There is a housing crisis looming and, if left unaddressed, will come home to roost in all sectors of the housing market.
Despite the compassionate work of non-profit organizations and low-income housing programs and the significant amount of state legislation passed to help put a roof over the heads of the less fortunate, there is still a whole group of disheartened home seekers being left out in the cold.
Who are they? They are often nurses, teachers, police officers and many others-earning the median income or just above it-who are being squeezed out of the market by sky-high home prices. As real estate professionals, we often witness the deep frustration after clients lose out on a home they could afford in a multiple bidding war.
This growing crisis is caused by a severe imbalance, with demand far out-weighing supply. There just aren’t enough re-sale homes or new construction inventory in a state that has one of the fastest growing populations in the nation. The scarcity of homes is driving up prices in Washington to unprecedented levels.
Consider Seattle, an extreme example, but one that is reflected to a lesser degree in many of our communities.
The Northwest Multiple Listing Service (NWMLS) reported that the median price for single-family homes sold last year in King County was $627,000, up a huge 14.4 percent from 2016, leading the nation in price increases that are way beyond affordable for much of the area’s workforce.
That price pressure pushes people to “drive to buy” in surrounding counties like Snohomish, Pierce, Skagit, Thurston and even Kittitas County. I know, because I have offices in Snohomish County and the median-priced home sold there in 2017 was $441,000, up a whopping 13 percent from 2016.
Builders aren’t building new homes to meet the demand, partly due to government regulations and the lack of buildable land. Sticker-shocked homeowners are hesitant to move up to the next rung of the housing ladder, leaving few homes on the first rung for first-time homebuyers.
Are there other affordable options available?
Condominiums are often considered more affordable, but developers are hesitant to build them due to uncertainty and risks. According to NWMLS data in January, there were 135 condominiums for sale in King County under $500,000 and only 6 of them were less than 10 years old.
Other affordable choices, like smaller homes, often don’t pencil out for builders because of land prices and regulations. Accessory dwelling units (ADUs), an affordable option for seniors who want to live close to their children, are often limited due to zoning and local land use restrictions.
Would more housing inventory lower prices? Sure it would. Consider Seattle rents that have actually decreased due to the recent uptick in the supply of apartment buildings. Don’t get too excited, though; most rents are still beyond middle income earners.
If we fail to address the housing crisis, it will stall mobility on the housing ladder and knock people off the first rung—some even into the streets. Families will lose out on a valuable long-term investment. The grown children of Washington’s parents will find it hard to live near their folks. Companies will look elsewhere for a place where their workers can afford housing.
It is time to take a deep dive into the regulations that are impacting the housing market. Though well intentioned, they are adding significantly to building costs and the hesitation of builders.
Encouraging condominium building through liability and insurance reforms would be a good start.
The state also needs to hold cities and counties accountable for how they plan for housing. Ensuring increased minimum density for housing supply is desperately needed in urban areas.
Clearly, this is not just a low-income housing problem. That’s a symptom of the entire housing affordability crisis. Our state must continue to take action to address the root of home prices that soar beyond the reach of so many Washington households exacerbating the need for low-income housing and cascading many into homelessness.
Jerry Martin is the president of Washington REALTORS® and the owner of RE/MAX Northwest REALTORS®, one of the largest real estate franchises in the region. Jerry is a graduate of the United States Naval Academy and a former CEO in the banking industry. He has practiced real estate for more than 20 years.