Continued growth of Norman housing is a balancing act, local experts say

·6 min read

Jul. 24—While the cost of development in Norman may come with high impact fees, city records show residential building permits have been on an upward trend since 2019. But expert perspectives vary in what that means for the future pace of housing growth in the area and effects on the city water supply.

Builders say fees associated with building permits and connection fees are a deterrent for Norman development. City connection fees, which include water and wastewater, total around $4,500 — the highest in central Oklahoma.

Conversely, the rate users pay is the lowest.

City Councilor Stephen Holman said new construction costs may be high in Norman, but the monthly cost to residents to live here is cheaper than all comparable cities in the metro and state.

Norman residential utility bills do indeed come in lower than any other city surveyed in the state, according to a study by Raftelis, a company specializing in management consulting for local governments.

The study shows Norman's water utility bills are less than $100 a month, assuming 10,000 gallon water usage and the standard meter size. Norman is the lowest among Ponca City, Ardmore, Lawton, Moore, Midwest City, Broken Arrow, Denton, Tx, Oklahoma City, Bartlesville, Lubbock Tx, Stillwater, Enid, Edmond, Tulsa and Lawrence, Ks., the highest rate at over $200.

Norman is the only city on the list and believed to be one of a small number of cities in the nation where water utility rate increases are voted on by citizens.

Utilities engineer Nathan Madenwald said the charges are for ongoing costs such as staff, electricity, maintenance, repair, meter reading and billing. They are also used to replace broken lines, meters and other required improvements that don't increase or expand system capacity.

Madenwald said a recent rate proposition failure and inability for the city to raise rates to meet rising costs hampers their ability to maintain the system.

Regarding new development connection fees, Madenwald said they are used to fund increases or expansions for the water system and cannot be used for maintenance, repair and replacement. This means those funds cannot offset water rate deficiencies for most costs and projects.

A recently-completed Raftelis study to determine legally justified connection fees found the city could charge up to $3,180 for a 3/4 -inch water meter based on projected future capital costs to increase capacity to meet future growth. The fee increased to $1,250 from $1,000 in April 2022 and will become $1,500 in April 2023.

Madenwald said Raftelis evaluated these fees and determined they are currently appropriate.

Cynthia Rogers, professor of economics at the University of Oklahoma, said it's important to consider what it costs the city utility to provide extra water, sewer and flood control when more activity is added.

"A private business would make sure it covered costs of what it sells, in this case, access to water, sewer and stormwater service," Rogers said. "Costs are incurred but not recovered directly from new activity when it comes to connection fees — someone pays."

Water supply, infrastructure upgrades with city growth

Norman does have the highest connection fees in the metro, but Holman said he hears from many residents that fees still don't cover the cost of connecting new development to city systems and maintaining those connections forever.

Connection fee increases provide funding to help achieve a balance of future growth with the water supply, Madenwald said, adding that the ongoing challenge is funding from low user water rates.

Holman said other cities may be more willing to subsidize the cost of new connections in hopes of attracting development, but despite high fees, developers are still choosing to come to Norman and the city is seeing strong population growth.

According to records, the city issued 434, 537 and 559 residential building permits in calendar years 2019, 2020 and 2021, respectively.

"If you drive around, you will see construction happening absolutely everywhere here," Holman said.

Additionally, Holman pointed to 2020 Census statistics showing Norman saw more total population growth since 2010 than any other city in the state besides Oklahoma City and Tulsa.

Norman increased from 110,925 in 2010 to 128,026 in 2020, an increase of 15.42%.

Holman said the current council and future councils must evaluate all fees on a regular basis to make sure they can provide services expected by Norman residents.

"That includes looking at reducing fees if it is determined we are collecting more than needed," Holman said.

Public Works director Sean O'Leary said it's possible for Norman to continue growing at the current rate without affecting Lake Thunderbird provided it meets regulatory stormwater requirements.

"In fact, we are doing just that," O'Leary said. "However, only 50% of the Lake Thunderbird watershed is in Norman — 38% of the watershed is in Oklahoma City and 12% is in Moore. Therefore, the Oklahoma Department of Environmental Quality and the Environmental Protection Agency must continue to regulate those two cities effectively in order to keep Lake Thunderbird from becoming more impaired."

Keeping up with demand

Attorney Sean Rieger, who often represents clients looking to build in Norman, said Norman routinely built more than 500 homes annually in the early 2000's, but what worked then may not be sufficient today.

Rieger said the number of homes built is relative to how large the community is at the time. A study by the Association of Central Oklahoma Governments in 2018 estimates Norman will grow by 52,444 people by 2040.

This growth will require 23,333 new housing units in Norman and 21,445 new jobs over the next 20-25 years, according to the study. That averages to about 1,040 new housing units needed annually, though this includes both single and multifamily.

As building permits increased in recent calendar years, the monthly supply of homes, which is the number of months it would take for the current inventory of homes to sell out without new housing added to the supply, has decreased.

Norman's monthly supply of homes for June was 3.6, 3.2, 2 and .8 from 2018-2021, according to Multiple Listing Service data. The 'days on market' metric, a demand indicator, has also seen an annual drop. The average time on the market for a home in Norman declined from 59 days in June 2018 to 47 in 2019, 38 in 2020 and 21 for the same period in 2021.

"If we are not keeping up to pace, then presumably we are not building enough housing supply to keep up with the anticipated demand," Rieger said. "...if supply is not keeping up with demand, then it would seem a natural prediction that housing prices may escalate faster than normal when more buyers are seeking fewer supply of homes."

Jeff Elkins covers business, living and community stories for The Transcript. Reach him at jelkins@normantranscript.com or at @JeffElkins12 on Twitter.