After years of slow growth, Watertown courts home buyers

Richard and Julaine Schimmel moved from Crystal to a spot outside Watertown in 1970, and brought their house with them.

More than four decades later, they've decided to leave the house but not the community. And it's a good time for it — in an effort to fill its vacant lots with new houses, Watertown is currently offering buyers a nearly $10,000 incentive.

"This is really the community we wanted to be in," Richard Schimmel said of the Carver County town. "We're just trying to find ways to make it more affordable."

It's common for small towns to court buyers this way, offering everything from tax abatements or discounted sewer hookups to free lots.

"[Watertown is] a third-ring community … and as such they're a little bit light on the traditional amenities," said Arnie Esterbrooks, vice president of the land development company Rolling Green. "So you have to entice people to move in there."

Watertown has about 4,000 residents, and 385 vacant lots.

The number of building permits for new single-family homes there spiked in the early 2000s, with an average of about 70 permits annually from 2000 to 2004. The bubble burst with the recession, though, and in 2012 there was just one permit issued.

Esterbrooks, who's collaborating with the city on the incentive program, said the recession forced his company to reduce prices across the board by about 30 percent.

"We were in a situation where we lowered our prices about as much as we could possibly do, and it still wasn't getting [buyers] off the fence," he said.

To mitigate that, the city is offering 15 permits with a $9,500 credit for water, sewer and stormwater trunk fees for new single-family homes and townhouses until Oct. 31. If any permits are left after that, they'll come with a $7,125 credit until Dec. 31. As of June 25, seven permits were spoken for.

City Administrator Shane Fineran said the short time frame is meant to spur quick growth.

"We didn't want this to drag out over a period of 12 months or 18 months," he said. "We wanted to see some activity right now."

"We're really not looking right now at the profit margins," Esterbrooks said. "Short-term loss will give us a long-term gain."

Though several lots have been claimed, not all will house new residents.

Developers are using some of the lots to build spec homes that may entice future buyers, Fineran said. Meanwhile, other lots are going to current residents, like the Schimmels.

Ben Winchester, a research fellow at University of Minnesota Extension, said there's no published research on the effect of these programs. But research he did on towns in northwestern Minnesota found that incentives tended to attract current residents more than newcomers.

It's not that people don't want to move to rural areas, he said. But housing stock is limited, new homes are expensive and towns often struggle to market their incentive programs.

Though the Schimmels didn't need much persuading to stay in town, the $9,500 permit credit will ease their transition to a twin home in Watertown — a spot where they're planning to live out their retirement. If they eventually need to move, Richard Schimmel said, the savings the permit provides will make it easier to do.

"Should we need assisted living, it's a lower cost," he said. "We don't have to take money out of savings to buy the home."

In coming years, baby boomers looking to downsize will free up a lot of housing stock in small towns, Winchester said. The homes they leave may not be new, but they will be up for grabs.

"It's not that people always want the new building," he said. "They just want something that's there."