May 13, 2013 4:18 pm

North Dakota’s housing fails to keep pace with oil boom

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A mobile home is seen parked at a site in Williston, North Dakota March 15, 2013. North Dakota's booming oil business has quickly ran up against a serious shortage of housing for the thousands of workers who have poured into the state looking to cash in on the Bakken oil formation that has made North Dakota the second-largest oil-producing state after Texas. Picture taken March 15, 2013.©Reuters

Tom Dierker has spent the past year living in a camper van. He has electricity and cable television, but no running water. “You pretty much live your life around when you need to use the bathroom,” said the 43-year-old restaurant manager at R. Rooster BBQ. “I’ve gotten used to it. I use the toilet at the restaurant and shower at the gym every other day.”

Mr Dierker moved to North Dakota in the hope that the Bakken region’s shale oil boom, which has created tens of thousands of new jobs, would generate demand for hospitality services. But what was meant to be temporary accommodation has now become a permanent home because of the region’s chronic housing shortages.

“In any other city, if you told someone you lived in a camper or in a car, people would think you were strange. But here you could be making $100,000 and living in a car. It’s totally normal,” said Mr Dierker.

The oil boom has been referred to as the area’s equivalent of the California gold rush of the 1800s. The 12-county Bakken region stretching over much of North Dakota and parts of Montana has seen its working population swell by 70 per cent since 2010, mainly driven by oilfield workers and those in fringe industries such as construction and transportation flooding the state in the search of highly paid jobs.

These newcomers sopped up inventories of existing homes on the market and spurred home prices, which have surged almost 30 per cent in the past year, to an average of $253,000, according to Realtor.com. Apartment rents too have accelerated while the price of one night’s stay at a hotel has risen upwards of $300, rivalling New York. Even a parking spot for a trailer can cost in excess of $800 a month.

Tom Rolfstad, director of Williston Economic Development, a non-profit which provides relocation and expansion services to new businesses, said: “We are urging caution. If people want to move here we are telling them to do a lot of homework about what it’s like before they arrive.”

Here you could be making $100,000 and living in a car. It’s totally normal.

Although steps have been taken to alleviate some congestion, overpopulation has resulted in rising crime rates, traffic logjams, heaving bars and restaurants, overflowing dustbins and long queues outside grocery stores.

“We’re working hard to catch up on the housing, but it’s a challenge,” he added.

Army barrack-style dormitories, known as “man camps”, have been built for oilfield workers – whose salaries average nearly $98,000 a year – and construction employees. But it is those on low and moderate incomes that are finding the housing crunch more difficult to manage.

Although new housing inventory in the past six months has relieved some pressure, home construction is still not happening fast enough to satisfy the mounting demand. Even as institutional investors, such as private equity group KKR, have sought to invest in Bakken housing, others are still wary.

With an unemployment rate of 1.7 per cent compared with the national average of 7.6 per cent, construction labour and housing for this workforce is hard to find. Sourcing manpower as well as building materials from out of state means that construction costs are very high, deterring many homebuilders.

A cautious approach to residential planning and financing by local governments and lenders has meant few plots of land are ready for development, which has also constrained supplies.

In addition, homebuilders and investors are concerned about building large stocks of new homes without the necessary supporting public infrastructure. Williston, which is the residential and commercial centre of the Bakken region, has $625m of infrastructure needs including landfill expansion, improved water treatment facilities and expanded roads.

Justin Glasgow, director of real estate investment banking at Robert W Baird, said the authorities in charge of the development of Williston have a long road ahead.

“As the oil industry matures, long-term workers will want to move their families over. Right now the facilities that families need to live a good life, such as supermarkets, parks and good schools just aren’t there. The city needs to think about its growth infrastructure.”

He added: “Things have moved so quickly, it has been difficult for them to keep up.”

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