Pa. drilling communities reap benefits of housing grants from impact fees
When the Marcellus shale boom started bringing waves of gas workers to Pennsylvania eight years ago, some rural communities faced an unusual scenario.
After decades of little or no growth, decent housing was sparse in parts of Greene, Susquehanna and Bradford counties. Sudden demand from workers with few choices of where to live sent prices skyrocketing.
“Early on, rents were doubling and tripling, and people weren't able to afford that,” said Bryce Maretzki, policy director for the Pennsylvania Housing Finance Agency, who noted that elderly residents became particularly vulnerable to being pushed out of their homes in favor of workers who could afford the higher rents. “As soon as leases were done ... people were not being renewed.”
Lawmakers five years ago devoted a financial stream toward efforts to ease the housing crunch that drilling created. The money comes from the Pennsylvania Housing Affordability and Rehabilitation Enhancement (PHARE) fund that is fed $5 million annually from the per-well impact fees paid by shale gas producers.
Since 2012, the Housing Finance Agency has awarded $33 million in grants to county and community programs to support housing development and assistance in 32 counties above the Marcellus.
“It has helped in the areas where the drilling has gone on. They've focused the money on where the most wells are,” said William McGowen, executive director of the Redevelopment Authority of Washington County, which is building patio homes for seniors in Claysville with PHARE money and has directed other dollars from the fund into assistance and voucher programs.
Communities such as Claysville, Williamsport and Donegal — all beneficiaries of PHARE funding — experienced big increases in rent that only recently started coming back down. For example, the average rent in Williamsport, a hub for drilling in the northeast corner of the state, increased 18 percent from 2010 to 2013, according to real estate data firm Zillow.
“There are a lot of vulnerable families that need that assistance; not a handout, a hand up,” said David Calvario, executive director of the Redevelopment Authority of the County of Greene. County commissioners reformed the dormant authority in response to drilling-related housing needs and it is putting PHARE money into mortgage assistance and programs to fix blighted and abandoned homes so they can be rented or bought.
The majority of PHARE funding has gone to the six top counties for shale gas production: Susquehanna, Bradford, Washington, Greene, Lycoming and Tioga.
Not all of the money has gone to communities that host drilling. For example, New Brighton in Beaver County and the city of Butler each received $400,000 over several years for housing improvement programs even though neither has wells close to town.
The legislation that created the impact fee and directed money into the PHARE fund — Act 13 of 2011 — requires only that approved projects “increase availability of quality, safe, affordable housing” for those in need or support rental assistance programs in counties where shale wells are producing gas, not specific municipalities.
“People don't live right on top of a drilling pad. People may live in one community and commute,” said Maretzki, who oversees the PHARE program.
Sen. Gene Yaw, R-Williamsport, who sponsored the legislation that created the PHARE fund before Act 13, said the money's use has followed the intent of the law.
“That was the intent, to help people being displaced as a result of rents going up where they live,” he said.
A bigger concern for some is that PHARE's funding stream could dry up or be diverted.
“If that money disappears, we'll be back to where we were,” Yaw said, noting the recent slowdown in drilling that generates impact fees. “Until such time that there is a greater demand … there's going to be less money.”
The impact fee, which raised more than $200 million a year until drilling activity dropped in 2015, has come under attack by lawmakers who think the industry isn't paying enough or that more money should go to counties outside the Marcellus region. Some proposals to impose a severance tax based on gas production would eliminate the per-well impact fee or change how money is distributed.
County commissioner and township supervisor groups have raised alarms over potential changes to impact fee funding, some of which goes directly to communities and environmental programs.
“I've tried to tell them, we'll continue to monitor and manage the funds as best we can, but counties should also be cognizant that this is a cyclical industry,” Maretzki said. “We're in a set of lean years, where the revenue is going to be down. They should be thinking of that. We've tried to put it on their radar.”
Gov. Tom Wolf's severance tax plan in his budget proposal for next year seeks to keep in place the current impact fee structure, which would maintain the PHARE funding, said spokesman Jeff Sheridan.
“What a final budget will look like, I can't say at this point,” Sheridan said. “We are committed to working with members of both parties and both houses” on a severance tax package.
Even if the fund is left untouched, its funding and the needs it is addressing are changing.
The idea of using drilling money to address housing issues came from then-Gov. Tom Corbett's Marcellus Shale Advisory Commission in 2011. At that point, rental prices in northern-tier counties already were increasing by 6 percent to 7 percent, compared with 2 percent for the rest of the state.
The Housing Finance Agency directed most of the first rounds of funding toward quick-fix initiatives such as low-income housing tax credits, rental assistance and home repair programs.
“We put the bulk of money into programs that were already in operation to help people who were right now facing issues,” Maretzki said.
In Washington County, officials already were planning an addition to the Century Plaza senior living development in North Franklin, which suddenly had a long waiting list.
“The money helped that project come to fruition,” McGowen said of a $606,500 grant. The county also funneled money to Habitat for Humanity to buy lots for new homes.
Greene County officials teamed with the nonprofit Community Action Southwest to help people get mortgage counseling and other services, Calvario said.
The Housing Finance Agency has encouraged counties to work with other groups and use PHARE money to attract matching funds for larger projects. The $33 million has leveraged about $280 million in outside investment, Maretzki said.
As drilling activity has cooled over the past year, rents have stabilized or fallen. More approved projects are aimed at building housing and other long-term solutions that will mitigate further crunches when drilling returns.
“Communities are taking a deep breath ... finding partners to do the right kind of housing development,” Maretzki said.
Calvario and McGowen both said they are looking at working with developers to build housing, especially as moderate levels of drilling remain in their counties.
“We still see the need for more affordable housing,” McGowen said.
The PHARE fund stands to get an additional boost of money this year as part of an expansion approved by lawmakers and Wolf in November. Money from realty transfer taxes will allow counties outside the Marcellus to apply for funding.
The Housing Finance Agency plans to keep impact fee money segregated in the fund so that it's only spent in counties that are eligible today, Maretzki said.
David Conti is the assistant business editor at the Tribune-Review. Reach him at 412-388-5802 or firstname.lastname@example.org.