Many words are spilled by government and advocates about the need to make housing more affordable in Seattle and King County. Special fees are assessed on real estate transactions for corrective programs. The mantra of affordable housing has birthed an epic library of “shelf art” – those volumes of earnest studies with scores of mostly unimplemented recommendations. But the core of the problem remains. According to experts on the ground and a series of studies and reports, housing affordability has worsened sharply in certain metro regions including Seattle because state, regional and local rules restrict housing supply.
Tight Housing Supply
Growing population and the incomes of high-tech and other higher-earning workers are the usual explanations for escalating housing costs in booming new economy locales like metro Seattle. That began to change with issuance of a 2008 study by University of Washington professor Theo Eicher.
He looked at 1989 to 2006 housing data for 250 U.S. cities and found government regulations drove prices up far more than population and income growth. Of the five Washington cities examined, Eicher found that state and local regulations “to negate sprawl…exacerbate agglomeration pressures at city centers” and added an average of $203,000 to housing prices in the Seattle region.
As elsewhere, Eicher found for metro Seattle that the greatest portion of increases were due to “statewide land use restrictions imposed by executive and legislature”, followed by “statewide growth management and residential building restrictions” and “municipal land use restrictions upheld by courts.” Income and population growth had a relatively smaller effect.
Versus peers, Seattle-Bellevue-Everett and Washington state ranked in the top tier for restrictive land use regulations according to an index used in the Eicher study from The Wharton School of Business at the University of Pennsylvania. It was based on reported policies from planning officials.
A top Obama Administration official has related concerns.
“Artificial Upward Pressure” On Prices
In 2015 remarks posted at whitehouse.gov, economist Jason Furman, appointed by President Barack Obama as head of the executive’s Council of Economic Advisors, issued a stern warning against the supply-limiting, price-spiking effects of restrictive zoning and land use regulations. Furman wrote:
“…excessive or unnecessary land use or zoning regulations have consequences that go beyond the housing market to impede mobility and thus contribute to rising inequality and declining productivity growth…
…The artificial upward pressure that zoning places on house prices – primarily by functioning as a supply constraint also may undermine the market forces that would otherwise determine how much housing to build, where to build, and what type to build, leading to a mismatch between the types of housing that households want, what they can afford, and what is available to buy or rent.”
Furman’s analysis is supported by the 2016 Demographia International Housing Affordability Survey, released in January of this year. It rates 367 metro markets including 87 majors, for middle-class housing affordability and finds the Seattle region “severely unaffordable.”
The survey used third-quarter 2015 data that compared median household income to median house prices. Known as the “median multiple,” a score for a metro region of 3 or under indicates housing is affordable, while 3.1 to 4 is “moderately unaffordable,” 4.1 to 5 “seriously unaffordable” and 5.1 or more “severely unaffordable.” The Seattle region’s median multiple was 5.2.
Matthew Gardner, Chief Economist for Windermere Services Corporation, a real estate services company based in Seattle, told Lens that “of course” the Growth Management Act – and related county and local oversight of land use – have over the years significantly driven up housing costs in Seattle-King County.
‘We Have to Re-Open The Conversation’
Back in the early 90s, as the state GMA was being implemented, the view was “fundamentally it makes sense; we thought there was plenty of land” said Gardner. Now, he said, “We’ve had a great run for the last 25 years in Central Puget Sound, but we have to re-open the conversation” because it’s no longer reasonable to limit housing density to one unit for every five or more acres outside currently designated growth areas.
Gardner said that inside the growth boundaries of Seattle-King County, “smaller and smaller parcels are available for development. Therefore the price of these lots is being bid up. As developers pay more, they must charge more. It’s Economics 101,” if you limit supply, as demand is escalating, prices will rise sharply over time.
Gardner added that in the buildable lands assessments that counties and cities must do under the state GMA to look at what’s inside Urban Growth Areas (UGAs), the local inventory is often inflated, viewed through rose-colored glasses. He explained the assessments don’t seriously forecast market growth and can gloss over unfeasibility of certain supposedly “buildable” sites that may be very costly, or lacking in infrastructure, or in poor settings for a residence.
“Like Playing SimCity With Our Land Use”
“It is sort of like playing SimCity with our land use. You can pretend a certain number of units will occur on types of zoned land, but there are a large number of constraints that, in fact, limit this and prevent it from occurring broadly,” said Art Castle, Executive Vice President for the Building Industry Association of Washington.
Not only are market demand and changing inventory given short shrift in the planning process, Castle added, but “the methodology in changing an Urban Growth Area boundary requires going through the locally adopted ‘reasonable measures’ to try and accommodate” the clustering mandate first, and “the appeals and Growth Management Hearings Board decisions intimidate cities and counties into compliance” that works against boundary expansions, and housing affordability.
Kennewick Is Looking Good
The Demographia survey report suggests another option for those seeking reasonably-priced housing: relocate. Compared to Seattle’s 5.2 median multiple, Kennewick’s is 3.3 and Olympia’s 3.8; both only “moderately unaffordable.” The grass is even greener elsewhere. According to the Demographia survey the nation’s most affordable major markets – with median housing prices only two to three times more than median household income – are Buffalo, Cincinnati, Cleveland, Rochester, Pittsburgh, Grand Rapids, Oklahoma City, St. Louis, Columbus, Indianapolis, Kansas City and Louisville.
According to the Q4 2015 Housing Market Snapshot from the Runstad Center for Real Estate Studies at the University of Washington, the median resale price of housing in King County was $494,500, higher than any other county in the state and far above the statewide average of $292,700.
Lawmakers have come at the Growth Management Act recently from several angles. A bill to repeal it has failed to advance in 2015 and again this year.
Another measure got a bit further. HB 2945 would have created a task force to re-examine the Growth Management Act and issue recommended GMA tweaks by November 1, days before elections for governor and state legislature. Sponsors were Rep. Sherry Appleton (D-23) and Rep. Luis Moscoso (D-1). The bill in February cleared the House Committee on Local Government and went to House Rules where it failed to advance to the House floor for a vote by the February 17 deadline for passing by majority vote in the chamber of origin.
Still alive is SB 6239, which would give multi-unit residential property owners a 15-year exemption from paying property taxes if one-quarter of the units in the building were affordable. The bipartisan measure passed the Senate Housing and Ways and Means Committees, cleared Senate Rules and the full Senate by cut-off. It’s fate currently is in the hands of the House Community Development, Housing and Tribal Affairs Committee. The chair is Cindy Ryu (D-32nd).
The Second Senate Substitute version of the bill now advancing would allow local governments to set below-market rent for the property-tax-exempt units at levels that are “affordable to households with an income of fifty percent or less of the county median family income, adjusted for family size.”