Housing Trends in Northwest Arkansas Pits Popularity vs. Affordability

Homebuilder Bill Burckart believes a regional policy approach can help alleviate the growing crunch on affordable housing in northwest Arkansas.

No one wants northwest Arkansas to become a victim of its own success.

The thriving region, centered on the four main cities of Washington and Benton counties, has enjoyed robust economic and population growth that’s not expected to slow down anytime soon.

But regional leaders are concerned that the rising economic tide could leave many in the area vainly searching for an affordable home.

The Northwest Arkansas Council announced in March that it would launch a workforce housing center to start addressing the housing needs in the region, which saw an 11% increase in the price of the average home in 2020. The center will be supported by the Walton Family Foundation, which in late 2019 released a report that detailed the housing dilemma.

The foundation’s report, “Our Housing Future,” painted a bleak picture for workers who earned minimum wage or less and their hopes of finding an affordable place to live. Northwest Arkansas has a population of more than 500,000 now with predictions of reaching 600,000 by 2023.

The average sales price of a home in Benton County was more than $293,000 in the second half of 2020, according to the Arvest Bank Skyline Report in March. Washington County homes sold for an average of more than $268,000.

“By the work we are doing in economic development making our region more attractive, we are contributing to that,” said Nelson Peacock, the CEO of the Northwest Arkansas Council.

Bill Burckart, the owner of Burckart Construction and a member of the Bentonville City Council, said regional leaders have been talking about the housing problem for the past 30 years. He said the cities in the region must cooperate by acknowledging the problem, deciding on group and individual city goals and then developing policies to reach those goals.

“This has been a long time coming,” said Burckart, who was a member of the research committee for the Walton Family Foundation report. “We are at a crossroads currently. We have the ability to not duplicate what some cities have done in the past. They are now in a crisis with all their workers [over] housing costs. We are reaching that level here. Do we work toward a solution ahead of the crisis?”

The increasing cost of materials such as lumber, wiring components and fuel is contributing to the region’s rise in housing prices, but northwest Arkansas’ housing problem is more closely linked to rudimentary supply and demand. As the population soared during the past couple of decades, the land available for housing did not.

As developable lots became scarcer, their value increased. A builder who buys a lot for $20,000 will build a more expensive home than on a lot for which he spent $10,000.

Burckart said regulations and red tape often cause housing development projects to take more than two years from conception to completion — and time is money in the construction industry.

“Affordable housing can be achieved,” Burckart said. “What policies can effect change? Right now there isn’t any cohesive policy throughout northwest Arkansas or even admission on what our goals are for housing.

“Each individual city hasn’t addressed housing. It is the most important thing to our citizens, but we haven’t addressed it.”

Again, the region’s economic strength has contributed to some of its problems. The 2008 recession was caused by the housing market crash, but people still moved to northwest Arkansas in droves.

The region is still trying to catch up, Burckart said, but now with 40% fewer builders and workers in the wake of the housing crash.

Peacock said his and others’ concern is that the housing squeeze will not only make life difficult for the poorest families in the region but also for workers such as teachers and firefighters. When the council announced the workforce center, Peacock made a point to note that Rogers firefighters couldn’t afford to live in Rogers.

Peacock said that when he lived in the San Francisco area, some colleagues lived as far as two hours away because that was where the nearest affordable housing was.

“That subtracts from the quality of your life if you don’t live where you work,” Peacock said. “That is exactly what we want to avoid. We want our critical workforce of people we rely on living and enriching the towns where they work. That’s good for workers and the community to build this way.”

Dense Solutions

Peacock said the workforce housing center is still in fact-finding mode and hopes to hire an executive director later this year.

For Burckart, though, there are some readily available “low-hanging” solutions that could make an immediate impact on the housing crunch. Rather than sprawl westward in search of new lots, northwest Arkansas needs to tweak its zoning regulations to allow more houses per acre.

Increasing that density will allow more homes at good locations and lower the land costs associated with each individual home.

Increasing density in a “thoughtful and responsible manner,” coupled with removing impact fees and speeding up the construction process timeline, would show quick dividends by lowering costs, Burckart said.

Sprawl is a particular problem for northwest Arkansas because there isn’t a transportation infrastructure to accommodate those living 30 miles from Bentonville or Fayetteville. Cheaper houses might be available that far out, but transportation costs would eat up a lot of the savings.

“If we don’t take some steps we are just going to continue to see sprawl,” Peacock said. “That’s the nature our growth will take if we don’t jump in. In five years, the problem will just be that much worse. People need housing right now. We are not at a crisis point yet, but we are heading that way.”

The area is in danger of becoming a tale of two housing markets. A white-collar executive who is recruited by a Fortune 500 company to relocate from Silicon Valley to Rogers might be pleasantly surprised to see how much house $1 million will buy.

“The biggest component of cost of living is obviously housing, and that is the piece that has been growing rapidly here in northwest Arkansas,” said Mervin Jebaraj, the director of the Center for Business & Economic Research at the University of Arkansas’ Walton College of Business. “If you compare us to San Francisco, no, we are not expensive. About 40% of the people coming to northwest Arkansas come from other parts of the state; compared to where they are coming from, it is expensive. It does reduce some of the draw people have to come here.”