In terms of housing availability and affordability, there are two predominant types of major metro regions these days, writes BuildZoom Chief Economist Issi Romem. Unlike outward-growing or “expansive” metro regions where housing prices are within reach of growing young families, Seattle-King County is one of the poster children for “expensive” metros where sharper growth limits drive prices up.
According to the 2016 Demographia survey Seattle-King County housing is severely unaffordable, with median costs more than five times median income.
Despite widening concern, there are mixed views on how best to correct the problem. Lowball population growth forecasts by the state for King County help to limit supply there, and local elected officials need to spend more political capital to engineer even greater density. That’s according to some panelists at the 22nd Annual Housing Issues Briefing presented Friday, June 3 at the Westin Hotel in Bellevue by Seattle-King County Realtors.
At the briefing, Sam Pace unpacked the bad forecasting practices codified in the Growth Management Act (GMA), a state law dating to 1990. Pace is a housing specialist for the Seattle-King County Realtors and former president of Washington Realtors.
Stale Data Takes A Real Toll
Pace explained that for the state’s Office of Financial Management (OFM), “the law the agency has been dealt” that requires 20-year population projections made just once every five years, is a critical piece of what’s gone wrong.
Under GMA, it’s mandatory that the OFM forecasts drive county and local planning for distribution and quantity of housing supply. But with rapid job growth and housing demand in King County, stale data takes a real toll.
Pace said King, Pierce, Snohomish and Kitsap counties use the mid-level OFM growth forecasts. OFM’s last five-year forecast, in 2012, projected a total population increase of 17,979 for King County in 2015; but the number of new state drivers’ licenses alone that were issued in King County that year to drivers moving here from out-of-state was 71,058. The figure does not include non-drivers in the house, or Millenials who don’t drive, natural population increases including newborns, or out-bound migration.
So without even factoring in other new residents because they don’t drive or were recently born, the state’s projected mid-level population increase used by King County to plan for housing was 299 percent lower than what actually occurred.
Pace and other realtors see the data problem as contributing to artificially low growth targets and thus, tight housing supply. According to the Northwest Multiple Listing Service 2015 annual report, average monthly housing supply in King County in 2015 was 1.3 months, versus the industry standard of four to six months. For the four-county metro region including King, Snohomish, Pierce and Kitsap counties it averaged 1.7 months. Through March of 2016, supply had edged down a bit more.
Median sales price on closing for condos and single-family homes combined in King County for 2015 was $432,000 versus $399,790 in 2014. For single-family homes alone, median sales price in King County was $480,000 last year, up from $440,000 in 2014.
‘Ugly And Getting Uglier’
Opening the briefing, President of Seattle King County Realtors Patti Hill said there is “an enormous housing supply crisis, an undeniable emergency. The law of supply and demand is at the core…I worry whether the American Dream will be out of reach in King County, especially when family buyers must compete against all-cash buyers. The housing supply crisis is ugly and getting uglier.”
Blowback On Density Hikes
However, residents are battling back in places like Mercer Island, where anti-growth sentiments about downtown apartment developments have become intense, said panelist Peter Orser. He’s an Island resident and Acting Director of the Runstad School for Real Estate Studies at the University of Washington.
Similar pushback has been evident in the southeast reaches of King County in the small city of Black Diamond, where a decision several years ago to approve a new master-planned community that would more than quadruple local population has sparked a city council war led by a new slow-growth council majority.
Orser is also former President of Quadrant Homes and Weyerhaeuser Real Estate Company, a former Mercer Island City Council Member, and a current member of Governor Jay Inslee’s affordable housing advisory body. He said local “electeds need to step up to the responsibilities inherent in growth management” and facilitate greater density within the established urban growth boundary.
That boundary is overseen by the county and roughly speaking, is a jagged line running north-south east of Seattle and its suburbs. Early on, under GMA, urban growth was to be not less than four dwelling units per acre, and rural not more than one unit per five acres. Pace says that’s not so anymore due to a court ruling. The section of the GMA which now defines urban versus rural is qualitative, not quantitative.
This much is clear. A big building wave of five-story apartment buildings with total units in each ranging from several dozen to a hundred or more, continues in certain Seattle neighborhoods including West Seattle and Ballard. Targeted to Millennials are edgily-named complexes like Salt in Ballard, and Decibel Twelve just south of Seattle University.
As the Seattle apartment boom has unfolded, waves of single-occupant vehicles exit these neighborhoods on weekday mornings, joining suburbanites in jamming regional roadways en route to jobs located far beyond timely access from home via transit. Seattle-area traffic congestion is sixth-worst in the nation and costs the region more than $3 billion annually. A greater supply of housing located in the right places within King County, could help mitigate the congestion.
At the Realtors briefing in Bellevue, Michelle Connor, Executive Vice President of Strategic Enterprises for the land conservation non-profit Forterra, said it needn’t be political suicide for local officials to talk about allowing more growth and density within King County growth boundaries, but greater leadership is needed to “galvanize consensus.”
A More Distributed Density
Another option that’s been advanced is a more distributed density that results from a judicious moving outward of King County’s urban growth boundary.
King County updates its comprehensive plan every four years and last time around, four pinpointed proposals to relax the boundary were rejected, with growth management advocates asserting there’s still plenty of room for growth within the boundary.
When ‘Buildable’ Really Isn’t
Matthew Gardner begs to differ. The Chief Economist of Windermere Real Estate told Lens earlier this year:
“…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’…
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.”
UW Prof’s Study: Growth Rules Also Driving Prices Higher
In the same article Lens reported:
“In a 2008 study…University of Washington professor Theo Eicher…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.
A sharp interest rate hike which could dampen home-buyer demand isn’t in the offing, and neither is any major relaxing of the King County growth boundary. Realtors stress that if more new Seattle apartments were condos and not rentals, that would at least get singles into the home ownership market, but the trend is in the other direction.
We’ll All Continue To Pay
Expect continued efforts to develop housing on what truly buildable land there is in King County, subject to the winds of local politics. Public education to forestall Not In My Back Yard (NIMBY) insurgencies would help, too, says Orser. He suggested to the briefing audience that perhaps UW’s Runstad School could partner with realtors and developers to sponsor free public classes to educate urban growth opponents on the real nature of developing real estate projects, including risk exposure and the effect of project delays.
Orser added that affordable housing needs to be more clearly understood as social and economic infrastructure, just like roads and schools.
One thing is certain. The costs of building – or not building – that infrastructure in King County will be widely borne.