O’Fallon is the fifth fastest growing community in region

Editor’s note: This is the first in a series of articles looking at home development in O’Fallon. In next week’s issue, the city parnters with contractors. The series concludes the following week with a family perspective on why families choose to live in O’Fallon.

When you crunch the numbers it becomes clear that O’Fallon has paved the way as a leader in the region’s growing residential housing development sphere.

O’Fallon Community Development Director Ted Shekell has seen the growth firsthand.

“Just since I’ve been in my position in O’Fallon in 1997 to now there’s been 3,727 new homes built,” he said.

With single family home building permits dating back to 1988, when 136 new homes were built, O’Fallon has never dipped below 82 new homes in 1990 and has reached as high as 384 new homes in 2005. From 1988 to 2015, 5,228 single family homes were built in O’Fallon, according to Shekell.

O’Fallon is a sought after location in the region, which consistently ranks as the fastest growing city in the metro-east, and the fifth fastest growing suburb in the St. Louis area, according to a five-year average of single family residential permits from 2010 to 2014 looking at Missouri and Illinois communities.

From 2010 to 2014, O’Fallon had 109 homes built, while Swansea had 64 and Shiloh had 60, according to an O’Fallon five-year average of single family residential permit reports. The four ahead of O’Fallon starts with Wentzville, Mo. which had 416 homes; O’Fallon, Mo. had 335; St. Peters, Mo. had 223; St. Charles City, Mo. had 170.

The first hub of new residential development is the O’Fallon and Shiloh area, he said. Following not far behind is Swansea and Mascoutah.

“Between three to five miles from the Interstate 64 exit 16 (O’Fallon exit) is the epicenter of housing growth in the metro-east, as well as it’s emergence as the ‘Healthcare Highway,’ or ‘Medical Mile,’ with a new hospital (Memorial Hospital East) that opened in Shiloh in April and another (St. Elizabeth’s Hospital) being constructed as we speak,” Shekell said.

Shekell anticipates the number of new home development to rise even more once St. Elizabeth’s Hospital in O’Fallon opens in 2017.

“It’s going to bring so many more job opportunities for people, and in turn more people will want to relocate here to minimize commute,” Shekell said.

Last year O’Fallon had 134 new homes built.

“O’Fallon has continued to see the housing market grow over the past five years. The median value of the housing stock increased over 5 percent from the estimated median value in 2013 of $224,047 to an estimated median value of $235,615 in 2015,” Shekell said.

In 2015, 5.2 percent of homes in O’Fallon were valued at $500,000 or more, where as 21.5 percent accounted for homes valued between $300,000 and $499,000. The majority of O’Fallon homes, 33.3 percent, were valued between $200,000 and $299,000, while 29.5 percent fell between $100,000 and $199,000. The lowest home value sits at 8.1 percent of $100,000 or less.

Why O’Fallon?

Shekell attributed a large part of the housing expansion to the influx of area residents working at Scott Air Force Base.

“We have so many military members here in town and in our surrounding corridors. We appreciate those guys and gals, and they all sacrifice a lot for our communities,” Shekell said. “They are a big part of our community. I think they make up a little over 35 or 40 percent of our town.”

Tracy Butler, executive director for Home Builder’s Association of the Greater Southwest Illinois, said she thinks the increase in new housing development is also a by product of the base.

O’Fallon’s close proximity to the Scott has been an economic boon to the community by directly employing more than 13,000 military and civilian workers, supporting over 18,000 military retirees and civilian workers, and indirectly employing another 25,000. The base supports a direct and indirect payroll of nearly $2.4 million dollars and provides $3 billion annual economic impact to the region, according to the O’Fallon economic development profile issued in the spring.

“It keeps us busy, even during the recession numbers were up and didn’t fall too much, so it’s very interesting,” Shekell said.

According to the U.S. National Bureau of Economic Research, the official arbiter of U.S. recessions, the Great Recession began in December 2007 and ended in June 2009 extending over a period of 19 months. It was related to the financial crisis of 2007 and 2008 and the subprime mortgage crisis from 2007 through 2009.

In terms of overall impact, the International Monetary Fund concluded that it was the worst global recession since World War II.

In 2006, reports indicate 304 new homes were built, which fell the following year to 203 with the dawning of the Great Recession, which was still higher than any year thereafter. In 2008, the new home built dropped to 121, but was back on track with 140 by 2010.

“We still had growth even during the depths of the recession. It’s an amazing thing, and I think what that shows us that people still wanted to come to O’Fallon because of the quality of life we have here continues to improve, and the numbers keep tallying up,” Shekell said. “From the 2003 to 2006 range we were pushing about 350 to 400 new homes a year, and that was hard to keep up with for us and for the schools — we were chasing that volume to keep up with the infrastructure.”

One plat, two plat

The land being developed for new residential housing in O’Fallon is split into two categories — preliminary plat lots and final plat lots.

“The preliminary plat means that’s the concept plan that city council has approved, where as final plat is where they implement all the infrastructure, which includes engineering plans of all the (utilities such as) water lines, sewer lines, road profiles and drainage systems and all that stuff,” Shekell said. “Right now there’s 782 preliminary plat lots and 357 final plat approval in O’Fallon.”

Final plats are the lots that are build ready with infrastructure in place, but dirt is still being moved, and the home has yet to be built, where as preliminary plat lots don’t have anything but undeveloped land, but a plan to build. Either way, both must be approved by city council to move forward.

When a final plat is given that means the developer has hired a contractor to come in and start building the bones of the home, also known as framing carpentry, Shekell said.

“This is an important number because when looking back again to the recession, in a three-year period, we had 3,000 new single-family home lots preliminarily platted. A 1,000 a year about — it was crazy. It was just off the charts. It was just that fevered in that period of time,” Shekell said. “And this business is based on supply and demand, so we had all this land and inventory out there, and when the demand dropped off (and) the financing became so difficult for families to get, there was a huge gap, and that took a long time for that inventory to get absorbed.”

There were less new subdivisions popping up for a few years because no one was buying land and financing locked up, he said.

“There were people still buying homes, but developers weren’t developing new land,” Shekell said. “So I take to heart when I see those numbers because it tells me that even in the worse of the worst times imaginable people still wanted to be here. That’s a sign of a healthy community.”

“Now that’s not the cost of the home the homebuyer pays, that’s just the value of the home on the building permit — that’s what the raw cost of the house to be built,” Shekell said.

According to Shekell, the American Community Survey lists O’Fallon new home values from 2010 to 2016 at about $321,000.

Shekell said building permit fees are based on the value and size of the home, “so most often the number hangs around $800 to $1,200.”

In terms of revenue, O’Fallon not only requires the building permit fee, but the municipality also requires an annexation fee of $2,250 for each home, and which go to help, primarily, offset costs of the city building and/or maintaining roads, he said.

“So for example, the work on Milburn School Road, those annexation fees from a lot of those homes in Savannah Hills and Windsor Creek, we take and put them in the capital improvements budget, and that still doesn’t offset the entire cost, I mean when Milburn work is done it’s going to be millions of dollars worth of work,” Shekell said.

Hypothetically, if O’Fallon wanted to offset the entire cost of road improvements, Shekell said they would have to charge an upwards of $6,000 per home in annexation fees alone.

“But that’s not practical,” he said. “So who pays for Milburn School Road? It’s too big and extensive of a project for any one developer to be expected to take on, so it’s (the city’s) responsibility to take care of that, but it’s incredibly expensive and takes time. We have to acquire right-of-way, and sometimes that means working with residents to obtain (right-of-way) to widen the roads, so that’s a long term and time consuming endeavor, and often times the developer will get in and establish the development site before we have a chance to finish road improvements.”

In addition to the building and annexation fees, the city charges $865 per home for park land dedication.

“That also goes into a capital fund for the city to use to acquire new park land,” Shekell said. “Parks are as essential to a community as the roads are. Building a community takes all of these pieces working together — great schools, good road system, park land and bike trails — all these things that people need and want, and fees like this help make our community better overall.”

Shekell said he feels it’s a fair fee to impose on developers.

“Otherwise the taxpayers would have to foot that bill. So we think it’s fair that developers that are generating some of this demand pitch in at least a percentage of the impact of new home construction,”

Those fees have been in place since about 2001, Shekell noted.

“And, if you look at the numbers it has not negatively affected development since it’s worked into the cost of the home,” Shekell said.

“So, if you have a family and you wanna put roots down and have a place where your property value is going to be taken care of, O’Fallon is that place, it just is, and that’s why I think that during the depths of the recession we still had people wanting to live here because that quality remained,” Shekell said.

This story was originally published July 20, 2016 at 11:55 AM with the headline "O’Fallon is the fifth fastest growing community in region."