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Rising Lot Preparation Costs Propel Housing Prices in NWA

4 min read

Lot preparation costs are helping to drive a surge in housing prices in Benton and Washington counties.

Installing the infrastructure for a residential lot and prepping it for construction can cost as much as $70,000, hampering the region’s quest for more affordable housing.

“Everything is twice as much as it was five years ago,” said Ben Shankle, northwest Arkansas president of Pavecon, a concrete and paving company based in Dallas.

The average price of a home sold in Benton County in the first half of 2023 was more than $423,000, a 77.1% increase from five years ago, according to the Arvest Bank Skyline Report. In Washington County, the average home price was $392,000, 67% higher than five years ago.

Lots themselves are more expensive as demand rises, and inflation has driven up construction costs.

High housing demand has overwhelmed engineers in the area. Daniel Ellis of Crafton Tull in Rogers said that when a developer comes to his company with a request for a subdivision design, it may take the company five months to start work.

“There is a real shortage of engineers, drafters and surveyors in northwest Arkansas,” Ellis said.

Northwest Arkansas has been adding 10,000 residents a decade and has surpassed 560,000 in population. It is projected to approach 1 million by 2045. Duke McLarty, the executive director of the Northwest Arkansas Council’s workforce housing council, said last year the region will need 90,000 more homes in the next 20 years.

Home starts aren’t keeping up. The Skyline Report said that the region has 21,675 lots under development in 379 active subdivisions with another 15,104 with either preliminary or final approval.

Developers and engineers alike want a smoother, quicker regulatory process.

Ben Shankle (Pavecon)

Bill Burckart of Burckart Construction in Bentonville has been a member of the Bentonville City Council since 2008. He understands the frustration with the drawn-out permit approval process, which he said has contributed to some projects taking more than four years.

“It is very risky,” Burckart said. “It takes so long. You don’t make any money until somebody moves in.” The risk factor drives lot prices ever higher, he said.

When Crafton Tull gets a residential project to design, it typically meets with city officials to discuss their the proposed development. They survey and make designs, then an exacting revision process takes place before permits can be issued.

“The level of detail that is required to get a project approved has definitely increased,” Ellis said. “The time to approve takes longer. … It takes more time to get through the process and get approvals. We have to go to the state as well as get state Health Department approval and a bunch of stuff. There’s the right way to do it, and to do it right is time and money.”

Shankle said his company did the infrastructure for one subdivision that approached $80,000 a lot. About 130 employees work out of Pavecon’s Cave Springs office, using high-tech GPS equipment in bulldozers and excavators, and working on 80-120 lots at a time at each site.

Shankle said he is paying some of his specialists more than 30% more than he was a few years ago.

“The cost for me to build a subdivision now is three times what it cost five to six years ago,” Shankle said. “It really happened after COVID. It sparked this price rise that hasn’t come down.”

No developer who wants to remain solvent is going to spend $60,000 on a lot, $60,000 to develop it, then build a house on it and sell it on the cheap. One solution, however, is a design strategy that regional experts have been preaching for years: density.

Burckart said building more or combined units such as duplexes  on individual lots will dilute acquisition and development costs for each unit. The more units per acre the better, but so far the density trend has not taken root in northwest Arkansas.

“We’ve all talked about it for decades, especially the last decade,” Burckart said. “We have defined all the barriers and challenges, every industry and agency and chamber of commerce. We have not yet brought it to policy. We still need to implement.”

Ellis agreed with Burckart on the need for more density in housing in the area. He said northwest Arkansas has plenty of land available for development, but that land should be maximized.

“The only way we are going to catch up is if we rethink housing, in my opinion,” Ellis said. “The single-family ranch-style home is not the way to meet the housing needs of northwest Arkansas. You have to think outside the box.”

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