Kansas Suburb’s Housing Costs Rival SoCal, Manhattan

New U.S. Census data shows that people are paying more of their income for housing in almost every part of the country. And it is hardly surprising that the California housing market, Manhattan and much of the Northeast sit atop that list.

But Olathe, Kansas?

Olathe (pronounced oh-LAY-thuh), 20 miles southwest of Kansas City, showed the biggest jump in the percentage of people paying at least 30 percent of their income on housing, as well as in those paying at least 50 percent on rent.

In a largely rural state not known for growth or overwhelming prosperity, here is a mini-metropolis of man-made neighborhood waterfalls, of what seems like endless construction of shopping malls and office parks.

Executives and immigrant workers, retiring baby boomers and young families have all been drawn to the newfound abundance of jobs, parks and strong-performing public schools.

“It’s basically been a supernova in terms of its growth. It’s a major suburb of Kansas City and for whatever reason has become the place to go. And that I can’t explain,” said Arthur P. Hall, Executive Director of the Center for Applied Economics at the University of Kansas School of Business.

Ever since Olathe’s days as a stagecoach stop on the old Santa Fe Trail there have been newcomers at the crossroads here, usually to take a rest and to move on. But as this prairie town and former bedroom community of close to 120,000 nears its 150th birthday, it is clear what has changed, according to the New York Times:

People come to stay. And pay a lot to do it.

“We grow 10 people a day, every single day,” Mayor Michael Copeland boasts, and population statistics back him up — Olathe has expanded by about 4,000 people a year for the past several years.

Since 1980, the population has more than tripled.

In the last five years, the average price for a new home has doubled to about $350,000. That makes Kansas mortgage loans awfully expensive for would-be buyers — not unlike what people looking for a Massachusetts home loan are thinking these days.

The data was collected before the real estate market began softening over the last year, and it was based on a small sample size.

At the high economic end, Olathe is dominated by homeowners who can afford their properties without a home mortgage — in one of the most prosperous counties in the country.

But still, a city in the Great Plains surrounded by farmland registering at all on such a list of expensive places has analysts befuddled.

DeeDee Palermo is one Olathe resident who feels crushed under the weight of the local housing market.

“I’m a single mom and I can’t make it on my own here, so I live with my mother,” said Palermo, 51, a retail store supervisor. “We’ve had all this massive growth, but for some people, things are worse than ever. I work full time plus some, and I can’t find a place to move to. Landlords want $800-1,300 a month.”

Palermo earns $8.75 an hour. She moved her family to Olathe a few years ago because she thought they could live better here than in Southern California or Arizona, where she held a variety of jobs. She is disappointed.

“You can’t make it here unless you pair up,” she said. “I can’t even think about owning a home.”

The data crystallized what many here like Ms. Palmero already knew: the burden of the Kansas housing market is not carried uniformly, and it is particularly daunting for those with low or stagnant wages who have had to deal with the reality of escalating real estate costs.

In that respect, some say, Kansas is not all that different from Manhattan or anyplace else where home buyers are feeling the heat. The new economics are particularly hard on renters and those in search of affordable housing to buy, as is typically the case in fast-growth suburbs and exurbs around the country.

Single-family homes designed for owner occupancy yield high returns to developers and municipalities than cheaper multi-family or rental units. That reality often results in development favoring families with lots of money to spend on upscale housing.

“As communities develop, they tend to attract higher and higher prices for housing, and the community becomes more attractive,” said Dean Katerndahl, an analyst at the Mid-America Regional Council, a planning organization for greater Kansas City. “We’re trying to advocate that there needs to be more variety in choices of housing, in the price basis but also in types.”

Census figures show that per capita income is $28,373, and for those who do not wish own a home or can’t qualify for a mortgage loan, the median rent is $676 for what is typically a six-room apartment.

Since 2000, the portion of the city’s population paying more than 35 percent of its income to rent grew to 42 percent from 19 percent. It also says there are almost three times as many owner-occupied units here than rental units, which number about 10,700. The poverty rate is also increasing, because the area’s growth is also attracting people with lower incomes.