The Housing Situation In Norman
High building costs in Norman are causing developers to move out of the area, according to a Norman Transcript article. Norman’s expensive building permit and water connection costs coupled with high inflation are pushing housing costs to higher levels than in other areas of the state. These problems are faced by developers and home buyers alike, and the cost to live in Norman has gone up over the years and currently ranks as more expensive than both Moore and Oklahoma City. The typical home value for Norman is $231,691, compared to Moore at $197,874 and Oklahoma City at $194,763 according to aggregated Zillow data.
Why are Some Cities More Expensive?
Living in city centers has always been more expensive than living outside of a city, and that has to do with supply and demand. Cities are concentrated with amenities, so people live in these places to be closer to the goods and services they need to access. These amenities range from the necessary—grocery stores, gas stations, etc., to the desirable—universities, salons, restaurants, bars, and the like. This causes an influx of potential residents looking to move to city centers, and depending on how desirable a city is and how limited the availability of its housing units is, the higher housing prices will become.
The National Bureau of Economic Research (NBER) cited a working paper titled “Superstar Cities” in which they suggest “the explosive growth in house prices in high-cost cities is fueled by three factors: the scarcity of housing units, the growing number of high income families in the United States, and the fact that high-income families have been willing to outbid lower-income families for scarce housing in preferred locations”. The cost of living in Norman has likely risen as the University of Oklahoma, a sought-after amenity, has grown and more students and families move to the area. And according to an Atlantic article, prices of everything tend to follow real estate pricing trends: “The price of real estate has a way of showing up in price tags all over the city. Ice cream shops, massage parlors, and architects charge more in cities with higher rental prices”.
Why is Norman Expensive?
Do the usual reasons ring true in Norman, though? Yes and no. It’s in a desirable place with proximity to a big city like OKC, and has larger tracts of land available. Norman is home to a university, which brings residents that end up staying long after earning their degree, and a lot of money spent in the meantime. OU is the largest employer by far in Norman.
However, Norman definitely outpaces the trend. Oklahoma City, a more populous municipality, is right beside Norman and far cheaper. Building costs in Norman are starkly higher in comparison to other cities of comparable population size. The Norman Transcript dug into developer costs to find out that “Permit and application fees confirmed in June for Norman, Edmond and Broken Arrow show Norman is almost $1,400 higher than Edmond and about $1,700 higher than Broken Arrow”. Norman has strict building site requirements that raise the cost during construction, like stormwater pollution reduction via silt fencing and a Stormwater Management Plan. They also require the purchase of on-site waste containers for extra cement, paint, and other dangerous substances, which can cost about $1,000 alone.
Developers in Norman have costs associated with plumbing, electrical, and mechanical permits, as well as street and curb reconstruction. Curtis McCarty, owner of a construction company, told the Transcript that “when a development is put in, the developer has to pay for all the water and sewer lines, water inlets, detention ponds, streets and curbs”.
Public Utilities in Norman
In fact, water connection costs are a primary concern for construction companies looking to build in Norman. “Norman’s wastewater connection fee is around $3,500. The city’s wastewater connection fee alone is more than $1,500 higher than Newcastle, the second-highest fee in central Oklahoma,” the Transcript says. Oklahoma City’s cost is $250, while Norman’s water and wastewater connection costs come out to around $4,500.
This discrepancy is partly due to Norman’s strange public utility structure, which requires a citywide vote to raise prices. In April 2022, the City of Norman held a vote on a water utility price increase to help fund water management projects, and Norman residents shot it down, with 54.59% of the voters against. The cost of these improvement projects ends up falling on developers and construction companies, and then passed along to the buyers when they calculate those high costs into the sale price. The extra upfront cost is off-putting to companies in the area when they can just leave city limits and build in cheaper areas right outside of town. Norman can boast low monthly residential utility costs, but the cost of the connection ends up being tied to the cost of the house.
Inflation
Utility prices in general have risen throughout the United States. Countrywide, “Energy prices rose 41.6%, the most since April 1980,” as of June this year, according to data from the U.S. Bureau of Labor Statistics (BLS). Electricity costs are up 13.7%, which is the largest increase since April 2006. Norman residents are also feeling those costs, as OG&E, the metro’s energy provider, implemented a price increase on July 1.
The national inflation rate was 9.1% in June of 2022, the highest since November 1981, up from 8.6% in May according to BLS data. “Food costs surged 10.4%, the most since February 1981, with food at home jumping 12.2%, the most since April 1979. Prices also increased significantly for shelter (5.6%, the most since February 1991), household furnishings and operations (9.5%), new vehicles (11.4%), used cars and trucks (1.7%), and airline fares (34.1%)”.
Inflation coupled with high housing costs is a recipe for economic disaster. If someone can’t afford a home, they’re practically forced to rent and forgo all the economic benefits that correspond with home ownership, while at the same time spending an increasing percentage of their income on costs of living. Because Norman is a college town, it makes sense that it would have more renters than other cities in Oklahoma, but renting is common in big cities where housing demands are higher than the number of houses on the market. However, 2019 data from the U.S. Census Bureau shows the national average of housing units occupied by their owner is 64.1%, while Norman’s average sits at 52.8%. That’s lower than Oklahoma City at 63.8%, Moore at 68.3%, and Oklahoma overall at 65.6%. Stillwater, another college town, is even worse off: In 2019, only 37.2% of the housing units in Stillwater were occupied by their owner.
Evictions, Foreclosures
Less homeowners and more renters mean more evictions, especially since the eviction moratorium enacted during the worst throes of the pandemic expired. “Four Oklahoma cities are in the top 100 evicting cities: Tulsa (11th), Oklahoma City (20th), Norman (83rd), and Broken Arrow (90th),” according to the Oklahoma Policy Institute. June data from the Census Bureau showed that 14,429 Oklahoma renters out of 85,710 respondents (16.8%) who are behind on their rent think it’s very likely they’ll be evicted in the next two months, and 39,811 (46.4%) thought it was somewhat likely. Rent increases are also to blame, with June data showing that 317,377 Oklahoma respondents out of 724,514 (43.8%) had their rent increased in the last 12 months.
It’s not just renters; the Census Bureau has similar datasets for homeowners behind on mortgage payments who may face foreclosure. Both evictions and foreclosures will lead to homelessness for those who can’t find another place to stay. Affordable housing is also a question of supply and demand, as mentioned earlier. The state currently needs over 70,000 affordable rental homes to meet the needs of extremely low-income renters, according to data from the National Low Income Housing Coalition (NLIHC).
Policies that Help
There are some positive movements in state and local policies to limit housing insecurity. Norman’s Center City Form-Based Code (CCFBC) does have provisions in place for new development and redevelopment that promotes more affordable multi-family housing in the city by removing certain zoning requirements, which ideally should help with the supply and demand issue. HB 3409, which modifies the Oklahoma Residential Landlord Tenant Act and increases the amount renters can spend on repairs that they can deduct from rent, should also aid in affordability and livability for renters.
The Oklahoma Policy Institute argues that even more should be done to help struggling individuals, like a wage increase and a more equitable tax structure for low-income Oklahomans. They also argue for a tenant’s right to a lawyer in eviction proceedings: “While most landlords have a lawyer in eviction proceedings, tenants often cannot afford one and do not have the right to a lawyer like in criminal court,” the Institute says. “Oklahoma should enact provisions that increase renter access to legal representation in eviction proceedings. Legal representation for tenants is associated with significantly greater odds of a tenant remaining in their home”.
Looking Forward
The long and short of all this is that every person and entity with a stake in the housing market—whether it be as a developer, construction company, property owner, or renter—is struggling with price increases in materials, fees, rent, property taxes, and whatever other payment their housing unit requires. This problem is not isolated to Norman, or Oklahoma, or even the United States. Supply chains around the world have been disrupted, and most countries are struggling with shortages. Prices have skyrocketed to reflect the situation. While there isn’t a magical fix-all, there are better times to look forward to. Most estimates place the inflation rate near the 2% Federal Reserve target by late 2023. That’s not to say prices won’t go down before that, but that is when we assume prices might go back to “normal”. Supply chains will stabilize, and hopefully with them, rent and mortgages too. When prices go down for developers and construction companies, they go down for buyers and renters as well.
Do you have questions and want answers about how these issues affect your business or property? Do you wish to take proactive measures to protect your business or property? Call the attorneys at PLAINVIEW LEGAL GROUP PLLC today at (405) 310-0183 to schedule a free legal consultation.
