Thursday, November 13, 2014

Learning to be regionable

Yesterday I was pleased to see that The Daily Yonder picked up on a local story I shared with them and included the synopsis below in their November 11 Roundup.

new housing construction (not in Roseau)
Photo by J. Harrington
"Housing shortages in prosperous towns like Roseau, Minnesota, are stifling economic expansion. Traditionally, demand for housing creates opportunity for developers to build more apartments. But lower rents in rural communities mean the numbers don’t add up for developers, reports the Minneapolis Star-Tribune.

"Reporter Adam Belz writes about the complex factors that are holding up housing expansion in Roseau:
  • Lower rents in small towns like Roseau make building new apartments far less attractive to developers. A developer would need to charge about $1,100 to $1,300 a month in rent to get the desired return on investment for new apartments. Rents in Roseau are much lower – typically around $600 a month.

  • Economists usually point to low wages as the primary reason for lower rents. But that doesn’t explain all the difference in Roseau. Wages in northwest Minnesota are about 25% lower than wages in the Twin Cities, but rent is a whopping 80% lower in Roseau than the Twin Cities.

  • The rural rental market works differently than the urban market, where there are larger pools of potential renters all in the same income category – a key ingredient for making apartment development work financially. Fewer renters in the same income category means apartments in complexes are more likely to sit vacant and “wreak havoc for a landlord.”

  • Construction costs are higher because a number of contractors folded during the recession. Others are busy meeting construction demands in North Dakota, booming from oil production.

  • New apartment complexes typically appraise for less than they cost to build.

"Government grants and loans can help fill the gaps, Belz reports. But there are no easy solutions.

"The bottom line is that the housing squeeze is affecting employment opportunity. Snowmobile manufacturer Polaris says it could add 200 workers if housing were available for them locally."
Although I agree with most of what's in the article and synopsis, I think a very important point deserves more emphasis. Roseau is largely a one employer (Polaris) town, just as the Iron Range is overly dependent on mining. That makes it tough to justify housing investment that can take many years to pay off if there is a risk that the dominant business will suffer losses and, perhaps, have to shut down and/or lay off a number of renters or homeowners.

diversifying rural economy
Photo by J. Harrington

Urban areas aren't immune to this kind of problem either, look at Detroit. In Minnesota, South St. Paul had to reinvent itself as the stock yards closed. How many operating grain mills can you find in Minneapolis these days? When I was working for Minneapolis in business real estate development, I learned a lot about the risks faced by a business having 75% or 80% of it's income tied to one customer, or a commercial building with just one anchor tenant leasing two-thirds or so of the space. Aaron Brown has been advocating for diversifying the Iron Range economy. My Minnesota has been writing about making mining and the Iron Range economy more sustainable. Similar approaches could benefit someplace like Roseau. When the inimitable Senator Paul Wellstone used to say "We all do better when we all do better," I don't think he was advocating for more company towns. (If it would increase their profits or meet other business objectives, Polaris could build the needed housing without a need for public subsidy.)

Successful city economies are normally part of successful metropolitan (or micropolitan) economies, which, in turn, are part of more broadly based regional economies. Does the phrase "balanced economy" ring a bell?

Economies rarely succeed based on friction. (Ask yourself, if you haven't already, whether and how much political gridlock is helping economic development.) Cooperation is as important as competition, although the latter gets unbalanced emphasis as the key to success. Neither Nature nor economics likes a monopoly or a vacuum. It seems to me that Minnesota has less emphasis on regional development and cooperation than it did when I moved here. If, as some suggest, we are moving toward a "sharing" economy, wouldn't we all do better if we learned more about how to share nicely. If the 97% of scientists that agree about climate change and global warming are correct, and those who claim we have moved into the Anthropocene age, all of us living on Earth need to learn how to tackle global issues cooperatively, and, maybe, discovering in time that infinite growth on a finite planet isn't sustainable no matter how small the


By Josephine Miles 
So populous the region
That from the next region
The crowing of children, barking of cars could be heard,
So that a continuous linkage
Of sounds of living ran
In the limber air,
District to district, Woodlake to Montclair,
Freestone to Smithfield, and one child’s cry
Was not concealed from any trade route,
Or passer by,
Or upstairs island of thought withdrawn,
Or basement of submerged magnificence.
One crow
Welkened the evening sky,
Bark blasted the dark,
Like an assertion in a time of assent,
Or an increase to astonishment.

June 1958

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