Transcript Eagle Ford Shale

Pursuing Innovative Housing Solutions in
the Bakken
Harold Hunt, PhD
Real Estate Center @ Texas A&M
College Station, Texas
[email protected]
The 6 Bakken Counties with the Most Drilling
and Their 2012 Population Estimates
(27k)
(8k)
(16k)
(8k)
(8k)
(27k)
Source: Minneapolis Federal Reserve & 2012 U.S. Census Population Estimates
Closest Distance to a Large Metro Area
Fargo
(26k)
Billings
(162k)
Minneapolis/
St. Paul
(3.3 mil.)
Sioux Falls
(167k)
Cheyenne
(92k)
Omaha
(890k)
Thoughts from Bakken Area
Developers
Thoughts from Bakken Area Developers
Developer #1:
• First considered RV/Cabin housing combination
• Changed to all cabins after resistance to RVs
o
Cities shortening permit times & demanding higher quality
• Found residents wanting to buy & leave rentals
o
Want families there; thinking very long-term
• Added truck stop, office & hotel to control quality
• Equity money primarily from 1031 investors
o
No debt financing available
Thoughts from Bakken Area Developers
Developer #2:
• Wanted western theme cabins on 1.3-acre lots
o
Higher than avg. quality, landscaping, private wells, septic
• County kept demanding changes before approval
o
(1) Sewage treat. plant, (2) paved roads, (3) 2-acre lots
• Developers will only build what pencils out
• Felt that govt. entities are:
o
o
o
Demanding too much permanent infrastructure & housing
Driving the cost of housing up over the $276k FHA limit
Lacking a clear vision of their housing needs
Thoughts from Bakken Area Developers
Developer #3:
• Truly “affordable” housing (govt. subsidized) can’t work
o
Median household incomes are too high
• Need “right-priced” homes (under the $276k FHA limit)
o
o
Built duplexes (sell for $230k per side)
Built townhomes ($199k to $220k per unit)
• Utilities gouging developers for hook-ups
• Cities & local lenders too wary after previous busts
o
Need more permanent infrastructure from cities
• Rule of thumb: Developers expect a profit by year 3
Thoughts from Bakken Area Developers
Developer #4 “Brainstorm” Session:
• Develop a MH subdivision for future S.F. homes
o
1-acre lots, heavy landscaping, paved roads & sewage plant
o
Use “high quality” manufactured housing
o
Make MH housing rental units but hold land ownership
under one owner for later removal & redevelopment for S.F.
o
Use a HOA to provide strong property monitoring & upkeep
o
MH or modular housing mitigates labor shortage problem
o
A problem with MH: it was stigmatized early on

The current fear: MH structures and neighborhoods won’t hold up
Visions of Manufactured and Modular Housing
& Their Developments Differ Widely
Visions of Manufactured and Modular Housing
& Their Developments Differ Widely
“Trailer Parks” Can Be As Upscale As You Like
From a recent news article:
“Paradise Cove in Malibu is a trailer park inhabited by actors Pamela
Anderson, Minnie Driver and Matthew McConaughey, where homes
fetch up to $2.5 mil. and come with marble floors.
“If your budget won’t stretch to that, there are communities like Parrish
Manor in Raleigh, NC, which is more like a health retreat – there’s a
football field, a community garden, playgrounds, a walking trail, picnic
area and sports programs for children. There is even a car
maintenance shed.”
Source: BBC News Sept. 2013
Thoughts from Bakken Area
Real Estate Brokers
Thoughts from Bakken Area Brokers
Brokers:
• Moving away from traditional to extended-stay hotels
• Cities want higher quality in new housing
• Need to monitor new housing density carefully
• See demand shift from rental to ownership
o
o
o
o
o
o
Convinced drilling will continue for many decades
Credit getting restored; seeing some lease/purchasing
Man-camps not desirable (little privacy; want their families)
Cities need families for teenage service labor
Some paying $1,100/mo. for RV space plus utilities
Paying $2.50 to $3.00 per SF per month for apartments
Thoughts from Bakken Area Brokers
Brokers:
• Households making <$90k qualify for govt. programs
o
Biggest group displaced has been senior citizens
• Need more “entry level” S.F. housing (around $250k)
o
Believe higher quality developments will survive best in a downturn
• Accurate data for housing demand is impossible
o
o
o
Developers using studies to attract equity investors
Cities rarely question need for new housing developments
Municipalities can’t compare fee structures across cities
 Often undercharging for taps, permits, etc. to cover actual costs
The Takeaways
Takeaways
Areas where these parties agree:
• “Perception” is this is a long-term play
• Market shows increasing desire to purchase housing
• Market shows decreasing desire to rent housing
• The “market” is driving demand for higher quality
housing as much as cities are
• Housing development primarily being financed
through equity funds, (thus increasing housing cost)
o
Need more lenders to take a chance on housing develop.
Takeaways
Areas where these parties disagree:
• What is the optimal housing density for cities?
• Are municipalities being unreasonable in their
demands during the permitting process?
• Are cities striking the right balance between “quality
of life” spending and “hard infrastructure” spending?
• Is using manufactured/modular housing today a
good idea for the long-term viability of a community?
o
If so, what is the correct ownership model for the land? For the unit?
REAL ESTATE CENTER
at TEXAS A&M UNIVERSITY
Mays School of Business
http://recenter.tamu.edu