four. Why is that?
Rivian now has 7,800 employees indicating our community now needs 9,000 more housing units over the next ten years. If only four houses were permitted in a month in Bloomington it is likely there were only eight in our community. That would equate to 96 new single family homes a year and in ten years add only 960 housing units.
Recently The Bloomington-Normal Economic Development Council presented numbers for the first six months of the year. It showed that from January through June only 46 new single family housing permits were issued. That’s right at eight per month. How do we catch up on our housing needs at eight single family homes a month?
According to Patrick Hoban, CEO of the BNEDC, “Home ownership is challenging due to high interest rates.”
Hoban also mentioned that developers are facing challenges funding the infrastructure (streets, sanitary sewers, storm drainage retention and sewers) that have to be constructed before homes can be sold in subdivisions.
Regarding single family home construction costs and why there is a lack of construction being seen in this area, Greg Troemel, Director of Inspections for the Town of Normal, said, “What I consistently hear from the builders, realtors and developers is the mortgage interest rate jump earlier this year, coupled with building materials inflation.”
“Interest rates and construction costs have either scared off prospective buyers or disqualified them financially,” said Troemel.
Instead of single family home construction we are seeing more multifamily housing construction in our area.
One reason Hoban said, is “Multifamily (housing) offers leasing options instead of home ownership.”
Troemel said, “The commissioned housing studies of the past few years have indicated this trend (toward multi-family units) based on trends and feedback from the younger people entering the workforce and housing market.”
“Their preferences are to rent and not necessarily tie into a mortgage, and the demands of homeownership,” Treomel said, “Many also do not have the available cash on hand for the larger down payments required in the current mortgage environment.”
A developer can also build more units at a lower cost in multifamily models.
BNEDC looked at the number of multi-family construction permits issued in the first half of this year. They found 37 permits issued representing 70 units. From this it is easy to deduct that most of these were duplexes.
The majority of these multi-family permits were issued in May for this year’s construction season. So it’s doubtful we can anticipate another 70 units being permitted during the last year. But for the moment let’s assume we could. That would still lead to only 140 units a year. In ten years it would be 1,400 units.
Combining the 960 single family units with the 1,400 multifamily units would give us 2,360 units leaving us 6,640 units short.
Suffice it to say that Rivian’s growth continues to far outpace our communities ability to provide housing.
Troemel listed the following reasons for why even the multifamily construction we see is limited; “Labor supply is thin, construction materials costs have settled some since the pandemic, but are still seeing inflation, higher mortgage interest rates, and construction loan terms, upfront equity demands for projects (more cash needed).
Troemel shared the following regarding the situation in Normal as we look ahead to the future discussing plans on the drawing board.
“We have the potential for about 1,600 MF units to develop across seven projects that are in varying states of progress, Troemel said. “The three most advanced (Shelbourne – 100, Carden Springs – 477 , The Archer – 136) will likely not offer units for occupancy this year or see visible construction until next spring. They too are fighting the construction loan interest rate environment, labor supplies and materials inflation.”
“Not included in those numbers is ISU’s Main Street dormitory project that proposed 1,200 beds,” said Troemel. They’ve indicated their recent cost estimates for that project have again delayed it’s 2025-26 opening. While this is for students, the growing enrollment is keeping the off-campus housing inventory essentially full and this makes it hard for folks to find an apartment on or off campus.”
Troemel added the following regarding the vastness of the number of houses needed in the area and trying to put that number in perspective.
“If you place stock in the reports indicating we need 4,000+ units in the market (2022 BNEDC Study that does not factor in Rivian), it’s (the current rate of development) not coming close,” said Troemel. I have a different view on this based on my experience.”
“In my time with the town (1985) Normal has issued about 4,000 new one and two family permits to date which equates to about 110 homes per year on average. Keep in mind Bloomington generally did twice what Normal did through these years. The low in my time here was 39 in 1985 and the high was 442 in 2003. Much of this was driven by State Farm’s growth and certainly DSM/Mitsubishi.”
“I’m not contesting the reports, but I think most people don’t realize how long it takes to add that number of units to a community.”
Troemel’s 28 years of experience in the development industry in our community argues that we would be wise to seriously consider his remarks. Still, amid the stark realities of his words, there is a ray of hope. Troemels words indicate the community can meet the task at hand. We just need to get back towards those 2003 numbers and sustain them.