Small Town. Big Housing Crisis.

Image via Flickr.

One question we get asked a lot at Strong Towns is how small, rural towns should be grappling with the high housing costs and outright housing shortages affecting so many of them. It's hard to offer a very satisfying answer. This is not because core Strong Towns insights don't apply, but because the problems are often so stark and so dire, in a way our urban readers might not appreciate.

A Strong Towns member tipped us off to some dramatic reporting from the Colorado Sun about the depth of the housing crisis facing Colorado's small mountain towns. Reporter Shannon Najmabadi explains the human toll in a series of three recent articles well worth a read. Lack of housing has left towns with large numbers of vacancies in critical jobs including teachers, police, and hospital workers; Najmabadi even finds a school superintendent who lived out of an RV for a month. The median value of homes sold in San Juan County increased nearly 60% between 2018 and 2021, while the number of homes priced at less than $250,000 declined by half.

The issues in these towns are an unusually pure microcosm of some of the issues seen in large communities, thrown into starker relief because "throw money at the problem" isn't on the menu of options in the same way. The part that gripped our member's eye, for obvious reasons if you're a regular Strong Towns reader, was this:

Across southwest Colorado, communities are grappling with a suddenly acute shortage of housing that threatens to displace middle-income workers. But the region’s small municipalities face added difficulties due to their size and limited budgets. Some are struggling to buy land, or extend the water, sewer and other infrastructure lines needed for new developments. 

It's expensive to grow. To expand a city's horizontal footprint means infrastructure: not just roads, but sewer and water pipes, expansions to water treatment capacity, fire hydrants, energy utilities, broadband. These small communities, looking for sites for new housing, are finding that these costs are up front and in your face.

In bigger communities, it's not actually that this dilemma doesn't exist; it's that we're able to use debt to kick the can down the road. Large-scale suburban developers with Wall Street financing typically pay for the up-front infrastructure to service new residential communities. This takes the costs of growth off the public balance sheet for the first life cycle of the infrastructure…but not forever. Where we don't do the math, those costs tend to catch up.

I've written, in particular, about the wildly insolvent growth patterns of the Colorado Front Range, the megalopolis encompassing Denver, Colorado Springs, Pueblo, Fort Collins, and their vast suburbs. Fueled by a seemingly bottomless municipal bond market and Wall Street's hunger for returns in an era of low interest rates, large-scale subdivision developers are increasingly funding their master-planned communities with special tax districts. An exposé from the Denver Post said they "virtually become the exclusive mechanism by which all new development occurs in Colorado today." These districts in the state are collectively authorized to issue over one trillion dollars in debt, and face very little scrutiny regarding the soundness of their investments. And in Florida and other states, they have a history of very dramatically going bust. 

Small towns face a different situation. To be clear, small towns are no stranger to the enticement of "free money"—often from state and federal governments—if they agree to overextend their infrastructure with no capacity to maintain it in the long term. What they don't have is the giant subdivision developers beating down their doors. In fact, the struggle that Najmabadi documents is more often to convince any housing developer to build anything at all.

Main Street in Durango, Colorado. (Image via Flickr.)

It's instructive to look at how small, rural communities have historically dealt with the need for growth. The prevailing model of development in North America today is to rely on debt-fueled development and subsidy, but in most of the world and for most of history, communities have not actually had that path available. So what do they do?

They use land obsessively economically. They fill in gaps in existing blocks, and subdivide and expand existing structures: strategies that urban planner Patrick Condon calls hiving and barnacling. They crowd together at first, and then expand as they can afford.

Towns like those profiled in this series should look at their land-use codes and ask a few questions, such as:

• What are the barriers to an accessory dwelling unit? A duplex conversion? Tiny homes?

• Is it possible to create residential space above commercial storefronts where there isn't already such space?

• Can we allow manufactured housing on existing lots (as an ADU) where it isn’t already?

• We have people living in RVs and cars already. While no one thinks this is a desirable answer, what can we do to, say, make parking an RV in town more comfortable in the near term?

• In short, how can we minimize the obstacles to ad-hoc adaptation that creates housing?

It looks like in Colorado, these conversations are happening, though the Sun is nonspecific in its references to "land-use codes." From there, you're not going to acquire a scale economy overnight in this stuff, but you've at least decriminalized some forms of adaptation led by locals in response to local need.

There are familiar factors involved here that are the same as anywhere, like high construction costs, and shortages of construction labor and materials. But there are also factors that are more specific (though not unique) to this region. One is a bifurcated market that puts permanent residents in competition for housing with a growing number of vacation home owners from big cities like Denver, who have Denver money and can pay far more than local service workers can afford.

This problem merits local, context-sensitive responses. Two big steps mentioned by the Sun are converting hotels to residences, and restricting short-term rentals (VRBO and AirBnB). Both make sense to me. Ultimately, I'm not confident that a town with a stunning natural draw ("We live in a postcard," says one Durango resident quoted by Najmabadi) can deal with this from the demand side alone—it's hard to make people not want to come to a spectacular place.

That's where I don't have satisfying answers. This is just a brutal set of circumstances, from which there's no silver bullet for these towns to buy their way out of. What's required is a messy process of many ad-hoc responses instead.

It's important to appreciate that the same national factors that have inflated all the costs associated with housing, nationally, create pockets of acute desperation locally. These towns are an example. For many of us in the middle class in bigger cities, the contours of the issue are less stark. Yes, housing costs are too high, they're straining millions of households' budgets, and we must make unpleasant compromises in where or how we live to compensate. But for people in some of these mountain towns, even those compromises are unavailable. You're living on the brink of having to simply leave the place you call home and never come back.

We need to address the big-picture, national factors pushing housing costs up and up. But we also need the messy, local, improvised responses—and not just in a Silverton or Mancos. Big cities should be doing the messy stuff, too. It's just that big cities have more ability to use debt to delay the day of reckoning.

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