Posted 3/29/16 (Tue)
By Kevin Killough
Temporary housing in Tioga appears to be safe for another year following a lively exchange at the city commission meeting Monday last week.
Representatives of apartment owners and developers showed up to lobby the commission to shut down two RV parks seeking one-year renewals of their conditional use permits.
The representatives reported occupancy rates of 50 percent or lower. At those rates, they said, they can not afford to service the debts they’ve accrued building apartments.
“My understanding is conditional use is temporary,” Carrie Montoya of Watne Realtors said to commissioners.
But the two RV park owners said they, too, have invested in developing their properties, and it’s not fair to shut down their businesses because other businesses are struggling to recoup their own investments.
The representatives of apartments said they have adjusted to changes in the current rental market. This includes lowering rents and creating more flexible lease terms.
Among the representatives lobbying the commission to shut down temporary housing in Tioga is Stacy Vejtasa, who manages the 170-unit Olson Apartments, as well as others in town.
She said her rents have fallen “dramatically,” with unfurnished two-bedrooms now $1,050 -- previously, furnished two bedrooms went for $3,000.
These rents are down more than 50 percent over what they were at the height of the boom but Olson Apartments sit half empty.
According to a survey done by Economic Development Coordinator Dennis Lindahl, the rents were higher by about $100 last month.
Montoya, who manages townhomes in the north part of town, said she has in one complex only four of 32 units occupied. With all these vacancies, Montoya said, temporary housing isn’t needed.
She said she has three-bedroom townhomes available for $1,500 a month.
“There’s plenty of housing available for permanent housing,” Montoya said.
Matt Hutchins with Roers Investments told a similar story for the Tioga Square Apartments he manages. He said he had 13 of 36 apartments there available.
One-bedrooms at the complex are currently going for $1,290 per month, and there’s little certainty he’ll maintain his current occupancy rate.
“I cannot get a 12-month lease. There are no 12-month leases anywhere in the Bakken,” Hutchins said.
Montoya said their leases have an escape clause that allows people who are laid off to get out of their leases.
In another complex, Hutchins has 25 units, 11 are vacant, and 10 are on notice. By May 1, only four of 25 units will be occupied.
He explained to the commission the difficulty developers faced when they came to meet the housing demand in the Bakken. While it was a long time ago for many, banks remember the 1980s bust like it was yesterday.
Typical terms, Hutchins said, are 50 percent cash in and 12-year mortgages.
“When the price of oil goes down, our mortgages don’t go down,” Hutchins said.
Hutchins said these investments were made on the belief that once the housing market reached a certain point, local government would eliminate competition from temporary housing to help inflate apartment occupancy rates.
At the current occupancy rates, Hutchins said they are losing money and warned widespread foreclosures would have detrimental impacts on the local economy, leaving abandoned properties across the city.
However, it’s uncertain eliminating temporary housing would prevent this outcome.
A couple of the representatives pointed out as support for closing RV parks that they are mostly empty and therefore not needed. But this could also mean closing them would have minimal impact on apartment occupancy rates.
Mark Black who manages some townhomes in the area wrote in a letter to the commission supporting the closing of temporary housing. Even at 100 percent occupancy, at current rents, he wrote, the properties do not generate enough revenue to cover all operational costs and taxes.
All took risks
Dave Guttormson who manages Gunn Enterprises RV Park at 301 Second Street said apartment developers must have known the risks.
He said from past dealings with Roers Investments, he read in their prospectus clear warnings about the volatility of the oil market.
The owners of RV parks are facing the same challenges in the current economic climate, Guttormson said, and he only has four of his spaces currently occupied. He said it can cost a lot to put in all the infrastructure and meet regulatory requirements in order to open up an RV park.
“People are willing to shoot craps on the table and take their chances,” Guttormson said.
Guttormson also said in many cases people needed to demonstrate a worth exceeding $1 million to buy into these apartment development opportunities.
“This isn’t grandma going to the cookie jar trying to figure out where the next dollar is coming from,” Guttormson said.
Hutchins said the $1 million minimum net worth isn’t always the case.
Marlin Powell, who represents Tioga RV and Trailer Park located at 217 Fifth Street, said the park hasn’t recouped its investment either.
“My partner is 73 years old, and he put his money into it as an investment. There’s no guarantees for our investments,” Powell said.
Guttormson pointed out he and his wife travel a lot to other communities in their RV where they see plenty of RV parks in every town. In those same towns there are plenty of vacant apartments too, he said. Despite that, the local governments don’t try to eliminate temporary housing to fill up those vacancies.
“For you to condemn one form of housing and push people to another form of housing, I don’t think that’s free enterprise or capitalism. I think people have a right to choose,” Powell said.
Hutchins also warned widespread foreclosures would result in a large depletion in the quality of housing in town.
“If you look at some of the apartments in town, they’re putting up different colored siding to make repairs . . . It looks bad,” Hutchins said.
All of the representatives argued apartments provide higher quality housing for the town and are invested longer term than temporary housing owners.
“These are not stick built. They’re brick and mortar. We want to take care of them. We want to be good owners,” Montoya said.
Commissioner Ronda Davidson expressed concern about undue financial hardships on renters if the commission reduces the options of temporary housing, but she also complained some RV parks are not well kept.
“People shouldn’t have to live in these conditions because they live in a camper,” Davidson said.
Powell said they have had a lot of people abandoning their RVs, which creates some problems trying to keep the area clean. He said the situation has greatly improved, and the park looks a lot better.
Guttormson said they deal with vacant RVs the moment they’re discovered to be vacant, and he said he goes to a lot of trouble to keep the park he manages looking nice.
“If they are vacant, they are out of here,” he said.
He said the state health department once called him after an inspection to compliment him on the quality of his park.
Powell also pointed out many of the RVs people live in are quite expensive and make for very comfortable homes.
“It’s their home away from home,” he said.
One more year
All things considered, the commission is reluctant to close down temporary housing without giving more time for rents to drop and more notice to RV park owners.
“If you ask the owners of RV Parks, they’d probably like us to eliminate permits on apartments to fill up RV Parks,” said Commissioner Todd Thompson.
There is also the concern what would happen to demand for RV spaces as construction projects resume over the spring and summer months, especially with construction starting on the Dakota Access Pipeline.
After voting to approve the one-year permits for the parks managed by Powell and Guttormson, the commission agreed to set up a committee to explore the issues and make recommendations to the commission.
One possibility is the creation of more ordinances governing the upkeep of RV parks, which would facilitate longer-term permitting.
Hutchins pointed out RV parks could easily set up shop again if the demand for housing returns.
But it’s uncertain any future investments would be made in temporary housing so susceptible to the whims of government.
Capital Lodge recently closed after a long history of resistance from the county government, including an application to rezone for repurposing to a more permanent facility. The Williams County Commission turned the plan down largely out of fear it would set a precedent for temporary housing to become permanent.
Due to the constant opposition from government and the community prejudice towards “man camps,” Capital Lodge owner Mike Boudreaux said he would probably never do business in Williams County again.
The Williston Commission recently voted to shut down all crew lodges in the city limits, and temporary housing operator Target Logistics is now pursuing litigation against the city as a result.
Many operators of temporary housing may not ever return to such a hostile housing market. For communities trying to grow, that would mean a housing market that’s very slow to catch up to demand.