Housing prices have begun to stabilize in the Puget Sound region, however the trend will not last long if homebuilders and developers are unable to build enough housing to meet the projected inflow of new residents and jobs.
That is one takeaway from the Master Builders Association of King and Snohomish Counties’ (MBAKS) Housing Solutions Breakfast hosted this week. Housing experts and policymakers weighed in on solutions to increase the supply of housing, address the housing affordability crisis and generally what can be done to improve the housing climate in the coming years.
Kat Sims, Executive Director of MBAKS, told attendees that some homebuyers are taking a brief pause, which has contributed to the bump in the number of the homes on the market and has caused rents to stabilize.
“While we are just starting to see the signs of a shift from more of a sellers’ market to a balanced market, it’s not the time to break into celebration yet,” she said.
The Puget Sound Regional Council is forecasting 1.8 million more residents and 1.2 million more jobs by 2050 in King, Snohomish, Pierce and Kitsap Counties.
“To me, these numbers more than any other are a constant reminder of how much work we have yet to do,” said Sims. “Even though housing price growth has slowed, and job growth continues to be robust, there is a strong likelihood that prices will pick up again unless more housing is brought to market.
Sims unveiled MBAKS’ 2019 Action Plan For Housing, which details the association’s top housing priorities for the upcoming legislative session. They include:
- addressing condo liability reform so more affordable condos can be built;
- creating a new planning grants program which would allow local jurisdictions to “eliminate unnecessary and costly hurdles to home construction,” according to Sims;
- changing the urban standard for short subdivisions, also referred to as short plats, to save builders time and expenses while going through the State Environmental Protection Act (SEPA) process; and
- streamlining the Local Project Review Act to save an estimated 18 days of unnecessary time within the permitting process.
“The theme of our legislative agenda is to find practical ways to streamline processes, eliminate redundant regulations and bring more housing at all price points to the market efficiently,” said Sims.
Matthew Gardner, Chief Economist at Windermere Real Estate, spoke to housing challenges and trends within the region, as well as why developers should place a bigger emphasis on building affordable condos.
“Are we building enough? No, we are not,” said Gardner, referring the issuances of single-family building permits.
In 2005, King, Pierce and Snohomish counties had 17,794 single-family building permits granted. The number of permits issued by the end of this year is unlikely to pass last year’s figure of 9,997 permits issued.
According to Gardner, the four corners of housing development are all remarkedly expensive for the Puget Sound region: land, labor, materials and regulation.
“We are running out of land…forcing land prices to go up,” he said.
During the recession, thousands of construction workers left the industry, causing a worker shortage. Not enough people are going to vocational school to become homebuilders, either, he added.
Another barrier within the housing sector are increased material costs. Tariffs on Canadian soft wood lumber and steel have driven up prices for builders. Gardner added that regulations make up a significant portion of building costs.
He added: “24 cents out of every dollar it takes to build a house in America goes to regulation…that’s a huge, huge number. It makes it remarkably expensive for us to build anything.”
The pricing challenges left many developers to focus on building apartments- so they could remain profitable. Although condos are making a return in Seattle and Bellevue, the high price tag will do little to address housing affordability concerns.
“We need to make some substantive changes to prevailing zoning relative to condominiums,” said Gardner. “You could, say, put everyone in 600-foot-tall high-rises, but it doesn’t make sense.”
With current costs, those units would be priced at close to $1000 per square foot for developers to make a profit, he continued. While there will be demand for high-rise condos, these expensive units will not meet the aggregate demand.
“We need to make some very tangible…steps to make adjustment to zoning and to land use to offset litigation that will be occurring if we want to continue to grow as a region,” said Gardner. “We are at an inflection point—unless these issues are addressed, I will argue that we will see a fairly substantial slowdown in our economic growth.”
Apart from changing the focus of homebuilder projects to address affordability and inventory issues, members from the state legislature are also working to expand on and improve progress made within housing.
State Sen. Guy Palumbo (D-1) told Lens there will be a whole slate of housing bills during this upcoming legislative session, including bills addressing condo liability reform, minimum density and a greater allowance for short plats within Urban Growth Areas (UGAs).
“What is percolating right now is an infrastructure package,” said Palumbo. “We really need to think about investing another package in the gas tax…there are just too many areas of the state that were left out…my district is one of them.”
He added that a large population of people getting priced out of Seattle have moved further north into his district.
“I think the need for an infrastructure package is now rather than waiting another 10 years which is traditionally what we do in the state. That is simply not going to work with the growth problems that we have.”