Work will start in the next couple of weeks on streets and curb and gutter for the planned $15 million Heart of America residential development in northeast Hays.
Four Hays builders now have committed to constructing four homes each within 18 months in the first phase of the development at 22nd Street and Wheatland Avenue, said Doug Williams, executive director of Grow Hays, the city and county’s economic development arm.
Home prices will fall within the $175,000 to $225,000 range.
"There’s a lot of need in that price range," Williams said. "I’m very confident that these are going to sale very well if market conditions in the spring and next summer are the same as they are now."
The builders are Paul-Wertenberger Construction Inc., Platinum Builders, Homes by Cornerstone Inc., and Brian and Dustin Schumacher.
Williams said Heart of America hit that price point in large part because the lot price, at $10,000, is so cheap. In addition, a special state rural housing incentive program eliminates "specials" on each home. Specials are typically paid monthly by homeowners over the course of 15 years or more to cover the cost of installing the water, street, sewer and other utility infrastructure.
The Heart of America builders, he said, are having to sharpen their pencils to meet the price point, Williams said.
"The builders are not going to be getting rich on this project. Hopefully they’ll make some money and can make a little profit, but it’s not going to be a lot of profit," he said. "The real winner, we’re hoping and the whole thing is designed for, is the end homeowner. They’re the ones that are going to get a good value and have a lower cost of ownership because of the specials being paid in a new home environment, which has not ever existed here before."
In return for the builders’ participation, Williams said, they get exclusive rights on the remaining 20 lots, all about 60 by 125 feet, in Phase 1 of the 21-acre development.
"That’s a sizeable commitment there, could be $800,000. That’s their commitment to the cause," he said. "And in exchange for that we’re giving them some level of exclusivity, in terms we’re not going to sell to other people, lot speculators, or other builders for that matter — and we allowed any builder that wanted to, we tried to contact all of them to participate — and these are the four that stepped forward and said they would."
Heart of America also awarded a contract to Paul-Wertenberger to put in the streets, water and sanitary sewer, Williams said.
"They’ll be starting sometime in the next couple weeks, but it does take several months to get the streets in and to get all that in, and we are heading into winter," Williams said. "So the likelihood of anybody starting a home, even if we get the streets in the next 60-90 days, it’s still probably going to be spring before we have some starts out there.
Each contractor must build one home for sale at $175,000, one for $200,000, one for $225,000 and the fourth for any one of those prices. The builders buy one lot at a time for $10,000, then must start building within 30 days. Each builder markets their own homes.
Builders took their choice of lots, and submitted plans for four price levels and floor plans. Covenants require the houses be 1,000 square feet or larger, have a two-car garage, composition shingles, new construction materials only, and non-basement homes must have a built-in safe room.
"We locked them into prices that they have to meet," Williams said.
The 75-home development is an effort by the nonprofit investment consortium Heart of America Development Corp. and Grow Hays to bring more affordable housing to the tight housing market in Hays. They have said new homes in the $175,000 to $225,000 range are nonexistent, making it difficult to attract a needed workforce and, subsequently, new business and industry.
Unlike other new housing in Hays, homeowners in the Heart of America homes won’t be paying monthly "specials" to the city for the cost of installing the water, sewer, streets and other utilities. Williams said that’s a saving for each homeowner of about $150 to $170 a month for 15 years.
"A $10,000 lot and no special assessments is a great opportunity, and based on where we’re requiring the price points to be, the ultimate winner in this will be the person who purchases the home," Williams said. "That’s the goal, to provide more cost-effective new housing to the area."
The project was made possible when the city of Hays designated the development a Rural Housing Incentive District, or RHID.
The way the state’s RHID program works, Heart of America as the developer is picking up the $1 million tab for the Phase 1 infrastructure, Williams said.
In return, the city of Hays, Ellis County and USD 489 forfeit a portion of the new property tax proceeds from the development so that Heart of America gets reimbursed for 85% of its investment over 25 years. Final approval for the RHID came in July.
Currently property tax on each lot is about $2 to $3 a year. With a new home, that will be about $2,500 a year, Williams said.
The RHID is the first of its kind in Hays. Others have been successful in Salina, Garden City and Dodge City.
"Our position is it’s much-needed housing and will be very popular and sell very well," Williams said. "I would guess that these builders will sell their four homes in less than 18 months and be started on more of them before that 18 months is out. I believe that 36-lot Phase 1 could be built out in 24 to 30 months."
Heart of America, a consortium of Ellis County businesses whose mission is to attract new industry to the city, has previously stuck to industrial development. With Ellis County industry saying growth in the area is strangled by a trained workforce shortage, Heart of America has said it is taking a new tack with the residential development.