Bloomington-Normal needs more housing. Creating more housing is proving difficult.
Despite that widely recognized need, fewer homes have been built in Bloomington-Normal in 2023 versus last year, according to building permit data reviewed by WGLT. In all, only 120 single-family homes and 76 new multifamily units were built in the Twin Cities as of Nov. 30. Recent studies estimate the community’s need at 4,000-7,500 units.
There are many reasons for this slow progress. The high interest rates and high material and labor costs impacting the entire country come at a particularly inopportune time for Bloomington-Normal, which is in a growth spurt led by rapid hiring at the automaker Rivian. The inflationary economy discourages some people from moving if they already have a home with a decent interest rate, or rent is somewhat affordable. Neighborhood opposition also can slow development.
WGLT spoke to developers who are leading projects all around Bloomington-Normal to learn more about their progress and what to expect in 2024.
The 300 Spot
The 300 Spot complex is the former Illinois State University student apartments at 300 E. Shelbourne Drive. The apartments have been vacant for about six years. Developers Mike Mapes and DJ Powell bought the property from ISU for $1 million with plans to renovate the 100 units and return them to the community’s apartment inventory.
The first eight units are expected to be completed and available for rent by the end of December. Another 16 will be finished in January, with more every month after that, said Mapes. Rents are expected to be around $1,000 for a one-bedroom unit, and $1,100 for a two-bedroom.
“Good things come to those who wait. And we just want to give them the best housing available and possible,” Mapes said. “So we’re doing full renovations, and that just takes time. We started with some units that were pretty well dilapidated, and we’re bringing those up to good living conditions.”
They started by repairing roofs, then repairing drywall and doing paint cleanup, plus new or updated mechanicals, cabinets and plumbing. The parking lot has been redone.
“It definitely took some time working with the Town of Normal, getting zoning right, giving them what they want. They wanted us to come up to standards and change the water pit, the water meter, the sprinkler system,” Powell said. “Some stuff definitely was reasonable and made sense. Some stuff seemed a little out there. We’re doing what we have to appease the Town of Normal.”
They’re starting by renovating what’s already there. Mapes and Powell are still pursuing some new construction on other parts of the property: duplexes on the Beech Street side to the east, and units for seniors on the Linden Street side to the west.
That could be a challenge. Even on the remodeling side, they found a difficult lending environment.
“It was a lot harder than we anticipated,” Powell said. “There’s still banks out there willing to lend. But it seems like they’re being a bit more restrictive these days.”
Archer apartments
Just a few blocks to the north is Raab Road and Linden Street. That’s where developer Steve Lehman is planning to build the Archer apartment complex, with about 136 units.
Demolition is expected to begin imminently on some structures on the southeast corner of that property, followed by construction. The first units should be ready in 12 to 15 months, Lehman said.
“There's so much planning, so much time expense, before you ever see anything happen. We’re a year and a half into it, or more. And I think you’re about to see some action out there,” Lehman said.
He said they're trying to build a real community at Archer, complete with a clubhouse as the social center, with a fitness center and work-from-home station.
“We also have a lot of eco-friendly-type features. We’re doing stormwater detention with a pond on the southeast corner, with a walking path, a fishing pier. EV charger stations for people who have electric vehicles. We really want to support the Rivian community,” said Lehman, who has relatives working at Rivian.
Those Rivian workers and others need housing now. WGLT asked Lehman — and all of the developers we spoke to — what takes so long?
Lehman explained each step. Buy the property, do a market study, do a traffic study, go through the annexation process, do engineering and architecture. Permitting. Getting the financials together. Lehman said he tries to overlap each of those steps as much as possible.
“All of that stuff is a huge risk. A lot of people just don’t do it because it’s so many moving parts. It costs a lot of money and time before you get anything back. It’s a challenging industry,” Lehman said.
One of the biggest challenges are high interest rates, which the Fed initiated to cool down the inflationary economy.
Lehman said he’s gone from projects with a 3.5% interest rate to over 7%. That adds up to millions of dollars in interest payments. Lehman said it's painful, though he hopes to refinance later.
“It is more challenging. I’ve seen a lot of people pull out of projects. That whole path of development can take years. I think I’m probably one of the quickest ones, and that’s still a year and a half! A lot of people might be two, three, four years of trying to get this launched, and they look at interest rates, and they can’t,” Lehman said.
One idea that Lehman has to speed things up is for Illinois to license general contractors at the state level, potentially loosening up the need for as many layers of building oversight at the local government level.
“In some other states, they say how about you get a license, like me, and pass all these tests and all this scrutiny upfront — and then we trust you to just get it done,” Lehman said. “I think Illinois is a little bit heavy on the government side. They could actually just do a test and if people know what they’re doing, [let them] do their thing.”
Weldon Reserve
Another developer says they’ve found creative ways to keep their project on the fast-track with the Town of Normal. That's Weldon Reserve, along Beech Street just north of Raab Road. Fourteen homes are complete, with 121 planned overall.
Jason Barickman with developer Fairlawn said they’re starting new homes every week and will continue construction through the winter as they’re able, with 2024 being a full year of construction.
Barickman said one reason it’s moving along so quickly is that the Town of Normal allowed them to work on public improvements, like roads, at the same time they're doing home construction. It’s concurrent horizontal and vertical construction.
“The town has some rules that are designed for a scenario where someone buys raw land, carves it up into buildable lots, and then sells those lots to another builder or a buyer who wants to build a home. And so in our scenario, we're all those people,” Barickman said.
“We bought the land. We're the builder. We're also the developer, building the final product. And so some of the rules that would apply to someone that was many players in that process, those rules didn't necessarily apply to someone who was the same participant throughout. It's a program that the town has that allowed for us to move simultaneously public improvements along with the homes. And to the town's credit, it has definitely moved that project along much quicker than otherwise.”
The Weldon Reserve homes will primarily be rentals. Barickman said Fairlawn wanted to stay flexible on that mix, but the high interest rates have pushed the demand toward rentals.
“If you think of a buyer or a renter of a single-family home that might be a $350,000 to $400,000 home — a nice home, right? — the cost of paying for your mortgage, insurance and real estate taxes, versus renting and just paying your rent … the purchase option is much more expensive, primarily as a result of interest rates today. And so we’re seeing huge demand for rentals, and we're continuing to rent out these homes to a very strong market,” Barickman said.
Carden Springs
That same developer, Fairlawn, also is building the nearby Carden Springs at Beech Street and Towanda Avenue, though it's not as far along.
They hope to break ground this winter on what will ultimately be a huge project: 477 units in 29 buildings, spread across 40 acres, over the next three to four years.
“There’s lots of open space, walking trails, tons of amenities, including a pond and dog park and toddler park and a very nice clubhouse with a pool and amenities,” Barickman said. “So, we think we've got something that's really good there that the market’s really going to react positively to.”
Barickman said the long list of challenges include those high interest rates, though they already have terms from their bank and are in a good place there.
Construction costs are still high, even if the price of lumber is coming back to earth. And coordinating all the subcontractors needed for a huge project like this is quite complex.
“We have been heads down. Once we got the town's approval to move forward with the project, we got to rezone, we got the town to approve a planned unit development. Then becomes the really heavy lifting on our end,” Barickman said.
Infiniti Pointe
The Infiniti Pointe development is near Hovey Avenue at Parkside Road. Plans call for about 120 single-family homes, 75 to 80 duplex-style homes, and about 250 apartment units.
Developer Krishna Balakrishnan planned to break ground this year on the horizontal infrastructure — like water, sewer, roads and utilities. But that’s now not going to happen.
Balakrishnan said the town wanted them to finish their infrastructure plan for the whole site, not just the first phase or phases, and that unexpectedly slowed them down.
“You plan something, but it never goes according to plan, at least in the construction world. There’s always something that comes up, no matter what,” he said.
Another challenge is the lending environment.
Lenders are willing to finance home construction, but Balakrishnan said he’s hearing they are not eager to loan money to build out that horizontal infrastructure. It could be a challenge, he said.
“Because the cost, if you build a home, the exposure per home is a lot less than if you’re doing infrastructure. It turns into a few million dollars. And then it takes a longer time to repay them because you only pay them when the lots are sold and all that stuff. So the banks are being conservative,” Balakrishnan said.
Washington Street (Coachman site)
The same economic environment also has slowed things down at the former Coachman Motel site along East Washington Street in Bloomington.
Developers were planning an $18.5 million housing project, with 24 townhomes and a five-story apartment building [48 units] on the mostly vacant property surrounded by East Jefferson, East Washington, and North Gridley streets. The same team just rehabbed the former CII East building, turning what had been a high-profile eyesore into the Northwestern Mutual building.
The city owns the Coachman property. The Bloomington City Council approved the housing project in June, including $4 million in future tax breaks to make it happen.
But one of the developers, Robbie Osenga, now says the project has been harder to get started than anticipated.
“From the time we started actively working on that development, to the time that it got to a critical decision point to start really investing significantly more dollars than we already had, so many things changed in a year span. Interest rates more than doubled from where we started, which is significant,” Osenga said.
On the demand side, Osenga said they also grew concerned about less appetite for “movement” within the local real estate market and worsening rent projections.
“When interest rates are low, and the economy locally was high in terms of people felt like they had a lot of opportunity professionally, people were just generally always open to moving in any capacity. Businesses are looking at opportunities. Homeowners are looking at what they might need in their next stage of life. And if the right thing were to pop up, suddenly everyone's a buyer or a seller when things are good,” Osenga said. “When your Locus of Control starts to change and shift, you start to get pretty content with where you're at. And you're not looking for movement at that point in time.”
As a result, Osenga said the Coachman project is now back in the exploratory phase. They're seeing if there's a path forward, but Osenga wasn't able to offer a new timeline for when the project might happen.
“It’s kind of like baking a cake. If you put in a little too much or not enough baking soda or powder or one ingredient, the impact that can have on the end result is pretty significant,” Osenga said.
Osenga sees all these challenges as an opportunity for the community to start to think differently. He said he’s excited about that opportunity.
“What's the saying? Necessity is the mother of all invention? By and large, housing development in our community has been effectively happening in some version of the same process for the last 20 or 30 years,” Osenga said. “This need to innovate and to think differently is a shared call to action. Our municipalities, our developers, our contractors, our buyers and tenants, all are going to have to shift some on how we do this.”
Osenga said we need to be looking for ideas in other communities, and bring the best ones here in a way that “honors who we are and who we want to be also in the future.”
“We can’t make short-term decisions that have negative long-term impacts for this future sustainability of our community,” Osenga said.
He said it may be time to more purposefully engage with local employers — often the ones saying, “We need more housing to fill these jobs.”
“I don't think anymore that just saying it is enough,” Osenga said. “I'm hopeful that we can start to have some collaboration and partnership. Not that they haven't been collaborative and partnering. But down to like actually partnering with us, as developers. If they've got the demand, and we've got the ability to help create the supply, then that's the piece that in this current economic time, the cost to take risks is higher. So if we can mitigate those risks, I think we can help meet that need. But they can no longer necessarily be done in isolation. It's gonna have to be a season of a lot more collaboration.”
