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November 2014

Rodents, regulations contribute to dwindling supply of housing lots

November 2014 - NWREporter

Housing SummitRodents and regulations are among factors contributing to a shrinking supply of buildable land and rising housing costs, according to experts who spoke at a recent real estate summit.

Housing supply needs to be a top legislative priority for state and local leaders, stated Shannon Affholter, executive director of the Master Builders Association of King and Snohomish Counties, which organized the event.

In comments and documents provided to the summit's 400 attendees, Affholter referred to "trends, options and legal hurdles" and noted an "explicit link between the availability of buildable lands and housing affordability."

Affholter, a former Everett city council member, emphasized the importance of "finding a path forward" to ensure the area's housing needs are met. (Puget Sound is forecast to grow to 5 million people by 2040.) The region "must do a better job of utilizing existing land supply and infrastructure to meet current and future housing demand." He called upon state and local leaders to make housing supply a top priority.

To frame the discussion for the half-day housing summit, representatives of the National Association of Home Builders provided an overview of the economic impact of homebuilding in King and Snohomish Counties, and presented NAHB's national perspective of land supply issues. Speakers from NAHB were Kevin Kelly, chairman of the National Association of Homebuilders (NAHB) and Dr. David Crowe, the NAHB's chief economist and senior vice-president.

Todd Britsch, Northwest regional director for Metrostudy (and former president of New Home Trends, which Metrostudy acquired in mid-September) provided a snapshot of the region's land supply and pricing.

In King County, the price of a finished lot has jumped from $134,516 in 2012 to $185,555 in mid-2014, a jump of nearly 38 percent. His figures show Snohomish County prices have surged 44 percent during the same period (see chart).

Commenting on the data, Britsch told the audience, "We're seeing lot prices absolutely skyrocket, and the numbers are staggering. It's a long-term issue and we have to address it sooner rather than later," he said. "And if we don't, the Puget Sound region is going to become the next San Francisco Bay Area, where only the 'elite of the elite' can afford to own a home."

Average Finished Lot Prices, 2009 - 2014(Q2)

2014 (Q2)
King $100,963 $116,005 $82,493 $134,516 $142,489 $185,555
Kitsap $89,873 $75,308 $43,127 $46,637 $49,715 $76,255
Pierce $71,724 $48,253 $44,545 $47,115 $62,980 $81,368
Skagit $106,829 $194,376 $60,405 $64,957 $52,010 $132,541
Snohomish $90,119 $70,747 $60,939 $72,394 $99,920 $104,294
Thurston $62,015 $46,183 $32,474 $31,809 $45,711 $56,122
Whatcom $81,615 $70,968 $66,378 $61,684 $71,168 $96,454
Regional Avg. $86,163 $88,834 $55,766 $65,587 $74,856 $104,656

A Metrostudy analysis of 5-year lot supplies shows the Puget Sound area is facing critical shortages of land supply, which will lead to further price escalation and housing shortages. Based on projected population growth and housing demand, King County has 3.87 years of supply remaining. In Snohomish County, the projections show only 3.29 years of supply.

In his remarks, Britsch acknowledged other factors that are hampering the housing recovery, and offered several "crystal ball trends." He expects national builders will continue to control 35-to-40 percent of the market, but expects smaller builders to reenter the market. Median prices for homes in Puget Sound will rise upwards of 10 percent ("although they should not," he commented) and buyers will migrate north and south in search of affordability. Britsch also predicts a slight downturn in sales volume in the next few years due to higher interest rates.

FainBritsch and subsequent speakers also mentioned potential consequences of recent protections for four species of pocket gophers under the Endangered Species Act. The protections could affect developments and permitting in Pierce and Thurston counties, where the gophers are found. Property owners who disturb the animals' habitats without approval of the U.S Fish and Wildlife Service risk federal penalties.

Nancy Bainbridge Rogers, another speaker at the summit, discussed legal challenges to creating supply. A land use attorney at Cairncross & Hempelmann, she noted the GMA-mandated Buildable Lands Reports generated periodically by counties fail to provide a full and accurate picture of future trends.

"The reports compare housing targets to the actual growth. The reports must determine whether sufficient land exists to accommodate population projections," she stated, adding, "Unfortunately, the reports are not required to include a feasibility component or an assessment of affordability."

A lively panel discussion focusing on legislative solutions included Senator Joe Fain of Auburn (R-47th District); Senator Marko Liias (D-21st District), from Mukilteo; Representative Jay Rodne of Snoqualmie (R-5th District); and Representative Larry Springer (D-45th District), from Kirkland. Other participants included homebuilders Mark Kaushagen of the Pulte Group and Lynn Eshleman from Pacific Ridge Homes.

Individual panel members cited specific action items that could advance the goals of housing availability and affordability, including:

  • coupling housing demand with affordability in future planning;
  • passing a transportation package and infrastructure financing bill;
  • comprehensive review of the Urban Growth Boundary and its possible expansion;
  • requiring cities in King and Snohomish counties to do a planned action on remaining undeveloped lands to assess infill housing opportunities;
  • eliminating redundancies in the review and permitting process, and establishing a meaningful time limit in which permits can be outstanding.

The event was supported by presenting sponsor Puget Sound Energy along with Cobalt Mortgage, Bill Korum's Puyallup Nissan, Regence and the MBA Health Trust.

The Master Builders Association is a trade association made up of approximately 2,700 member companies involved in the residential construction industry. It is the nation's oldest and largest local home building association affiliated with the National Association of Home Builders.