Why real estate inventory near the Marcellus Shale is low and prices are rising

This fall, Century Plaza Apartments in Washington is expected to unveil 14 additional apartments for older and low-income residents.

About $1.1 million of the $2.2 million construction price tag came from money generated from the state’s Marcellus Shale impact fee, said Bill McGowen, executive director for the Redevelopment Authority of Washington County. 

The drilling industry boom in places like Washington County has squeezed the housing market, especially among those looking for lower-priced apartments and homes. 

At Century Plaza, which already has been 100 percent occupied in the last 19 years, there was a long waiting list, Mr. McGowen said.

“Over the last three to four years, we’ve seen a trend of greater demand for housing and rentals,” he said. “We’re seeing shortages. We’re not in crisis mode, but it’s above normal. We have a pretty good housing stock left over from the steel mills and glass plant days, and the hotel industry has been keeping up.”

But rates have gone up, which has put pressure on lower-income residents looking for space, he said, “especially younger workers and the elderly.”

Century Plaza, a former hotel that has 65 units, is the second project that the redevelopment authority has undertaken with the help of Pennsylvania Housing Affordability and Rehabilitation Enhancement funds using money generated from the state’s shale drilling impact fee.

Another project underway is to redevelop the Washington Trust Building. The developer, Pittsburgh-based Trek Development Group, plans to turn the nine-story building in downtown Washington into a mixed-use facility.

“The housing portion is going to be a combination of market-rate and affordable housing,” said Mr. McGowen, who added that a key portion of that project — getting approved for low-income tax credits — is in the application stage.

The $17 million Trust Building project includes 44 apartments, about two-thirds of which will be targeted to qualifying, lower-income residents. Currently, office tenants are the only occupants in the building.

Bryce Maretzki, director of strategic planning and policy for the Pennsylvania Housing Finance Agency, said the impact on housing from the Marcellus Shale industry has taken different shapes.

“At the beginning, there were a lot of people coming from out of state that were looking for hotels, short-term housing and rentals,” Mr. Maretzki said. “That has matured, and now more Pennsylvania residents are in the Marcellus workforce. The income they’re getting is higher, and they’re looking for new housing or renovated housing.”

That is one of the factors driving up market rates for those in the area.

“There’s a demand for better housing, and there’s an escalation in affordability of housing — so those at the bottom are struggling,” Mr. Maretzki said. “We’ve seen landlords that are increasing rents when leases come due because they can command more of the marketplace.”

As of May, the average annual salary for workers in the core oil and gas industry — including drilling and pipelines — $89,818. For those in related industries, it was $66,070, according to the Pennsylvania Department of Labor and Industry.

Last week, the PHFA said it’s launching its third round of funding to improve the availability and affordability of housing in the Marcellus region. It plans to distribute $9.6 million to eligible projects.

“There’s lots of unmet demand for housing,” Mr. Maretzki said. “Many of these communities have very old housing stock. These are resources that can help upgrade and improve existing homes.”

There are two components to the funding, he said. One part is $5 million generated from fees for wells drilled in 2013, using a formula based on the price of natural gas and other factors.

The second source of funding is through a provision in Act 13, the state’s sweeping Marcellus Shale law. Under the law, municipalities get a portion of the money generated from the shale impact fee. Anything greater than 50 percent of their municipal budget or greater than $500,000 goes to the Pennsylvania Housing Affordability and Rehabilitation Enhancement to address housing needs.

There are typically six counties whose surplus funds goes to address housing — the same counties where drilling activity is the heaviest, Mr. Maretzki said.

The surplus money typically gets targeted back to those counties for housing needs “because that’s where the need is,” Mr. Maretzki said. In southwestern Pennsylvania, those counties are Washington and Greene. The others are in the northeastern part of the state. 

To date, the PHFA has distributed $16.7 million. In 2012, $7.9 million was available for housing. In 2013, that increased to $8.7 million. This year, it’s $9.6 million.

Many counties also use grants, federal funds and other sources to develop their housing plans.

Barry Crumrine, president of the Washington-Greene Association of Realtors, said home buyers in the region are facing a very competitive market. “Inventory is low,” he said. “Nice, decent homes that are priced correctly have sold within a week.”

Mr. Crumrine, who also is a real estate agent with ReMax Community, said demand is for a variety of single-family homes, but ranch homes are in the spotlight as more baby boomers downsize from larger homes.

Meanwhile, he estimated that rental rates in Washington and Greene have jumped about 30 percent. “A nice three-bedroom, two-bath townhouse in Meadowbrook [Washington County] could be going for $1,600 a month,” he said.

Stephanie Ritenbaugh: sritenbaugh@post-gazette.com or 412-263-4910

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