Affordable Housing Not Keeping Pace with NWA Population Growth

A new center could address the issue by creating walkable, mixed-income neighborhoods in cities.

Street of residential houses

Northwest Arkansas had the fastest population growth in the state over the last decade with about 100,000 more people living in the region now than a decade ago, according to new Census data. More residents means more people looking for houses and that increased demand has led to an increase in prices. 

The average price of a home in Benton County during the first half of 2021 was $311,000. That’s a 14 percent increase from last year and a 43 percent increase over the last five years. In Washington County, the average home price is $297,000, which represents a 24 percent increase in one year and a 47 percent increase in five years.

The issue of affordable housing in the region was a major focus of the State of the Northwest Arkansas Region Report, which was discussed during a Zoom webinar today. About 400 people attended the virtual presentation, a collaboration between the Northwest Arkansas Council and the Center for Business and Economic Research at the University of Arkansas. 

Nationwide, housing affordability often impacts minority communities. Black, Native American and Hispanic households are more likely than white households to be extremely low-income renters, according to the National Low Income Housing Coalition. Twenty percent of Black households, 18 percent of American Indian or Alaska Native households and 16 percent of Hispanic households are extremely low-income renters. This racial disparity is the result of higher homeownership rates and higher incomes among white households.

Although average annual wages in Northwest Arkansas have increased by about 6 percent since 2020, that’s not enough to afford the increase in home prices, CBER director Mervin Jebaraj said. 

“Why do we have home prices going up? It’s because, at least since 2014, the population has been growing significantly in Northwest Arkansas and we really haven’t built enough homes to keep up with that population growth,” Jebaraj said.

The current issue of low housing inventory is the opposite of the housing crisis that occurred in the early 2000s when contractors overbuilt. At that time, construction of housing units outpaced the population growth, leaving many homes to sit empty.

A lack of land on which to build tends to be the underlying issue of why the region hasn’t produced enough housing to accommodate residents who want to live in cities and close to amenities, Jebaraj said. Fewer available lots leads to higher land prices and homebuilders have tried to cope. 

For a time in Fayetteville, builders put more smaller homes on small lots to deal with the high cost. Most of the other cities are constructing larger homes on the expensive lots. This does not produce enough homes to deal with the influx in households, so people end up buying more housing than they need.

“What’s really driving home price increases in Northwest Arkansas is that the available land to develop homes on is diminishing and as a result, land prices are increasing fairly significantly,” Jebaraj said.

A potential model for addressing affordable housing is Des Moines, Iowa where they’ve expanded how much housing they’ve produced in their downtown. The area accounts for more than a third of the city’s overall population growth over the last decade and more than half of all new housing units.

Typically, Northwest Arkansas residents have dealt with rising home prices by driving farther out of cities — away from the central corridor, jobs and amenities — to places where housing and land is less expensive. While the initial price of a home may be cheaper, the cost of transportation to commute to work or to amenities within the city can prove very costly, Jebaraj said. All this driving also results in more greenhouse gas emissions, which can have a negative impact on the climate.

The significant growth putting pressure on the region’s housing market is expected to continue, so it’s important to prepare and now is the time to act, said Nelson Peacock, NWA Council president and CEO.

“If we don’t begin to address the issue of housing affordability now, we’re going to miss our window,” Peacock said. “We are going to miss the chance to change the trajectory here in Northwest Arkansas.”

In March, the NWA Council, with support of the Walton Family Foundation, announced the creation of the NWA Workforce Housing Center. The center’s mission is to provide housing for working families near areas where significant jobs or commercial and public services are planned or available. The project is still in the early stages and officials expect to announce the center’s executive director and community advisory board members in the coming weeks. 

The center will collaborate with community partners to address affordable housing issues to create solutions that are unique to each community.  

“We must ensure that these are well-designed and high-quality options…we want to promote mixed-income, walkable, amenity and transit accessible neighborhoods for our region’s workers and their families,” Peacock said. 

The center is expected to be up and running early next year. More information about affordable housing is available on the NWA Council’s website.  

Antoinette Grajeda
Antoinette Grajeda

Antoinette Grajeda is Editor-in-Chief of Arkansas Soul, the host of the Affirmative Action podcast and a Northwest Arkansas-based journalist. She has covered race, culture, politics, health, education and the arts in Arkansas for nearly 15 years.

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