Housing unaffordability similar to conditions in California was forecasted for Washington state during a July 8 housing summit in Bellevue. Whether or not Washington Center for Real Estate Research (WCRER) Director James Young’s predictions prove accurate will depend in part on what policies may be adopted in the future to address issues with high construction fees, extended permit processes and environmental regulations.
While U.S. Rep. Denny Heck (D-10) remarked that the issue is “not going to be solved with any silver bullet because there is none,” State Rep. Andrew Barkis (R-2) offered potential ways to keep the cost of construction down. Barkis is an active member of the National Association of Residential Property Managers and the National Federation of Independent Businesses. He told attendees that “we have fees on everything” related to homebuilding that are collected by cities and counties. He argued the fees should be reduced, though the challenge will be to then “keep the counties and cities whole.”
A similar observation was made at the summit by Jay Robertson with Cascade Homes. “The biggest thing we’re running into now is those fees. They’ve gotten so large I’ve had projects where they needed hundreds of thousands of dollars before we got a permit.”
He added that the cost of those fees is inconsistent throughout the state. “It’s just such a crapshoot right now of what those fees are going to be. Those fees tend to be a detriment to buying a property.”
Kurt Wilson with SoundBuilt Homes remarked that “mitigation fees for the most part don’t build things. They supplant budgets that have other revenue sources.”
The significance of those fees was emphasized when Sen. Phil Fortunato (R-31) inquired as to the effectiveness of SB 5802, a proposal he sponsored this session to create “housing affordability zones.” Within those zones, impacts would have been prohibited, and buildings fees could be no more than $1,200. The local government would be able to keep the state’s portion of sales tax revenue collected from the construction, while the developer would receive a four percent business and occupation (B&O) tax credit. The bill got a public hearing in the Senate Committee on Housing Stability & Affordability but did not advance.
When Fortunato asked if the bill would have allowed the construction of homes under $200,000, Roberts said “it would be tough to do. You need to roll back the fees the state has. You could probably squeak in a 1,200 square-foot house if you (also) roll back some of the state building codes.”
This legislative session highlighted the different, nuanced priorities for builders who want more favorable land-use policies and local government advocates who are earnest to maintain control for cities and counties that are required to make long-term plans under the state Growth Management Act (GMA).
While many bills introduced this session failed to bridge the divide between the two groups, they were able to find a compromise in HB 1923 sponsored by Rep. Joe Fitzgibbon (D-34). The bill creates a “menu” of options for local governments to choose from. It’s an approach favored by Sen. Hans Zeiger (R-25). At the summit he told attendees that “you had everybody from cities and the housing industry working together to come up with the right language in that bill.” He added that future legislation should focus on incentives rather than mandates, while avoiding further financial burdens to local governments.
One of the provisions in HB 1923 exempts some residential construction from appeals under the State Environmental Policy Act (SEPA) process. One suggestion raised at the housing summit was to better streamline the SEPA process or better integrate with other regulatory processes that have also been added.
Possible GMA reforms have also been an oft-discussed path toward improving the housing supply. Under the state law passed in the early 1990s, counties required to plan under GMA are divided into urban growth areas (UGA) and rural areas in which density is concentrated into the UGAs. However, the boundaries have caused problems not only for builders but also for school districts looking to build facilities outside UGA to serve urban students.
Zeiger suggested at the summit that UGAs be extended outward to allow for more growth while also considering aspects of Oregon’s concept of urban and rural reserves. “We simply have not kept up with where we need to be when it comes to GMA.”
Sen. Patty Kuderer (D-48) agreed, noting that there are aspects of the law “that aren’t working.” Kuderer is chair of the Senate Housing Stability and Affordability Committee, which held a work session in March on GMA. Kuderer says the committee will have another work session next year on the topic and the “possible options that we can implement in order to make the GMA work fairly for everyone.”