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As the home-buying season gets underway in Lawrence, those in the industry say the city is facing a historic shortage of homes on the market that requires city leaders to take action.

Lawrence Board of Realtors President John Huntington said that in his 30 years of experience, he has never seen such a low inventory of homes for sale. As of this past week, he said, only 44 homes were on the market in Lawrence.

“We’ve never come even close to numbers like this,” Huntington said.

By contrast, around this time last year there were roughly 400 local listings. The board sent a letter to the Lawrence City Commission this past week stating that the city’s housing shortage had hit a “critical crisis” and that the board is seriously concerned about how it will affect housing affordability as well as other economic factors. Addressing the city’s affordable housing shortage has been a key effort of the City Commission for the past several years, and after receiving the letter the commission agreed to hold a work session to discuss the housing shortage with the board and other stakeholders in the housing industry. The conversation could reopen debate about growth limitations in Plan 2040, the comprehensive plan that covers Lawrence and the unincorporated areas of Douglas County.

The plan has a growth policy that prioritizes infill development and requires developers who want to expand the city’s boundaries through annexation to provide a community benefit, such as jobs, affordable housing or parkland. The Lawrence Board of Realtors, Lawrence Home Builders Association and the local chamber of commerce all previously expressed concerns that the annexation limitations could limit housing supply and make both new and existing housing more expensive. Because annexations require the city and its taxpayers to pay for additional infrastructure maintenance and emergency services, the city sees the policy as the most cost-effective and environmentally sustainable way for the city to grow.

Mayor Brad Finkeldei, who was formerly on the planning commission, later told the Journal-World that the shortage of houses on the market and the effect on prices and other economic factors is certainly a concern, and that a strategic discussion is needed. However, he said the conversation about expansion has changed over time. He said that 20 years ago it was more of a growth versus no-growth debate, but that now any discussion about how the city grows cannot be had without considering how expanding the city’s boundaries can affect affordability overall.

“I think as time has gone on, people are looking at these issues of building houses a little differently than they did before, just like they have with density,” Finkeldei said. “I think there is a changing kind of discussion going on. I don’t think you can have these discussions without talking about affordability.”

Affordable housing

The board contends, however, that the shortage of housing, both in existing homes and new construction, is having immediate effects on home prices and could have other economic consequences.

The letter states that the current housing shortage is unprecedented and has created an increasingly competitive selling environment that is artificially inflating the fair market value of properties and driving up the cost of housing. To illustrate the point, the letter states that in a balanced market, meaning a market that does not favor buyers or sellers, there is enough available housing in a city to provide an inventory of about five to six months. But currently, there is less than a month’s supply of housing available. Of the 44 homes for sale, only 12 are listed under $250,000.

For example, Huntington said one of the agents in his office recently listed a home, and after a little more than an hour he had 17 showings scheduled and ultimately ended up with 13 offers on the house. He said those competitive environments drive up prices. For comparison, Huntington said from Jan. 1 to March 10, the median price for a one-story home with three bedrooms and two bathrooms in Lawrence was $240,000, compared with $222,000 during that same period last year.

Regarding the reasons for the current market, Huntington and Danielle Davey, governmental affairs director for the board, noted that a shortage of homes is a national problem not unique to Lawrence. But in Lawrence’s case, they cited what they said is a low number of newly constructed homes available, a low inventory of buildable lots in the city and cumbersome requirements for annexation of new land. Davey said an increase in demand, perhaps due to people wanting more space at home amid the pandemic or low interest rates, is compounding the shortage of supply.

“There are other factors that I think are driving up demands and making buyers more interested in the current market, and there’s just not anywhere near enough inventory to meet that demand,” Davey said.

Davey also said it’s important to have homes at every price point, because if choices are limited, people looking to upgrade will stay in their entry-level homes, decreasing options for renters looking to get into their first home. Davey described the city’s housing market as having a ripple effect through the local economy, affecting not only the city’s efforts to make housing more affordable and the other costs and purchases that come with buying a home, but other economic factors such as recruitment of new employers to the community.

“Housing is such a fundamental issue for any community,” Davey said. “It’s kind of a multi-armed beast in that it reaches into all these different issues that our community faces.”

Potential action

The letter states that because the process of annexing new lots can take about 18 months, the board believes the city should be proactively planning for the annexation and development of new lots and working with community partners to facilitate the building of additional housing. The board suggests those conversations include the Lawrence Home Builders Association as well as nonprofit agencies in housing.

Davey said the city needed to be proactive about annexing land for new lots if it is to address the shortage. She said a strategic conversation among stakeholders was needed as soon as possible, especially given how long it will take to add new housing to the market.

“We need to be having the conversation about what are the next steps because if (annexations) take 18 months, then we need to be talking about it now,” Davey said. “Because two years from now, we’re going to be running out of places to build.”

Regarding what potential actions the city can take to help the housing shortage, Finkeldei said though he doesn’t think the city should get in the business of speculatively annexing land into the city, there are other actions the city could take. First, he said, the city could have discussions with developers about why there aren’t more annexations. And when it comes to, for example, developing west of Kansas Highway 10, the city could encourage multiple land owners to coordinate their efforts for a large subdivision, so expansion of city utilities and services would be more cost effective.

“That’s a conversation that is certainly worth having,” Finkeldei said. “And how can we time that, how can the city support that, and how does it fit into Plan 2040 so we can see how it all works together?”

Still, Finkeldei said building within the city’s boundaries where annexation and rezoning are not required and infrastructure already exists is the quickest and most cost efficient way to add housing to the community. In the end, he said, both annexations and infill development would likely be needed.

“We need to be sure we’re encouraging those infill lots to be built upon, and if there is something the city can do to encourage that, because that’s a quicker solution,” Finkeldei said. “But I think we do need to look at both.”

The City Commission has not yet set a date for the meeting to discuss strategies to address the housing shortage, but requested that the topic be included in one of its meetings in April.