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November 2017

Fixing housing crisis is attainable, but ...

Elliot F. EisenbergFixing the housing crisis can be done, but it will take time said keynote speaker Elliot F. Eisenberg, Ph.D. in opening remarks at the 4th annual Housing Summit presented by the Master Builders Association of King and Snohomish Counties.

On an even less-optimistic note, Dr. Eisenberg, the president of GraphsandLaughs, told the audience of 400 housing stakeholders that once a city becomes unaffordable it is difficult to change.

In hopes of ensuring "housing opportunities for all" while confronting serious affordability concerns, MBAKS unveiled its 10-point plan for housing attainability at the event (see below).

10-Point Plan for Housing Attainability

2018 MBA Legislative Agenda

  1. 10-Point Plan for Housing Attainability report coverShort Plats. Change urban standard to 9 lots in UGAs with local option for 30.
  2. Modify Completeness Review Code. Eliminate the 28-day completeness review and the 14-day re-review for a determination of consistency.
  3. Implement Vesting of Local Permits. Local jurisdictions are asked to adopt vesting of local permits, similar to action taken by Snohomish County.
  4. Minimum Net Urban Density. Amend GMA to establish 6-unit per acre as minimum standard.
  5. Simple Majority for School Bond Measures. Change to simple majority, same as the threshold for levies.
  6. Condominium Liability Reform. Implement the "Runstad recommendations" to lower perceived risk and uncertainty.
  7. Adopt Fee Simple Townhouse Codes. Implement in all local jurisdictions to ease financing and insurance hurdles.
  8. Minimum Single-Family Residence Requirement. Require comprehensive plans to enumerate a detached single-family residence requirement so growth plans are aligned with market realities.
  9. Implement SB-5254. Implementation would clarify the methodology and process by which buildable lands are assessed under GMA.
  10. Implement Housing Affordability Response Team (HART) Recommendations.

Housing Summit presentation slideThe three-hour program also featured a half-dozen speakers plus local radio and TV personality Pat Cashman who served as emcee.

"There are no starter homes being built," lamented Eisenberg, whose background includes 12 years as an economist with the National Association of Home Builders. Instead, he noted the trend is for bigger houses, with 51 percent of new starts ranging upwards of 2,500 square feet. "Too many big houses are being built," he stated.

Eisenberg said housing starts are the crux of the issue, pointing to a lack of lots, gun-shy lenders and high prices as primary culprits. In the multi-family sector, he said activity is dead for buildings with 2-to-4 units. Commenting on starts by region, he described the West as "absolutely terrible."  

"We are not building enough homes because builders effectively can't build homes at the lower prices and make any money," he stated.

An analysis by prices shows new homes costing under $200,000 are "an insignificant percentage."

The speaker blames regulations for much of the spike in new home prices, noting they account for up to 30 percent of the cost of homes in the upper quartile. In 2011, the cost of regulations, including during development and construction, added an average of $65,224 to the price of a new home. Last year, it jumped nearly 30 percent to $84,671.

In his overview of the national market, Eisenberg also discussed new home inventories ("now near normal levels"), existing inventory ("still shrinking"), the huge influx of foreign buyers ("spending in the past year is equal to 500,000 units"), rising rents ("but maybe they've peaked"), price growth ("it's unsustainable"), renters and the hurdles they face, tight credit ("thus, no housing bubble"), and changing demographics.

Demographic changes should start pushing up the home ownership rate, which statistics confirm have started rising, reversing a decade of declines.

Turning to the local market, Eisenberg said the future looks much like the present. With regard to unemployment rates, he described King County's as outstanding, Snohomish as average, and Pierce as continuing to improve.

Housing starts overall are "okay - and that's the problem," according to the keynoter. "With decent start numbers, things are still bad. We need more condos in the multi world." He also believes prices here are rising too quickly, reiterating his point about the impact of regulations.

To illustrate the microeconomics of government regulations, Eisenberg listed five consequences:

  1. Increase new house prices
  2. Decrease housing supply
  3. Increase existing house prices
  4. Push building outside regulated zones
  5. Decrease land prices

Several solutions exist to create affordable housing, the speaker believes. He offered a list that requires limited dollars. "It's important to build all types of housing," he emphasized. The advocate for density also suggested ending exclusionary zoning, ending inclusionary zoning and deed restrictions, expediting reviews for affordable projects, reducing the use of impact fees, and collaborations with Realtors and Habitat for Humanity.

HART Recommendations

Following the economic overview, Brian Bonlender, the agency director for the Washington State Department of Commerce, discussed the recommendations of the 2017 Housing Affordability Response Team. That interdisciplinary team, which was formed by the Affordable Housing Advisory Board, was charged with addressing "the state's need for housing that is affordable to all economic segments and populations."

Bonlender opened his presentation with a review of headlines from 2013 editions of the San Francisco Chronicle. "We're already the San Francisco Bay region of five years ago," he commented, adding "Housing unaffordability is transforming our community and heading us in a direction no one wants to see."

The group's recommendations focused on land use, construction/regulations, and funding/finance concerns. In its quest to facilitate housing development along with stable and dependable funding for affordable housing, HART members also recommended continuing their work by collaborating with other groups to understand barriers and to propose solutions.

To roll out its legislative agenda and 10-point plan, the MBA turned to Clay White, principal planner at LDC Inc. and a former planning and development services director for Snohomish County.

"Planning for growth is difficult," White stated. Reminding the audience that one million people are expected move to the region in the next 20 years, he said we can be successful if the attitude approaches planning as a "proactive art."

White described MBAs 10-point action plan as a bold legislative agenda that focuses on quick wins, with a view of to the longer term future. The plan offers a mix of solutions designed to increase housing supply and "practical process improvements that will eliminate unnecessary and costly hurdles to new home construction without compromising environmental protections."

"We need to find avenues to save time. Time is money," White stated. He also emphasized the importance of synching up planning for growth with market realities. While discussing review standards he said MBA is not seeking alteration of substantive standards. The proposed modifications are already implemented in some jurisdictions, he noted.

Also speaking on various components of the legislative agenda were Gail Luxenberg, executive director of Habit for Humanity in Seattle-King County; John Nehring, mayor of Marysville who reminded the audience "Growth is not just an issue for big cities;" and Rep. Joe Fitzgibbon, from Washington's 34th District, who discussed the benefits of minimum urban density, a simple majority for school bonds and implementation of SB 5254, designed to ensure adequacy of building lands and zoning in urban growth areas and provide funding for low-income housing and homelessness programs.

Luxenberg discussed how Habitat's interests are aligned with builders and other advocates for homeownership, suggesting condo liability reform could enable the creation of more supply. "Habitat organizations elsewhere have been able to get the needed density through condo development. Low income homeowners are also beneficiaries of condo development," she stated.

"Going vertical" (with condos) would help Habitat respond to various segments of the population who are typically served by the Habitat model, such as people in service industries, single moms, and older adults. "They all add richness to our society. They want to live where they work," she commented.