Housing affordability has become one of the most talked-about land use issues in virtually every major urban center in North America. Less focus has been directed to the lack of affordable housing options in small towns and rural areas, despite a significant need that spans the demographic spectrum. On the upper end, the population in small towns tends to be older and aging more rapidly than its urban counterparts. According to a survey conducted by the Housing Assistance council, one-quarter of U.S. seniors live in rural communities and 54 percent of rural senior renters are cost burdened, paying more than 30 percent of their income for housing. The shortage of affordable rental product is also affecting a younger, low- to mid-income workforce segment. While perhaps not as obvious as in urban geographies, small communities require a range of housing options, including rental projects that offer access to jobs, transit, health care, and community amenities.
Challenges, Opportunities, and Best Practices
The development of small-scale multifamily projects faces unique hurdles despite the fact that the existing inventory plays a key role in the housing spectrum. According to the most recent American Housing Survey, properties ranging from five to 19 units account for more than half of the U.S. inventory of buildings with more than five units. Similarly, Statistics Canada reports that apartment projects of less than five stories represent more than two-thirds of the country’s multifamily rentals. Much of this stock is aging and new construction can be particularly challenging in smaller and more remote geographies. Barriers include the following:
- Economics. Without economies of scale, fixed line items such as management fees result in high costs per unit. Most projects require multiple layers of financing, including local subsidies, which can be less available in rural areas. Institutional equity and traditional debt tend to be risk-adverse, expensive, and demanding of a level of scale and experience not often associated with small projects.
- Limited resources. It can be difficult to find reasonably priced contractors and property managers in rural areas. The public sector, while well intentioned, may struggle with limited staffing and a lack of land use planning expertise.
- Community perception. Stigmas around affordable housing can translate into neighborhood resistance.
Even so, attractive opportunities exist, including the ability to develop infill sites that take advantage of existing infrastructure. In addition, small projects are likely to be a better, more welcome fit in lower-density communities. Because these geographies are often overlooked by large players, local owners and operators can leverage market knowledge to drive tangible, focused impacts. Development feasibility can be supported by:
- Regional-scale planning that builds on coordinated public/private partnership initiatives.
- The creative use of local grants, subsidies, and loans, as well as the use of alternative equity sources that tend to be more passionate about social equity at a local level.
- Diversifying income streams via mixed-use and mixed-income projects.
- Education that emphasizes broader community benefits such as job growth and economic vitality.
- Public-sector incentives, including land donations and fee waivers.
Housing in the Lower Columbia Region of British Columbia
The Lower Columbia Region (LCR) is part of an area in British Columbia, Canada, known as the Kootenays. The LCR comprises a handful of small towns, including Rossland, Trail, Fruitvale, Montrose, and Warfield, as well as the surrounding rural electoral areas. The region’s world-class recreation and lifestyle opportunities are attracting an increasing number of new residents from more expensive parts of B.C., including Vancouver. This growth has been particularly pronounced in the city of Rossland, which is a focal point for outdoor activities and home to RED Mountain ski resort.
LCR communities exemplify the demographic and housing market attributes described earlier, notably an aging stock of single-family homes and a lack of affordable rentals suitable for a low-to-moderate-income workforce and independent seniors. According to the most recent LCR Housing Need and Demand Assessment, detached homes account for nearly 80 percent of the LCR inventory, more than half of which was built before 1960. By 2026, seniors aged 65 and older will represent over 30 percent of all residents in the region. While still inexpensive relative to B.C.’s urban centers, home values and rents have increased to the point where more than 20 percent of the LCR population pays more than 30 percent of their gross income toward housing.
Numerous public and private stakeholders are working to address this issue. In particular, the Lower Columbia Affordable Housing Society (LCAHS) has emerged as a regional champion to facilitate and implement housing strategies throughout the region. This volunteer-driven nonprofit is part of a broader economic development organization, the Lower Columbia Community Development Team Society (LCCDTS). Columbia Basin Trust (the Trust) is another key player with a mandate to manage its investments and “delivery of benefits” for the ongoing economic, environmental, and social good of the LCR and larger Columbia Basin, a geography that includes the entire Kootenay region. Together with the support of the federal and provincial governments, local cities, and private-sector employers, these groups are successfully driving the creation of affordable rental housing.
The December 2017 announcement of a $28 million partnership between the Trust and the province of British Columbia underscores best practices in the region’s housing efforts. B.C. Housing is the provincial Crown corporation benefiting from a political environment currently very supportive of investment in housing. Its $14 million commitment matches an equal one from the Trust. Together they funded 167 units of affordable rental housing throughout the Columbia Basin, including one LCR project in Rossland. The successful origination and allocation of this award can be attributed to several critical factors.
- The Trust’s longstanding relationship with B.C. Housing. These organizations have more than a decade of experience working together. Clarity around mutual objectives allows for quick execution once a need has been identified.
- A data-driven approach. Both the Trust and the LCAHS emphasize the need for a robust understanding of the market and have proactively commissioned quantifiable demand assessments that provide fact-based support for housing assistance.
- Public/private partnerships. Major LCR employers including the Kootenay Savings Credit Union and Teck’s Trail Operations committed to initial funding for the LCAHS. These partnerships gave the Trust and B.C. Housing an additional level of confidence in the organization’s capabilities.
- A local champion. In conjunction with LCR cities and community organizations, the LCAHS’s work in education and advocacy has fostered awareness of the importance of affordable housing in driving economic vitality.
- Proven implementation and management experience. The LCAHS has successfully renovated, built, and managed a portfolio of LCR rental units and is well positioned to leverage lessons learned in future projects.
Best Practices in Rossland, B.C.
Rossland’s attractive alpine setting and sense of community make for a highly desirable living environment, one that has spurred one of the highest rates of population growth in the LCR over the past decade. Home values jumped 40 percent between 2006 and 2016 and virtually all recent construction has been limited to ski- and golf resort–oriented condominiums. Available multifamily rental stock for a modest-earning workforce is almost nonexistent while Rossland’s two independent rental projects for seniors—Esling Park Lodge and Golden City Manor—have long wait lists.
The city recognizes the benefits of a diverse resident base that includes its workforce and seniors, as well as the need to expand housing options to serve both. This has translated into timely support for multifamily development proposals (both market-rate and affordable) and density allowances for centrally located, serviced sites. Other examples of good planning include the adoption of a widely accepted short-term rental policy that helps maintain a 70 to 80 percent “regular resident” base and an Age-Friendly Action Plan that includes provisions and incentives for affordable, safe housing.
The grant that Rossland received from the Trust and B.C. Housing will be used to construct workforce housing on what is locally known as the “Emcon lot.” This high-profile site is located in the downtown core and has been the subject of various development concepts for years. Preliminary housing plans now call for a mixed-use rental project with ground-floor commercial space and 20-plus residential units, which could potentially include both subsidized affordable and market-rate product. The selection of Rossland’s proposal can be attributed to:
- The ability to showcase the Emcon project’s ability to reduce the area’s affordable housing need.
- A commitment by the city to donate the land to the LCAHS under a long-term lease structure.
- A joint ownership arrangement between the city of Rossland and B.C. Housing that relies on the LCAHS as an experienced nonprofit partner and acting landlord. As Rossland Mayor Kathy Moore said, “It helps to have competent people in place!”
- A scale that allowed the development proposal team to leverage third-party consulting expertise.
- Ongoing, open communication with the Trust and B.C. Housing.
The coordinated efforts behind the Emcon lot proposal exemplify a more broadly applicable model for small-scale, affordable rental housing, one that is based on thoughtful, creative planning, and passionate, engaged participants.
KIMBERLEY PLAYER expertise as an economic and real asset adviser spans more than 20 years serving public- and private-sector clients. Her work is based on an extensive research background that she has leveraged internationally, in market assessments, feasibility analyses, valuations, and economic development projects. In addition to her participation in ULI, Kimberley is currently the director of research at Equilibrium, where she focuses on identifying sustainable real asset investment strategies, including opportunities in affordable and workforce housing.