Government has become the single biggest home builder in Springfield this year.

Few new homes are being built in Springfield and Clark County as the area tries to recover from a housing market crash that affected the nation. The housing crash made the issue of a declining population worse, local housing experts say.

So far this year through August, a total 28 building permits have been issued in Springfield and Clark County, compared to 60 for all of 2011, according to the local governments. At the height of the Clark County market in 2004 and 2005, 230 permits were issued a year.

Builders typically pull a permit when they’re close to starting construction.

Meanwhile, in 2008 and 2010, Springfield received a total $8.5 million in federal Neighborhood Stabilization Program funds to rehabilitate, demolish and build new houses to try to stabilize communities suffering from blight and declining property values, said Shannon Meadows, community development director of Springfield. Some of those funds have been used to partner with other agencies such as Clark County Community Habitat for Humanity to build new houses for people who qualify because of their income.

As a result of the Habitat partnership, most Springfield homes being built this year are through that project.

The fact private home construction is still so sluggish says the economy hasn’t improved enough in Clark County to create enough jobs or confidence for people to want to spend money to build a new house, said Kent Sherry, executive officer of the Building Industry Association of Clark County. The presidential election year adds to the uncertainty, Sherry said.

“There is slow forward movement in the housing market nationwide. In Springfield, where we used to average 250 to 300 houses a year, we’re doing 45 to 50; that is not really strong growth, although I do look for this year to be better than last year,” he said. “If you get more people employed, more houses will sell.”

Home construction hard hit

New home construction has been hard hit because of the economy and because of the declining population, said Andy Irick, senior vice president of retail banking of Security National Bank, Clark County’s largest bank.

The U.S. Census Bureau estimates Springfield’s population in 2011 was 60,333 people, down from 65,358 in 2000. The entire county’s population has gone from 147,548 in 1990, to 137,691 in the most recent 2011 estimate, according to the Census Bureau.

At a peak, Springfield issued 102 building permits in 2007 for construction of new residences. Clark County saw its number of building permits for houses, apartments and condominiums rise in 2004 and 2005 to 230 a year before dropping.

“I would also say because of the drop in the values of homes, there’s a lot of good deals out there. You can buy a lot of house today,” said Bill Fralick, president and chief executive officer of Security National. “Until that inventory gets absorbed, I think it’s going to be slow for building new homes. The population’s down. Without population growth, you can’t keep adding to your housing stock. I do agree we need to be tearing down some of the housing stock.”

Home builder and remodeler Dan Kegley has told the Springfield News-Sun it’s hard to compete with the price of foreclosed homes and short sales. The costs of some building materials, such as fuel, are rising.

“Everything is being built today with such higher standards attached to how we have to build a house. The energy efficiency and the equipment and everything that’s put into these homes saves so much money on utility bills that even though the cost of a new home might exceed what you can buy something else for per square footage, the savings on utility bills and things of that nature really set a new house apart from the older ones,” said Kegley, of Springfield’s Dan Kegley Construction.

Neighborhood stabilization funds

Springfield has too many houses, said Meadows.

To help solve that problem, Springfield has used federal Neighborhood Stabilization dollars to acquire and rehab homes in the Highland Southgate area, build 16 new homes with Habitat for Humanity in the Grand Avenue neighborhood, renovate a duplex on Southern Avenue with Interfaith Hospitality Network, build new houses with St. Vincent de Paul and Housing Connection, provide funding to develop Drexel Avenue apartments for seniors, and do green rehabilitation of homes in the Western and Eastern Edge neighborhoods.

About $850,000 of the funds have gone to demolish properties throughout the city, Meadows.

“It’s not necessarily because we’re trying to take over the building industry, that’s not what we’re trying to do whatsoever. But during this reset of the housing market, we have been able to continue to perpetuate that stabilization effect in removing units and trying to balance some of the construction of units that aren’t as desirable by the private market,” she said.

The houses built with this funding and in partnership with other agencies are sold at a loss for the city.

“A private builder will not participate in that,” she said. “The reason we can take it at a loss for the city is because we’re using federal funds.”

By the end of the year, the federal funds must be spent; however, after that the city will still receive revenues from the sales of houses that it can use to do more work. At some point, funding from NSP or other resources will run out and/or a neighborhood will be stabilized.

“Once you get to a level of market stability where it makes sense for the private guy to come in and build a house, we need to get our hammers out,” she said. “The role of our staff at this point in time in neighborhood stabilization is to manage those funds the best we can and invest as strategically as possible, build relationships as strong as possible and get the heck out as soon as the market is in a point that somebody from the BIA wants to build.”

Opportunities for Individual Change of Clark County, the county’s nonprofit Community Action Agency, also has two housing projects running on Broadway Street in Springfield. The housing units will be leased to the nonprofit’s clients.

One is a stud-to-stud rehabilitation of a double by students in the nonprofit’s construction trades program.

The other project is to build a new house in conjunction with Springfield-Clark Career Technology Center and the city. The house is being built on a previously vacant lot owned by the city with the work by students of CTC, said Mike Calabrese, executive director of Opportunities for Individual Change.

Opportunities did its first housing project last year.

“Housing, employment and transportation are the three critical areas that you have to address when you try to stabilize a family. It just made sense that we do what we can do in the housing realm, and it was something that we could control ourselves,” Calabrese said.

“If homeowners and landlords see that there are investments being made into a particular area or into that neighborhood west of that hospital, that helps to stabilize home prices and encourages them to maintain their properties better,” he said.