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Growning Pains By Stephen Geer
In a time of dreaded market prospects, few job opportunities and downsized economic realities, the boom of Marcellus Shale drilling has created unique possibilities for people in Pennsylvania.
However, with an industry growing at such a fast rate, unforeseen problems seem to seep out of the ground with the natural gas. At a recent Keystone Energy Forum, PACB President Nick DiFrancesco headed up his own panel to help address these problems, specifically dealing with housing.
Few experts would have predicted a mini-housing boom in this economic climate, yet that is exactly what has been happening all across Pennsylvania. At a recent Energy Forum, representatives from all across the state gathered to call for help to manage the escalating symptoms of this young industry.
The panel, comprised of housing, finance and real estate representatives, discussed the struggles of attempting to expand housing in a market where most banks are extremely wary of loaning in an unknown arena. Former state representative Mark McNaughton said that “The jump in price and the jump in the lack of affordable housing in the Marcellus Shale region is absolutely astronomical when you hear some of the statistics on the value of price increases.” With many drilling sites popping up all across the state, hotels are filling up due to the lack of affordable housing in the area, and the over-crowding is beginning to have an impact on the local municipalities. DiFrancesco further explained the anomaly of Marcellus Shale housing, saying that bank regulators view it merely as a blip in the housing market, and not worth investing into. He believes that is not true, however, and views the situation more as havens from the economic downfall, protected by the Marcellus Shale drilling sites. However, DiFrancesco still says that “The regulatory environment is as bad as it has been for as long as I remember. It's really, really bad.” Mike Clementoni of Modular Building Association believes that in order to begin housing development, energy companies need to step forward with financial guarantees, to help calm the banks' skittishness. While many banks view investing in the potential housing market as pure risk capital, having deep pockets reinforcing the developments should soothe the banks into loaning to these companies. Pat www.pacb.org |
| 27
The jump in price and the jump in the lack of affordable housing in the Marcellus Shale region is absolutely astronomical when you hear some of the statistics on the value of price increases. Families living in their car in their friends driveway is not an acceptable solution,
but unless something is done soon, that is all we have. McCune, President of Community Bank agreed, remarking that by having energy companies back loans to the the housing developers, banks will be much more likely to loan. He believes that regulators are not interested in stopping banks from loaning, but instead just attempt to avoid risky ones. McCune went on to say that one issue that continues to be an issue across the state is those who fear the environmental impact on the local areas, and that before anything can be done, we must come to an environmental consensus. “The environmental risks can be mitigated and controlled I believe,” McCune said, “but there's not an understanding in the population that that's the case.” Beyond the local impact of the housing, most housing firms are more likely to borrow from local banks, rather than larger, national banks. The ability to have a locally grown bank, who know the area, and can make judgments based on first hand experience is best for these companies. The national banks with overarching programs will have little interest in approving these unique loans. Thus, many of these housing developers are hoping that community banks will step up. Robert Bobincheck of the Pennsylvania Housing Finance Agency, says that until that happens though, many individuals being displaced due to 28 |
| www.pacb.org
these growing issues will continue to face problems. “Families living in their car in their friends driveway is not an acceptable solution, but unless something is done soon, that is all we have.” That this situation must be addressed immediately was emphasized by all present, not only for the possibility of a financial boon to the areas with Marcellus Shale, but also to help these low income families in desperate times. The growing pains of an industry flourishing such as this has led some to believe it is best to stay away all-together – yet those on the panel said that pushing the issue to the corner will only last for so long. Should the energy companies decide to back these housing developers (and many believe they will), it would turn into a winwin situation for all involved; housing planners would begin hiring contractors all across PA, and community banks would receive long term interest payments backed by the large energy companies, who will continue to hire employees. In the long term, Marcellus Shale could have a profound effect on Pennsylvania's economy, but this catch 22 must be fixed before Pennsylvania can move forward.
www.pacb.org |
| 29
Growning Pains By Stephen Geer
In a time of dreaded market prospects, few job opportunities and downsized economic realities, the boom of Marcellus Shale drilling has created unique possibilities for people in Pennsylvania.
However, with an industry growing at such a fast rate, unforeseen problems seem to seep out of the ground with the natural gas. At a recent Keystone Energy Forum, PACB President Nick DiFrancesco headed up his own panel to help address these problems, specifically dealing with housing.
Few experts would have predicted a mini-housing boom in this economic climate, yet that is exactly what has been happening all across Pennsylvania. At a recent Energy Forum, representatives from all across the state gathered to call for help to manage the escalating symptoms of this young industry.
The panel, comprised of housing, finance and real estate representatives, discussed the struggles of attempting to expand housing in a market where most banks are extremely wary of loaning in an unknown arena. Former state representative Mark McNaughton said that “The jump in price and the jump in the lack of affordable housing in the Marcellus Shale region is absolutely astronomical when you hear some of the statistics on the value of price increases.” With many drilling sites popping up all across the state, hotels are filling up due to the lack of affordable housing in the area, and the over-crowding is beginning to have an impact on the local municipalities. DiFrancesco further explained the anomaly of Marcellus Shale housing, saying that bank regulators view it merely as a blip in the housing market, and not worth investing into. He believes that is not true, however, and views the situation more as havens from the economic downfall, protected by the Marcellus Shale drilling sites. However, DiFrancesco still says that “The regulatory environment is as bad as it has been for as long as I remember. It's really, really bad.” Mike Clementoni of Modular Building Association believes that in order to begin housing development, energy companies need to step forward with financial guarantees, to help calm the banks' skittishness. While many banks view investing in the potential housing market as pure risk capital, having deep pockets reinforcing the developments should soothe the banks into loaning to these companies. Pat www.pacb.org |
| 27
The jump in price and the jump in the lack of affordable housing in the Marcellus Shale region is absolutely astronomical when you hear some of the statistics on the value of price increases. Families living in their car in their friends driveway is not an acceptable solution,
but unless something is done soon, that is all we have. McCune, President of Community Bank agreed, remarking that by having energy companies back loans to the the housing developers, banks will be much more likely to loan. He believes that regulators are not interested in stopping banks from loaning, but instead just attempt to avoid risky ones. McCune went on to say that one issue that continues to be an issue across the state is those who fear the environmental impact on the local areas, and that before anything can be done, we must come to an environmental consensus. “The environmental risks can be mitigated and controlled I believe,” McCune said, “but there's not an understanding in the population that that's the case.” Beyond the local impact of the housing, most housing firms are more likely to borrow from local banks, rather than larger, national banks. The ability to have a locally grown bank, who know the area, and can make judgments based on first hand experience is best for these companies. The national banks with overarching programs will have little interest in approving these unique loans. Thus, many of these housing developers are hoping that community banks will step up. Robert Bobincheck of the Pennsylvania Housing Finance Agency, says that until that happens though, many individuals being displaced due to 28 |
| www.pacb.org
these growing issues will continue to face problems. “Families living in their car in their friends driveway is not an acceptable solution, but unless something is done soon, that is all we have.” That this situation must be addressed immediately was emphasized by all present, not only for the possibility of a financial boon to the areas with Marcellus Shale, but also to help these low income families in desperate times. The growing pains of an industry flourishing such as this has led some to believe it is best to stay away all-together – yet those on the panel said that pushing the issue to the corner will only last for so long. Should the energy companies decide to back these housing developers (and many believe they will), it would turn into a winwin situation for all involved; housing planners would begin hiring contractors all across PA, and community banks would receive long term interest payments backed by the large energy companies, who will continue to hire employees. In the long term, Marcellus Shale could have a profound effect on Pennsylvania's economy, but this catch 22 must be fixed before Pennsylvania can move forward.
www.pacb.org |
| 29
