Amid housing crunch, KS lawmakers want to expand rural incentive program to big cities

Scattered across Wyandotte County are more than 12,000 vacant lots, a figure driven in part by past demolition, white flight and westward expansion of Kansas City, Kansas.

Kansas lawmakers want to build homes on some of those lots again.

The Kansas Senate last week passed a bill that would expand the state’s Rural Housing Incentive District program to cities with at least 60,000 residents, a group that includes KCK, Overland Park and Wichita, among others. The legislation, approved on a bipartisan 30-6 vote, would allow cities to issue bonds and divert future tax revenue to help pay for the development of up to 100 houses a year.

The measure, Senate Bill 34, now heads to the Kansas House, where state Rep. Pam Curtis, a Kansas City Democrat, says housing needs in her urban district are just as great as in rural areas. Jobs paying between $60,000 and $80,000 a year are available in and near the county, she said, but there are not enough houses for those workers.

“My community is a great place for a lot of that workforce to live but we’ve really got to make those investments,” she said. “I don’t think without that help from the government — that will be difficult to make that affordable.”

Kansas struggles to supply affordable housing, like many areas of the country. In 2021, Kansas officials released the first comprehensive statewide housing needs assessment in nearly 30 years, which found that having a home that raises quality of life is becoming more difficult to achieve.

The assessment found that on the Kansas side of the Kansas City metro, nearly 20% of homeowners and 40% of renters were “cost burdened,” generally defined as households that spend more than 30% of their income on mortgages, rent or other housing expenses.

In Kansas City, Kansas, the number is nearly 46%, according to DeWayne Bright, a FUSE Corps executive fellow who briefed Unified Government officials on Wyandotte County’s housing situation earlier this month. FUSE Corps is a San Francisco-based nonprofit focused on racial equity that works with local governments across the country.

“We want to make sure we’re protecting the most vulnerable within the community,” Bright told the officials.

In Wyandotte County, some older neighborhoods — including ones made up predominantly by people of color — have appraisal gaps, meaning the sale price of houses and their appraised values don’t match, the housing assessment said. It added that in Johnson County, “not in my backyard” attitudes lead to opposition to new types of housing.

Some of the data in the assessment is already outdated because of changing pandemic conditions, the tumultuous housing market and high inflation. Still, the report reflects a growing movement across Kansas to provide more affordable housing, and a recognition that housing supply will prove important to the state’s economic future.

Recent announcements of large businesses coming into the state with plans to hire thousands of workers have further focused attention on housing availability. The future Panasonic battery plant in De Soto may employ upwards of 4,000 people and a planned Integra Technologies semiconductor plant outside Wichita will have some 2,500 workers.

“Over the past three years, I think the state of Kansas has made significant strides in appropriately resourcing affordable housing development,” said Brennan Crawford, director of the nonprofit Community Housing of Wyandotte County, which typically builds between 12 and 24 houses a year.

Crawford counts a tax credit for low-income housing, additional dollars for moderate income housing, along with proposals such as Senate Bill 34 as examples of progress. But even if Kansas is moving forward now, it hasn’t always been that way.

“I also think that, historically, Kansas as a predominantly rural low-income, low-tax state has underinvested in affordable housing for a long time,” Crawford said.

Ryan Vincent, director of the Kansas Housing Resources Corporation, a public nonprofit that administers federal housing programs for the state, said Kansas has had a housing problem for generations. The Great Recession in 2008 exacerbated the shortfall, however, as builders left the industry.

“Since that time, we simply haven’t kept pace with the number of new homes that are needed and our housing stock continues to deteriorate,” Vincent said.

In Kansas, the average year of construction for residences is 1949, according to the housing assessment. The median age of houses in the United States was 39 years in 2022, according to the National Association of Realtors, meaning that half of all houses were built before 1983.

In 2019 in the Kansas City metro, the report said, there was a lack of available housing units for individuals with incomes under $25,000 a year — and a lack or limited availability of units for individuals earning more than $75,000 a year.

Gov. Kelly likely to sign bill if it passes

Democratic Gov. Laura Kelly would almost certainly sign Senate Bill 34 if it is approved in its current form. The Kansas Department of Commerce has previously testified in support and Kelly included expansion of the program in her budget proposal.

“Overall, we support any increase or expansion of RHID,” Rachel Willis, the agency’s director of legislative affairs, told lawmakers at a hearing last month. “It is a strong program that should be applied broadly across the state since the housing crisis is not specific to a region or communities of certain sizes.”

Supporters of expanding the Rural Housing Incentive District program to bigger cities are quick to caution the proposal isn’t a silver bullet but would provide local officials another “tool in the tool box” to encourage new housing development.

“Without these incentive programs, it will be hard to keep up with the demand for needed housing,” Cory Haag, the owner of Emporia-based Haag Development, told state senators in written testimony last month.

The current program works by providing reimbursements to developers related to the cost of building new housing in rural areas or, in some instances, renovating existing buildings located within a central business district, according to the Kansas Department of Commerce.

Senate Bill 34, while making larger cities eligible, would allow construction on existing lots to qualify for the program if infrastructure – including utilities and streets – have been in place for at least 10 years. That provision in particular may aid in developing vacant lots like those in Kansas City, Kansas.

Cities, which would have to approve the creation of districts where construction could take place, are supporting the legislation. The average square footage of homes built under the program within a district couldn’t exceed 1,650 square feet, excluding garages, patios and other exterior areas.

The Kansas Budget Office was unable to estimate the cost of the program because the financial impact of the program depends on future development. Still, Kansas Budget Director Adam Proffitt wrote in a fiscal note that the program could reduce revenue to the state because cities would pledge future tax revenues toward repaying bonds.

Wendi Stark, a research associate with the League of Kansas Municipalities, told a Kansas Senate committee in February the bill “would now allow all cities to further invest in existing neighborhoods, utilizing resources already in place to expand a community’s housing potential and restore residential structures that have fallen into disrepair.”

How effective the expanded program would be depends on the details of how it’s carried out, according to real estate and housing experts. Stanley Longhofer, director of the Wichita State University Center for Real Estate, said in some instances incentive programs end up subsidizing development that was already going to happen.

If the Rural Housing Incentive District program is done correctly, the incentives are effectively “free money,” he said, because the new development leads to rising property values — and therefore more property tax revenue — that wouldn’t have happened otherwise.

“But that’s the trick — would it have occurred anyway?” Longhofer said.

Supporters of the incentive program say that in some areas — like parts of KCK — developers are unlikely to build new housing on vacant lots without financial aid. That’s because in those areas homes often cost more to build than what they’re worth on the market.

But if enough lots are developed, proponents of the incentives say property values will begin rising.

“It’s a tool, it’s a financial mechanism … to make the math work so we can build some of these houses,” said state Sen. Rob Olson, an Olathe Republican who introduced the bill.

Rural vs. urban

The limited opposition that exists to expanding the program has centered on a handful of right-wing state senators. Some, like state Sen. Alicia Straub, an Ellinwood Republican, have complained about continuing to name the program a “rural” incentive when it will be available across the whole state.

Others, like state Sen. Mark Steffen, a Hutchinson Republican, see an unacceptable expansion of government.

“It’s big government. It’s the never-ending narcissistic assumption that government can solve everything,” Steffen said on the Senate floor.

Steffen acknowledged the issue of housing is difficult. He ticked through the ways the market has changed, as prices have boomed and interest rates have climbed, along with the cost of construction.

“The point being that there’s variables way beyond our control and way beyond what government should be wading into. We’re about small government, less bureaucracy, the free market,” Steffen said.

Olson said during debate over the bill that senators were getting hung up on the name of the program. He argued Kansas can’t afford to allow residents to continue drifting away from the state.

“I think this will help a lot of people who need housing,” Olson said.

Contributing: Katie Bernard of The Star