With high prices and high interest rates, fewer people are looking to buy a home. (WTIU/WFIU News)
About 13 years ago, Beth and Jeff Smith decided to buy some land and design their own house. They built a 4,800-square-foot house for themselves and their two kids. Now, their daughter has graduated from IU and is moving and their son is a rising junior at IU and doesn’t live at home. It’s time to downsize.
“The reality is that it's also aging, and so there's a lot of upkeep and maintenance and repairs that are coming with it that we're thinking about, do we want to invest a lot more money here to update and modernize,” Jeff said, “or do you want to downsize to a smaller place, more modern, newer in a different location.”
Beth and Jeff have looked online for smaller homes but haven’t found the right one. Among other things, they want a home that’s about 2,000 square feet, modern, energy efficient and a yard. The most important criterion is to be in the downtown area. What they’ve found is either too expensive or too old.
“When you look at what would you be giving up versus what you're gaining? And it just doesn't make sense to sell the house that we built, because it has all the things that we wanted for something that would be maybe a compromise for what we already have,” Jeff said.
What they want the city doesn’t have at the moment. Anna Killion-Hanson, director of housing and neighborhood development for the City of Bloomington, said the city faces multiple barriers in providing housing for specific groups of people due to fair housing laws. These laws prohibit them from building housing based on demographics, such as age, sex or race. This means they can’t develop housing that targets a specific group, such as people like Beth and Jeff who are getting older and want to downsize.
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There is also less movement in the market right now due to high prices and high interest rates, resulting in the “golden handcuffs” effect. Fewer people are buying homes, resulting in less demand.
“We're locked right now. What we really need to do, and the only things that we can do, is influence the market,” she said. “So how do we influence the market? So, we are piloting a couple of programs this year. One of them is an interest rate buy-down to encourage unlocking those golden handcuffs, because housing needs to appeal to everyone. There's not just one type of house that will be appropriate for every homeowner or tenant.”
Killion-Hanson said it’s also hard to develop a variety of housing options due to land scarcity, zoning and planning restrictions, and high material and labor costs. These barriers aren’t attractive to developers, resulting in a lack of housing options.
“That goes back to the entire ecosystem. There has to be ability to move up and down. Not one specific housing type will work for everyone. And as I said, 72 percent of our workforce commutes outside of our community. And what does that tell you? That tells you we don't have the housing types or enough supply to have a healthy market.”
City efforts to influence the market include down payment and closing cost assistance programs and rental deposits for low to moderate income households. The city has also supported the Home Investment Partnership, a federal program that provides funding for Habitat for Humanity homes.
Another key step in influencing the market and attracting more developers, Killion-Hanson said, is making changes to the city’s Unified Development Ordinance. This could involve speeding up the permitting process. The longer it takes, the more expensive it gets.
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“It makes it easier for a local developer that maybe wants to build something. It also means that it's not just larger developers that can afford to pay to play,” she said. “Basically, it means that anyone could go out and be a developer if they knew that there was a finite amount of time that they're not on the hook waiting for their permit, right? I think it will help influence affordability, because we're getting more folks that can participate.”
Killion-Hanson acknowledges concerns like Beth and Jeff’s, but said the way to provide more specific housing options is to look at the market as a whole. The city doesn’t normally act as a developer, except in cases like the Hopewell project.
“We just don't have a lot of new areas for growth,” she said. “It's limited in options at this time.”
Beth and Jeff said they would consider building a new home downtown if the opportunity arose, but they know land is hard to come by. If possible, as they get older, they would prefer to be close to walking trails and amenities. A development like Hopewell, which is close to downtown and by the B-Line walking trail, is appealing to them.
“What I decided that I don't want to do is move further out into the county,” Beth said. “I just don't want to be so far out that I'm away from the amenities of the city. I really love living close to things, and I don't want to have to commute and be far away from things.”
