Reno’s Housing Future Hangs in the Balance

Directly southwest of Reno lies a cautionary tale for Northern Nevada. California is in the throes of a deep, and seemingly unsolvable, housing crisis. Home prices have skyrocketed so far out of reach of the middle class that 138,000 people fled the state in between July 2016 and July 2017, according to U.S. Census Bureau data.

For years Reno has been a beneficiary of California’s housing dysfunction. Californians have crossed the border for the relative relief of Reno’s attainable home prices and less regulated business environment — according to the Census Bureau, Nevada gained 38,000 residents the same year California lost 138,000.

But some housing experts now see the early warning signs of a California-style housing crisis in Reno. They are concerned that policymakers are repeating the same mistakes that put California in the housing hole they so desperately are trying to dig out.

While Reno is still a world away from Bay Area prices, the imbalances that lead to a housing crisis are clearly at play in Reno. Population growth is outstripping housing supply and has been for years. Housing project approvals are increasingly onerous and costly. And limited land and increasing labor and material prices are driving up the cost of new home construction.

According to a Housing and Urban Development study on the Reno area, Reno is growing by an average of 7,575 people per year (1.7 percent) while only permitting 2,100 homes. This is occurring in a very tight housing market — the study estimated the 0.9 vacancy rate in the area.

“During the 3-year forecast period, demand is estimated for 7,000 new homes. The 1,375 homes currently under construction in the [Reno region] will satisfy some of the demand,” the report, entitled Reno, Nevada: Comprehensive Housing Analysis, says.

That imbalance between housing demand and housing supply spells trouble, says Don Tatro, executive director of the Builders Association of Northern Nevada. And there is no sign that it is changing anytime soon.

“We’re not keeping up with housing demand. That is very evident,” said Tatro. “We have growth, and we have jobs coming, but we don’t have housing.”

This simple arithmetic is compounding upon itself. As Reno exited the recession housing starts stubbornly stayed low while a series of high-profile business relocations kicked the job market into high gear. As more and more jobs poured into the region — many from companies fleeing California’s high housing prices — Reno seemed to ignore one of the most vital elements of economic development — a place for these new workers to live.

“We can’t tout jobs and go to ribbon cuttings unless we go to groundbreakings,” said Tatro.

While Reno’s housing problems are perhaps years away from reaching a level similar to California, it is also true to note that California’s housing crisis did not occur overnight. In an in-depth study of the origins of the state’s sky-high housing market, California’s Legislative Analyst’s Office, a nonpartisan fiscal and policy advisor to the California Legislature, showed how a lack of supply primarily drove the state to its current housing state.

In explaining why California doesn’t build more housing, the study noted four things: community resistance, environmental reviews that can be used to stop projects, a finance structure that incentivizes non-residential development, and limited land.

Professionals who have followed the Reno housing closely for years see those same dynamics increasingly at play in Northern Nevada.

“The longer a housing project takes and the more strung out it gets … at the end of the day you can’t do that missing middle housing anymore,” said Andy Durling, principal at engineering firm Wood Rogers.

The missing middle is a term frequently used for housing that is attainable to the middle class. It is often the missing housing piece because market-rate housing is driven out of reach of middle-class families by a land, labor and project approval costs, while low-income housing projects can pencil out with the help of state and federal subsidies and tax credits.

Durling is currently involved in a project that perfectly illustrates the struggles housing developers have in building housing for that critical middle-class family.
Daybreak, a 4,700-home housing proposal in South Reno that would have provided critically needed attainable housing for middle-class families, was recently voted down by the Reno City Council.

The Reno City Council cited the project’s location in a floodplain and within portions of the city’s critical flood pool as reasons for the denial, despite the project planning extensive flood mitigation measures that would keep the city’s flood pool capacity intact.

Durling said that for Reno to truly tackle its housing issues, projects like Daybreak will have to be thought of in a different light.

“If you were to mark off all the property that is in a floodplain and keep it from development, it would be huge. It would change the character of our community. You could only build in these small areas,” said Durling, noting that Reno City Hall, the Reno Convention Center and much of Damonte Ranch is in a floodplain. “We are at a point in Northern Nevada where the easy stuff is gone. We are dealing with land that has some minor issues to it. Our options are we have to develop in slightly constrained land, or we are going up into the hillside, and none of that is affordable.”

In a city where jobs are pouring in, and the population continues to swell, Reno will be faced with one of the key questions over its future — how to avoid the dwindling housing supply that has hamstrung housing markets like California. Those decisions might not be easy — they might entail approving projects that have opposition or finding ways to use property that is not perfect.

“It is a very small group, but very loud, who obstruct these projects,” said Tatro. “But we have to look for a way to approve good projects first instead of immediately saying ‘no.’”

Daybreak is not the only recent housing project that has seen opposition. Prado Ranch, a Lemmon Valley development that proposes housing for Reno’s “missing middle,” has seen neighborhood backlash as well, despite offering significant roadway, stormwater, parks, and school benefits to the area along with the much-needed housing.

Oddly enough, even California — often help up as the poster child for everything wrong with housing policy — is moving in this direction. After years of intractable housing fights that have left the state with fewer and fewer new homes to meet the demand, California is changing course. New California Governor Gavin Newsom unveiled a bold new housing agenda that could include the drastic step of punishing communities that don’t get new housing built for their residents. Newsom has floated the idea of withholding state funding to communities who do not meet their housing targets.

Tatro sees a need for a similar urgency in Northern Nevada.

“We need to get more projects out of the dirt,” said Tatro.

Having seen what happens in communities that don’t build housing, and having seen the statistics that show Reno’s population surging much faster than housing construction, he believes this is a critical time for Northern Nevada.

“If we become a community that says ‘yes’ to attainable housing we will have a long and prosperous future,” said Tatro. “ But if we turn our back on housing there will be significant penalties.”

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