VALPARAISO — Fifty years ago, when Project Neighbors first started, the organization could buy a house in Valparaiso for about $40,000, fix it up and rent it for the affordable price of $350 a month. Last week a half lot was sold in Valparaiso for $125,000, Project Neighbors Executive Director Paul Schreiner said.
“The scarcity of land and the high-demand of housing leads to the decreasing likelihood that we continue to successfully create the affordable products that we have,” Schreiner said.
Through volunteers and fundraising, Project Neighbors works to strengthen the Valparaiso community by offering childcare, healthcare, educational support and their centerpiece — affordable housing. The group buys old homes, refurbishing some and demolishing and rebuilding others, before renting the units to low-income residents. To help build generational wealth, the group sometimes sells the properties to tenants. It has produced over 100 units of housing and currently manages 46.
The demand for Project Neighbor's services "is constant," but Valparaiso's low vacancy rate and high cost of land paired with the soaring price of construction materials has made meeting that demand a difficult task, Schreiner said.
Housing Opportunities, a nonprofit that provides emergency shelter, resources and affordable housing to residents throughout Porter and LaPorte counties, is feeling similarly squeezed. The organization owns and rents out about 200 units at reduced rates and subsidizes rent for around 60 families living in properties owned by traditional landlords. The average stay in their rentals is over three years.
"Typically we run 98 to 99% occupancy every year and we do not have a ton turnover, and that is simply because of the affordability of it," Housing Opportunities CEO Jordan Stanfill said. "Once someone gets into a two-bedroom at $650, then that is usually the most affordable place they can find."
The cost of vibrancy
Over the past 25 years, Valparaiso has worked to transform the downtown into a hub of commerce, cuisine and recreation.
"Elevate Valpo," a recent study and plan created to guide future development, found that dense downtown housing is needed to sustain local business. A 121-unit complex, called the Linc, is currently planned for the north side of Lincolnway between Michigan Avenue and Morgan Boulevard.
Valparaiso's downtown is now in high-demand, as is much of the rest of the city.
A residential market analysis published by the city in 2021 found an 830-unit deficit for non-student, very-low income renters. The study also said as the city continues to grow “diverse housing types at various price points” need to be developed.
The 22 representative apartment complexes examined in the study had an aggregate vacancy rate below 2%, compared to Indiana's rental vacancy rate of 9.7% and a national rental vacancy rate of about 5.6%. The study also found that from 2000 to 2018, Valparaiso’s population has grown by 20%, exceeding the growth rate for Porter County as a whole.
While researchers have found that simply creating more housing, even high-end housing, drives down overall rental costs, in Valparaiso, zoning puts a firm limit on density.
Zoned out
The housing study reported that the majority of homes in Valparaiso are in single-unit structures. The city is a patchwork of different residential, commercial and industrial zones. Multifamily housing is only fully permitted in areas zoned Urban Residential and Campus. It is allowed with a special-use permit in Residential Transition areas and on a limited basis in areas zoned Commercial, General, Commercial Business District and Central Place.
Where multifamily areas are limited, developers often build denser complexes on smaller patches of land to maximize investments. When the small patches of land are pricey, say $125,000 for a half lot, the developer has to build higher-end housing, "otherwise it is just an impractical investment in the land," Schreiner explained.
The easiest way to reduce development costs and subsequently the price of rent is to simply build smaller houses, Schreiner said.
When Schreiner was working as a general contractor in the early 1980s, he started off building "starter homes" — modestly sized, affordable homes primarily for young families. As the cost of land has "skyrocketed," building smaller starter homes has become increasingly difficult.
In 1973 the median size of a new single-family home was 1,525 square fee, in 2020 it was 2,333 square feet.
Building smaller, more affordable housing is simply not feasible for many developers, Stanfill said. The only way organizations like Housing Opportunities and Project Neighbors can swing it is through federal and state subsidies.
"Everything is more expensive. The land prices are increasing substantially and so it makes it harder to do small developments," Stanfill said. "We typically do not like to do large development of affordable housing all in one location, but sometimes you have to do that just to get that return."
Rising prices
While land prices are a huge barrier, sometimes that is just the beginning. After the environmental study, environmental mitigation, the energy study, the building permit and demolishing the existing structure, Schreiner can "easily spend $10,000 to just get to the starting line."
Once the construction starts, Project Neighbors is able to save about 40% of the total costs by using volunteers, but materials are an additional financial burden. Pandemic-related supply-chain disruptions have caused building material costs to increase "at the speed of light" — a sheet of plywood that would have once cost $12 is now $50, Schreiner said.
The affordable housing plight is a "national crisis," Stanfill said, and it has become harder and harder to find available land across Porter and LaPorte counties. Currently, over half of all the income-restricted rental units in the County are clustered in Valparaiso, with only 20% of the county’s total population.
One solution has been to work directly with land owners. Stanfill said when they are contacted about available land before it is listed on the market, Housing Opportunities has a far better chance as there is no competition with for-profit developers.
Valparaiso Councilman Robert Cotton, D-2nd, said the city should give tax abatements and other incentives to encourage affordable housing. He also said the city needs to focus on building housing for current residents, not "building a city that will be pleasing to someone who does not live here." The Uptown East apartment complex located near Valparaiso University will soon be converted to "workforce housing," for residents earning between 50% and 80% of Valparaiso’s area median income.
While Housing Opportunities and Project Neighbors are working to ready more housing everyday, many residents need an affordable place to live now.
"Ultimately the solution for most of this is not mental-health counseling, it is not substance-abuse relief, it is simply the need for more housing, and not housing in general but housing that can be occupied for $600 to $700 a month," Schreiner said. "Those other factors that tend to create unstable lives, many of them heal when you have stable housing.”