The New American Gentry

The Wall Street Journal

Wealthy folks are colonizing rural areas, bringing cash, culture -- and controversy

The word "gentrification" conjures up images of once-poor urban neighborhoods invaded by cappuccino bars and million-dollar condos. Now, broad swaths of rural America -- from New England to the Rocky Mountain West -- are being gussied up, too.

Affluent retirees and other high-income types have descended on these remote areas, creating new demand for amenities like interior-design stores, spas and organic markets. For many communities, it's the biggest change since the interstate highway system came barreling through in the 1960s and 1970s.

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With the Internet allowing people to work from almost anywhere, the distinction between first and second homes has become blurred. Many people are buying retirement property while they're still employed. Millions of soon-to-retire baby boomers, say demographers, will propel this trend for years to come.

"What we're seeing is a class colonization," says Peter Nelson, an associate professor of geography at Middlebury College and an expert on rural migration. "It really represents a shift in the nature of the economy from a resource-extraction economy to an aesthetic-based economy."

Such change can create social tensions, as longtime residents are either driven away because they can no longer afford housing or are forced to adapt to new careers.

The impact of rural gentrification is playing out in this lakeside town, situated roughly 100 miles from Boise in Valley County. For decades it's been home to ranchers, farmers and timber workers. It has also served as a weekend retreat for residents throughout the state who flocked to Payette Lake for summer fishing and boating.

Today, Valley County is attracting newcomers from as far away as New York and Sydney. They're putting up second and third residences costing well over $1 million -- price levels once reserved for the few waterfront properties.

In recent years, developers have snatched up land for $100,000 an acre in some cases, or 40 times what it fetched as farmland. Though home prices here are declining as in other parts of the nation, houses still cost about 60% more than in 2004.

The influx of money is creating new jobs in hotels and restaurants as traditional industries like farming and timber fade out. Tamarack ski resort in nearby Donnelly helped super-charge growth in the area. Opened in 2004, the resort, the nation's newest downhill ski destination, is expected to cost about $1.5 billion when fully completed in a decade or so.

Retail sales in the Valley County area increased 30% between 2003 and 2005, according to local research. New members in the McCall Chamber of Commerce include a jewelry store and two art galleries.

Jeff Bowlby, a Seattle cabinet manufacturer, has purchased three properties here over the past six years. Along the way, he's noticed an explosion of new services and goods for sale. One local fly-fishing store, for instance, now sells rubber waders for $750 a pair. Spa del Sol offers a $125 Salmon River stone massage, using heated local stones that have been carefully selected "for their shape and energy." Remarks Mr. Bowlby: "The notion of getting a massage five years ago was pretty crazy."

City Market & Wine shop opened here about a year ago and caters to epicureans with $200 bottles of Italian Barolo and two dozen varieties of olive oil. For Thanksgiving, the store posted a sign-up sheet for organic turkeys. "Probably every Range Rover in town shops here," says Mark Colafranceschi, a Canadian transplant who owns the shop with his fiancée.

Uneven Development

Rural gentrification, and the trappings that go with it, isn't unique to Idaho. Washington's Methow Valley, once a logging community, now attracts cross-county skiiers. Its Twisp Municipal Airport boasts about 30 hangars for private planes, or double the number 10 years ago. Virginia's Bath County, tucked into the Allegheny Mountains, encompasses a number of land grants given to colonists in the 1600s. A longtime favorite among hunters, boaters and fishermen, it began sprouting second homes in the 1990s.

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And yet gentrification is selective. Rural America makes up about three-quarters of the nation's land mass, but has just 17% of the population, about 50 million people. Many mining towns and Great Plains' farming communities have stagnating or shrinking populations while more scenic communities are soaking up new residents.

One indicator of rural gentrification: An increase in residents' total dividend, interest and rent income. That measurement, tracked by the Commerce Department, is a sign that new residents -- usually retirees -- are living off their investments rather than salaries. In Teton County, Wyo., home of Jackson Hole Mountain Resort, total dividend, interest and rent income has risen 177% between 1996 and 2005, one of the largest increases in rural America.

Other resort counties have seen similar increases. Eagle County, Colo., which includes Vail, has had a 109% increase in non-wage income , while Mono County, Calif., where Yosemite National Park is located, has had a 94% rise.

In Valley County and elsewhere, the influx of city money can be a challenge for rural economies. Infrastructure like roads and sewers becomes strained. Fire departments, which often rely on volunteers, don't expand as quickly as the housing stock. and the newcomers push prices up, in some cases forcing locals to outlying towns. To lure teachers, the McCall-Donnelly Joint School District three years ago created a $250,000 housing fund , and rents apartments to teachers at subsidized rates of $500 to $1,000 a month.

But a number of veteran teachers have moved to nearby New Meadows, in adjacent Adams County, where real estate is cheaper. Kurt Dwello is one of them. A sixth-grade math and science teacher, he moved to McCall in the early 1980s and spent $40,000 building a house there. When he looked out his window, he saw an open pasture and grazing cattle. Three years ago, when he packed up for New Meadows, the view had been transformed -- to one of a golf course and several new houses. "It was getting too busy here and things were getting really expensive," he says.

The area, though, has not been immune to the real-estate bust. Construction has slowed and building permits today are down. If they were to sell today, people who bought at the peak in 2005 would most likely lose money. But demographic trends indicate that people will continue coming here.

One reason: baby boomers and the previous generation are moving to rural areas in increasing numbers. Kenneth Johnson, senior demographer at the University of New Hampshire's Carsey Institute, says 76% more people over age 50 moved to "recreation counties" -- places with lots of amenities and seasonal housing -- in the 1990s than in the 1980s. "This suggests that people who are now in their 50s and 60s are moving into these recreation counties more than in the past," he says.

Ripple Effects

Jim Jones is the kind of person who, without a career change, couldn't have lived here before the Internet. Mr. Jones, a 59-year-old sales consultant, moved to McCall full-time from Issaquah, Wash. about nine months ago after tiring of traffic, people and noise. He still works a six- or seven-day week and spends a lot of time on the road. But living in McCall has its bonuses -- like afternoon skiing. "It's been discovered and that's a good thing," he says. "Communities like this have to grow, because they've got too much to offer not to."

In Valley County, as with a great many gentrifying areas, some local residents are turning to the political process to try to keep the area from becoming another Aspen or Vail. Over the past few years, the McCall City Council has placed limits on chain restaurants and passed an ordinance prohibiting gated communities. A measure to increase the height limit on lakefront buildings to 50 feet from the current 35 feet was shot down.

One of the more contentious issues has been the local airport, which doesn't yet have commercial service. Those who support the area's changes would like to lengthen the runway and add a passenger terminal. Those against growth would prefer to see the airport stay just as it is.

"Are you going to be a government for the people who live here or are you going to be a government for the people who want to come here and develop?" says Tuck Miller , a ski coach and McCall native who recently ran for City Council and lost. "That's what every one of these fights is about."

The ripples of gentrification can even be felt in nearby Cascade, a blue-collar town whose culture once revolved around the timber industry and the now-defunct Boise Cascade saw mill. "It used to be only locals," says Karen Cowper, a bartender at the Valley Club, which has walls adorned with mounted moose heads, a selection of hard hats and a sign that reads: "We support the timber industry."

These days, the bar is packed with construction workers and ski bums who come up to work and play. Ms. Cowper, 54 years old, says she now makes about $150 on a weekend evening -- triple what she collected in tips three years ago. To keep up with changing tastes , the bar now stocks Guinness and microbrews, says Ms. Cowper, who scrawls new drink recipes on index cards and keeps them in a flip-top metal box.

She isn't the only one learning new tricks. With the closing of the saw mill, many workers retooled their skills and moved to service jobs. Ron Lundquist, who had operated a forklift at the mill, earned a degree in hotel management.

Today, the 52-year-old is marketing director at the Ashley Inn, a new hotel in Cascade. Instead of hauling lumber from the conveyor to train, he does things like traveling to snowmobile-trade shows to promote the area. Though he misses the camaraderie of the sawmill, he says "I'm proud of what everybody has pulled together to make happen here."

Evolving Fortunes

Valley County has tracked the arc of rural gentrification. Like much of the West, its first growth spurt followed the Civil War. The Homestead Act, signed by Abraham Lincoln in 1862, provided up to 160 acres of western land to anyone willing to live on and farm it. Eastern farmers and immigrants headed west. But rural growth slowed almost as quickly as it surged.

By the turn-of-the-century, with much of the desirable western land settled, most of America's immigrants began pouring into cities. They were joined by descendants of the original homesteaders. With mechanized farming reducing the need for labor, young people left the farm for urban jobs. The shift to the cities continued over the next several decades.

Until recently, Valley County's economy rose and fell on farming and timber. In the 1970s, when the local timber industry was at its peak, there were five mills in the vicinity. In later decades, mills were shuttered as a result of job-displacing technology and federal limits on logging in national forests.

Rural counties gained population in the 1990s, a development that surprised demographers who dubbed it the "rural rebound." This movement continued in 2001 and after.

One area that picked up traction was Valley County. Between 2003 and 2006 , the county issued an average of 530 new housing permits a year, compared with an average of 167 a year in the previous three years. The population increased 16% to 8,836 between 2000 and 2006 , and almost all the growth was due to people moving in. Roughly 54% of the county's homes are occupied by part-time residents.

A Fancier Playground

Valley County long has been a recreation hub. Payette Lake, a glacier lake that sits on the edge of McCall , is a summer draw for boaters and fisherman. But it's become a lot fancier: Hotel McCall recently added a restaurant. And it replaced its room keys, which were attached to wooden buoys that could float, with plastic key cards.

Winter sports have taken on increasing importance. In 1961, the Brundage Mountain Resort opened with financing from J.R. Simplot, the billionaire potato magnate. More recently, the Tamarack Ski Resort has spent millions on magazine ads and radio commercials to broadcast the virtues of Valley County to wealthy homebuyers around the world.

People like Scott Pine have come here for good. A few years ago, Mr. Pine, a 54-year-old high-tech entrepreneur who spent his career in Silicon Valley and Seattle, began looking at homes in Bend, Ore., and Minden, Nev., near Lake Tahoe. After the opening of Tamarack, he and his wife spent $1.1 million building a four bedroom house in McCall. It sits on the ninth hole of a golf course and has views of the northern Rockies. "You have all this open space and nobody is around you," he says.

Some are finding it hard to let go of the past. Ken Roberts, an Idaho state representative, has spent his entire adult life farming hay, grass and oats on land that has been in his family since 1901. That was the year his grandfather arrived in a horse-pulled wagon whose splintered, rusted remains sit under a canopy of ponderosa and aspen pine trees on the edge of the family farm.

Now that Valley County has been discovered, the value of Mr. Roberts's family land has shot up from about $1,500 an acre a few years ago to more than $100,000 in some places. When his mother, who is in her late 70s, passes on, he estimates the federal tax bill could exceed the total earnings of three family generations. Despite the huge tax hit, Mr. Roberts says his goal is to keep at least some of the 600 acres in the family.

"There's 106 years of family history down there, and I love to farm," he said on a recent evening, as he sat in his truck and looked down on his land. Mr. Roberts acknowledges that his problem is a good one to have. But unless he sells the land to a developer, his family will remain land rich and cash poor.

So now he's looking to develop certain parcels, and use the money to preserve the rest as farmland. He's also found a way to supplement the farm's modest income: he started a construction company.

Write to Conor Dougherty at conor.dougherty@wsj.com

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