RURAL BOOMTOWNS: THE RELATIONSHIP BETWEEN ECONOMIC DEVELOPMENT
AND AFFORDABLE HOUSING

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I. EXECUTIVE SUMMARY

Introduction

Throughout the 1990s, several communities in rural America experienced rapid economic development. These boomtowns -- extremely high growth areas -- are at the extreme end of the growth/decline axis, and are sufficiently important phenomena that their low-income housing needs should be given special attention. They have become boomtowns for a variety of reasons: gaming, the military, tourism, retired residents, even prisons.

Overall, there is a general lack of understanding about how variables such as the types of jobs created, wage levels paid, population trends and the capacity for housing construction impact a community´s low-income housing needs. The purpose of this study is to examine the relationship between economic development and the need for low-income housing in selected high growth rural areas.

Case Studies

Camden County, Georgia

The source of Camden County´s economic boom was the unexpected arrival of the Kings Bay U.S. Naval Submarine Base, which triggered a two-decade expansion of jobs in lucrative defense-contracting services and other related industries. However, the comprehensive planning process that occurred prior to the location of the base was reactive rather than proactive, and low-income residents felt that they were left out. While the presence of the base was offset by substantial federal impact funds and there was a generous surplus of housing units, the supply of affordable housing was never sufficient, and the few left out of Camden´s military-industrial expansion were left out of housing as well.

Deadwood, South Dakota

While Deadwood, South Dakota´s history sprang from the boom-and-bust cycles of the gold-mining industry, its most recent gold-mine was in the form of legalized gambling. Even though the growth brought on by the gaming industry was titanic and compacted into a very short amount of time, the city´s status as a National Historic Landmark District enabled it to capture a significant amount of gaming revenues and channel them into housing, as well as place very strict regulations on land use and architecture. However, gambling also brought with it a bottom-heavy service economy that made both rental and single-family housing unaffordable, even when the city went into a housing glut.

Fremont County, Colorado

In relying on a federal prison to provide economic growth, the officials of Fremont County assumed that the impact would be similar to that of the state prisons that the county had hosted for over 100 years. However, the federal prison did not bring the local jobs or revenue that were expected. Housing was inadequate for incoming employees, who subsequently moved and when private builders finally began to replenish the housing stock there was still a significant shortage of affordable units. Fremont County learned that dealing with a tax-exempt federal entity is a very different matter than dealing with the state Department of Corrections (DOC), and that very careful planning and capacity-building are necessary to capture revenue from it.

Washington County, Utah

Because of its natural and historical attractions, Washington County was able to sustain a three-decade boom from retirees (1970s), tourists (1970s to 1980s), and inmigrants from California (1990s). Due to its primary appeal as a retiree-attraction county, the economic growth in Washington came from service sector industries such as health (at the upper end) and food/beverage and retail (at the lower end). Since the majority of growth was in low-wage jobs, and since Washington County was virtually the only stable employment center in the region, the county attracted a population of young "boomer" families who were much poorer and in much greater need of affordable housing -- particularly rental. Even when the "boom" began to slow after 1996, there were still waiting lists for Section 8 rental units and housing costs have shown no sign of abating.

Conclusions

The three main benefits that rapid growth brings to rural areas are population infusion, economic growth, and more jobs. Many rural areas in the U.S. have been plagued by population loss, particularly of younger wage-earners who migrate elsewhere for job and education opportunities. However, even though population, industry and employment gains were all hallmark traits of the four boomtowns in this study, better jobs, higher salaries and industrial stability were not necessarily a part of the bargain. In fact, in many instances, the quality of employment declined as the boom took off.

The benefit a locality can extract from incoming industry depends on the kind of industry driving new growth and the amount of strategic planning that a community does in advance. Government industries -- such as the military and federal prisons -- are far more difficult to negotiate with due to their entrenchment in bureaucracy, and local revenues have to be captured indirectly from business growth since they are tax-exempt. High-growth private industry -- such as gambling -- is taxable; however, the employment opportunities that it brings are often low-income and transient and affordable housing can only be guaranteed through careful development regulation. Long-range growth sectors such as retiree attraction may provide for decades of economic expansion; however, the price is typically the creation of a two-tiered economy with retirees at the top and poor, young inmigrants in service-sector jobs at the bottom.

Either before the boom or in its wake, there is still a population for whom rising property values only mean higher rents and a steeper cost of living. Housing for these people can only be provided through careful planning, not by trusting the housing market to adjust to meet their needs eventually.

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INTRODUCTION

Throughout the 1990s, several communities in rural America experienced rapid economic development. These boomtowns -- extremely high growth areas -- are at the extreme end of the growth/decline axis, and are sufficiently important phenomena that their low-income housing needs should be given special attention. They have become boomtowns for a variety of reasons: gaming, the military, tourism, retired residents, even prisons. While growth is good for the economy, it brings numerous challenges that may not have been considered by local officials and community leaders. One such challenge is helping longtime residents prepare for the influx of new people to the community. In many small towns residents know their neighbors, talk with them in the local market, and share common values. A sudden influx of new residents can have a traumatic impact on a small, tight-knit community.

Another challenge facing rural boomtowns is the relationship between economic growth and housing. Not only is a general understanding of this relationship important, but the community must also be prepared to develop strategies to deal with the impact. For example, in many communities economic growth leads to increased land and property values, which ultimately lead to increased housing costs. Similarly, boomtowns that experience population growth may also experience an increase in average rent. This is a classic supply and demand model -- as demand increases and supply does not, prices rise. While boomtowns typically have an overflow of jobs, they are often low-wage jobs, making it difficult for low-income and first-time buyers to either purchase homes or find affordable rental property. These factors are compounded in communities where the housing stock is limited and production cannot keep up with the needs of the residents.

Overall, there is a general lack of understanding about how variables such as the types of jobs created, wage levels paid, population trends and the capacity for housing construction impact a community´s low-income housing needs. The purpose of this study is to examine the relationship between economic development and the need for low-income housing in selected high growth rural areas. There is no blueprint for how a community should respond to the challenges mentioned above. Indeed, every community has unique goals, opportunities and obstacles, and its approach should reflect these differences. However, there are lessons to be learned from communities that have experienced rapid economic growth.

Using a case study format, this report examines how rapid economic growth impacts small communities and how four rural boomtowns were able (or unable) to manage both economic growth and steadily rising populations. Specifically, the report describes the impact that rapid growth has had on low-income housing in these communities, how the communities responded to housing needs, and the challenges they faced in doing so. Finally, drawing upon the experiences of these four boomtowns, this report outlines the changes that appear in housing markets when communities experience rapid growth -- and attempts to provide some guidelines for areas undergoing the same kind of growth in the future.

CASE STUDIES

Camden County, Georgia

The source of Camden County´s economic boom was the unexpected arrival of the Kings Bay U.S. Naval Submarine Base, which triggered a two-decade expansion of jobs in lucrative defense-contracting services and other related industries.  However, the comprehensive planning process prior to the location of the base was reactive rather than proactive and low-income residents felt that they were left out.  While the presence of the base was offset by substantial federal impact funds and there was a generous surplus of housing units, the supply of affordable housing was never sufficient, and the few left out of Camden´s military-industrial expansion were left out of housing as well.

History

Camden County has a rich history that dates all the way back to 1565.  In fact, St. Mary´s (the county seat) is the second oldest town in the United States.  From its earliest days, the land between the St. Mary´s and Satilla rivers had always been of military importance, having been exchanged several times between the French, the Spanish, and the British, finally falling into American hands at the end of the War of 1812. 

In the late eighteenth century, British settlers noted the abundance of live oak trees and eyed their use as ship-building material.  Subsequently, on November 20, 1788, a group of 20 men met on Cumberland Island and signed an agreement to establish the port town of St. Mary´s (each received four town lots for a down payment of $38).  The British general James Oglethorpe later founded Fort Williams on the south side of the island, which commanded the entrance to the St. Mary´s River.

After the War of 1812, antebellum Camden County was the home of several plantations, and its economic base was primarily rice and cotton farming.  As of the 1800 census, St. Mary´s had a population of 190 whites, 73 slaves, and three freedmen.  One nineteenth century historian -- a native of St. Mary´s -- observed that the abolition of slavery was "disastrous to planting interests."  Many plantations fell into disrepair or were destroyed during the Civil War, after which their heirs abandoned them and moved to Savannah, attracted by the "unwholesome allurements" of city life.  The county went into severe recession in 1900, and agriculture took the form of subsistence vegetable farming by freed slaves and poor whites.

From the nineteenth century until 1920, the advent of the steam powered saw mill led to a booming timber economy.  However when the timber industry declined, it took a great deal of the county´s population with it, going from a high of 7,690 in 1910 down to 5,910 in 1940.  In 1941, the Gilman Paper Company opened its plant in St. Mary´s, reviving the sagging population from 5,910 to 8,900 over the next nine years, and many saw the mill as a harbinger of economic prosperity.

Then, in 1954 the U.S. Army purchased the land that is now Kings Bay Naval Submarine Base.  From the 1950s to the early 1970s, the facility was used to store ammunition and conduct support exercises.  In 1975, the Spanish government asked the U.S. Navy to remove its nuclear submarine squadron from its base in Rota, Spain.  After a search of 60 potential U.S. sites, the Navy chose St. Mary´s, Georgia as its submarines´ new home and purchased the land from the Army in 1977.

The Boom: Kings Bay Naval Submarine Base

Located at the very southeast tip of Georgia, Camden County is just north of Florida on the state border.  The county, which is 698 square miles, includes three municipalities -- St. Mary´s, Kingsland and Woodbine -- each with its own mayor and city council.  There is also an unincorporated section of Camden County that the County Board of Commissioners oversees.  After the installation of the Kings Bay Naval Submarine Base in 1977, and the arrival of ten Trident nuclear submarines in the mid-1980s, the population of Camden exploded.  From 1980 to 1990, the population jumped 43 percent to 30,882 and in the 1990s, the population leaped an additional 60 percent to a total of 47,800 (1997 estimate).  In 1997, Money Magazine rated St. Mary´s, Georgia as America´s number one small boomtown.

While some communities lobby to attract new business and industry, and other communities establish economic development authorities, neither the residents nor the local government of Camden County played an active role in bringing the naval base to the area.  In fact, the military made the decision independent of local community priorities and without consulting with members of the community.  Camden County and St. Mary´s government officials were informed by the Navy in the mid-1970s that the naval base would be built in St. Mary´s. 

In 1975, a team of county and city employees and elected officials began visiting other cities that host large military installations to learn from their experiences.  During these visits they learned that growth would impact the community in many different ways.  They developed a prioritized list of needs in anticipation of a rapid spurt of growth and a large influx of in-migrants.  The list included such things as improving and expanding water and sewer lines, school facilities, and roads and highways.  In the early 1980s, county planners formed the Kings Bay Impact Coordinating Committee (KBICC).  From 1981 to 1983, the KBICC initiated a complex long-range planning process that involved the participating jurisdictions of Camden County, Kingsland, St. Mary´s and Woodbine.

To provide citizen participation, a Citizens Advisory Committee (CAC) was formed, consisting of community members of each of the four jurisdictions.  The CAC, in turn, was divided into five subcommittees (Housing, Economic Development, Community Facilities, Natural and Historic Resources, and Land Use), each addressing different concerns about future development.  Beginning in 1991, the CAC met once a month for three months, with subcommittees meeting in between each full committee meeting.

In between the CAC´s findings and the end of the planning process was a complex chain of government officials and paid consultants, whose task was to facilitate and streamline the process so that the outcomes would not conflict between jurisdictions (see Appendix A).  At the end of one year, all four jurisdictions had hammered out comprehensive five-year plans that would be used to regulate all future development proposals and provide for mitigation of any significant impacts on the area. 

Government officials viewed the comprehensive plans as dynamic and flexible documents, capable of responding to any changes in community facility requirements, area economics, or military objectives at the base.  The planning process ostensibly allowed the community to evaluate the existing housing needs of the county, giving room for grassroots input on the location of existing housing, the number and type of housing available, the cost of existing housing and the age and condition of the existing housing stock.  How much the older and low-income residents benefitted from this process, however, was more problematic.  One woman interviewed described the community meetings as "cliquish -- it was all about the politics.  They invited the military people, but they didn´t say a thing to the people who had been living here for generations."  The final comprehensive plan for the county was equally unrepresentative: "The whole thing was written by a bunch of consultants from Atlanta.  Now how is someone from Atlanta going to know a thing about living here?"

"Guns and Butter" Growth

The military created thousands of jobs in Camden County and provided Camden with federal impact funds to offset the fact that their enlisted personnel were not permanent county residents.  Since 1980, the military has paid the county approximately $58 million to address pressing growth needs such as extensive road and highway improvements, expanded fire and police services, water and sewer lines, and a $14 million high school and recreation center. 

However, the influx of military employees still placed a great demand on county and municipal services.  Each submarine at the base had a crew of 300 and many of these officers had families with children.  Even though the military provided the county with substantial growth mitigation, the impact of the base and its ten submarines still outstripped existing resources.  In 1998, roads were still constantly in need of repair because of the heavy flow of traffic in town and most schools were still overcrowded, using portable trailers as makeshift classrooms.

The overall result of the military presence was a two-tiered "guns and butter" economy, where the highest paid jobs were in military positions, the manufacturing sector, and services targeting base personnel and military-related industries. 

High-end military contractors (Lockheed Missiles and Space) and the county´s manufacturing mainstay, the Gilman Paper Company, were the bulk of the lucrative manufacturing sector that, as of 1996, employed 1,267 with an average yearly wage of $39,600.  Although nowhere near as lucrative as the manufacturing sector, the second largest employer was the county´s municipal sector, with the largest number of jobs coming from Camden´s public school system. 

The service sector came in third with the best positions in health ($25,100 per year) and engineering/management services ($24,700) -- although it provided a good deal of low-wage clerical jobs as well.  The Kings Bay Naval Submarine Base employed about 9,500 people, 5,500 of whom were enlisted military personnel.  The remaining base employees were either Department of Defense civilian employees (2,500) or government contractors (1,500).  In 1996, the base´s average annual payroll per person was $24,000.

The total civilian labor force in Camden County in the same year stood at 15,746, and at its bottom was the retail trade, where eating and drinking establishments alone employed 1,019 -- more than half of the entire sector -- and paid average annual wages of $7,702.  The sector as a whole did not offer much better, paying an average $10,670 per year.

Housing Affordability

Between 1980 and 1997, the population of Camden County increased from 13,371 to 47,800.  In 1990, the county had 9,459 households (63 percent of them homeowners), with 10,885 housing units available (up from 3,518 in 1970).  Consequently, the availability of housing in and of itself was not a problem.  The central problem was its affordability.

At first glance, the population of Camden County seems to have gained a windfall from the presence of the Kings Bay Naval Submarine base.  Its 1993 median household income was $33,430 (up from $28,212 in 1989), with a poverty level of 11.2 percent -- substantially better than for Georgia overall (with a median income of $31,148 and poverty rate at 16.8 percent).  As of the 1990 census, the median value of a home in Camden County was $66,700, up 127.6 percent from 1980. 

Nonetheless, the litmus test of housing affordability is cost burden (the percentage of a household´s gross monthly income that goes to either rent or mortgage payments).  According to U.S. Department of Housing and Urban Development guidelines, any housing unit is unaffordable if its total monthly expenses per household exceeds 30 percent.  In 1990, the median gross rent for Camden was $416 and the median percentage of monthly income paid for rent was a comfortable 24.5 percent.

However, in the $20,000 or lower income range, the vast majority of renters were cost-burdened, with the most severe burden placed on households with incomes of $10,000 or less.  Out of the 647 renter households in the $10,000 or below income category (out of a total renting population of 3,457), 67 percent paid at least 35 percent of their income for housing. 

Once a renter´s income shifted to $20,000 or above, this trend completely reversed, with the vast majority of renter households having no cost burden at all.  In other words, low-to-poverty level renters were squeezed the hardest for their shelter costs, whereas the middle-income to affluent households were virtually unaffected. 

As of 1998, Camden County had only three public housing projects, with a total of 85 units.  The units were fully subsidized and managed by the Camden County Housing Authority.  The only other subsidized housing in Camden County were five other complexes, managed by private companies, that were Low Income Housing Tax Credit properties (unaffordable for most households that qualified for public housing).  With nearly 500 households living in unaffordable units, the subsidized housing stock was nowhere near adequate.

While the majority of housing in Camden County is not rental -- 63 percent of all occupied units are owner-occupied -- that proportion has shrunk considerably from 84.1 percent in 1970.  As the ownership housing stock has shrunk, housing values have correspondingly risen, accompanied by a surge in the property tax rate.  The effect on Camden´s homeowners has not been as onerous as it has on low-income renters; however, regressive cost burdens are still a problem.

According to the wife of an enlisted officer, many of the military families chose to build new homes in the 1980s because the cost to build was "cheap," even if they would only be in the area for five to six years.  Consequently, the number of homes built per year in Camden County spiked from 1985 to 1988 with 1,669 "cheap" single-family homes aimed at the needs of the new military personnel.  However, the greatest proportion of cost burden was still at the bottom of the income scale.  The 379 homeowning households in the $10,000 or below salary range were still the most severely cost-burdened, with 36 percent of them spending 30 percent or more of their monthly income on housing costs.

When county officials conducted their housing needs assessment in the early 1990s, they concluded that the housing condition county-wide was fairly good.   There was a mix of construction styles, costs, and environments appealing to Camden´s burgeoning middle class.  The Camden County Joint Development Authority also promoted the county as "retaining small-town charm in conjunction with the healthy bustle of our business community."  Its lush tax base also enabled it to develop a strong public school system, with one of its elementary schools achieving Georgia and National School of Excellence status.

Lessons Learned

Camden County´s experience with the Kings Bay Naval Submarine Base has been mixed.  The growth spurred by the arrival of the base has triggered impressive employment opportunities, nurtured a thriving high-end manufacturing and service sector, and provided federal impact funds and property taxes for an award-winning public school system.  Camden´s new affluent middle class has access to abundant housing, and the development of more than five industrial parks, plus generous tax incentives, all seem to cement Camden´s future as a high-tech, industrial magnet.

Nonetheless, as one local activist put it, "Johnny can´t go to school if he doesn´t have an address."  For the minority of the population left behind by Camden´s growth -- primarily single mothers and elderly people -- the economic boom obliterated the supply of affordable rental housing and left people in older homes trapped in dilapidated structures.  A worker at the Department of Family and Child Services pointed out that women coming off welfare and working low-end service jobs have not been able to afford rental housing through vouchers (in 1997, county officials put limits on the number of building permits they will issue in an effort to slow new construction).  With incomes far too meager to purchase a home, these women and their children have been left with nowhere to go.  The older owner-occupied housing at the north end of the county is also falling apart, leaving senior citizens with substandard shelter -- but afraid to leave their homes for unaffordable rental housing.  By 1998, even base personnel were moving outside Camden County, leaving local jurisdictions with the dilemma of how to lure them back and retain them.

The overall benefits of hosting a military base for Camden County have buoyed the economy and created a solid infrastructure; however, they were not enough to guarantee a sufficient supply of affordable housing -- in spite of a surplus of thousands of units.  Since the military is a government entity (hence, tax-exempt) any local revenues derived from its presence had to be either in the form of federal impact funds or taxes from newly stimulated business development.  Even though Camden received $58 million in funds since 1980 and developed an impressive industrial and residential tax base, the lopsided housing cost burdens faced by the county´s poorest residents meant that there would have to be some form of public/private commitment to building and maintaining an adequate low-income housing supply.

Finally, the planning process -- which should have provided the basis for adequate low-income housing -- was not useful or accessible to those residents who needed it the most.  The woman quoted above, who runs a homeless shelter, maintains that "for ten years, I´ve been tromping up and down, yelling like a bag lady.  But they don´t want to hear about it.  Nobody wants to hear about it." 

While Camden County had to adjust to the abrupt arrival of a military base, Deadwood, South Dakota had to deal with another sudden visitor: the gambling industry.

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