In pursuit of answers regarding Affordable Housing, our investigation should consider all aspects of the problem. I will include a few I know about.
The term “Affordable Housing” isn’t well defined so it can be considered in the context of properties for sale and properties for rent. Rental properties can be privately-owned, government owned like the Snohomish County Housing Authority or NGO owned (non-government organizations typically non-profits) like Cocoon House or Housing Hope subsidized by government. These properties are for rent to people with varying income levels.
If you believe that public private partnerships might be a way to create affordable housing, they are working in some areas. We approve property tax relief for some projects if there is an aspect of affordability incorporated into the credit agreement. It’s not clear what qualifies for affordability in this scenario.
Section 8 has been a way to incent private landlords to rent to low income tenants, but the pool of money and the applicable regulations haven’t kept pace with demand. There are anecdotal accounts of huge fraud within the Section 8 program that might warrant investigation. It was reported recently that there is an eight year wait for Section 8 housing with the current inventory of properties.
Private sector property owners cannot be expected to cut rents out of the goodness of their hearts so if the government wants access to the property, they need to kick in enough to cover the differential between appropriate rent for low income tenants and market rent for the landlord. There might be other incentives for landlords that would also make participating worthwhile.
If affordable housing is only for rental properties our focus could be on them, but home ownership is still the American dream. How can we keep buying a home within the range of young families?
Let’s take a look at why buying a home is so expensive.
There are a few components to housing cost consistent with all segments; land cost itself, driven by local and state/federal regulations, building regulation driven by local permits and fees and construction cost of the building.
From the standpoint of housing cost at a structure level, the cost in our market is comparable to other places in the country. Framing materials, plywood, roofing, drywall, carpet and fixtures are generally the same price across multiple markets. A home built in Boise, Idaho should have approximately the same component cost as a home built in Snohomish, Washington.
So, for the most part, factors effecting housing cost for consumers is driven by something other than the structure. It appears that government regulations are the driving force.
Right out of the gate, the government controls the zoning of the land that might meet affordability requirements better if more was set aside for multi-family development rather than single family detached housing. Encouraging condominium construction might address a deficiency for housing where ownership is a priority. Condo construction comes with its own set of obstacles also created by the government we cannot begin to address here.
When the state passed the Growth Management Act, it created a tool to limit the amount of land available to developers which we knew would artificially drive up the cost of developable land. Areas outside Urban Growth Areas would be down-zoned to rural density in the One Dwelling Unit per Five acres range while land within UGA’s would immediately escalate in value because of the finite supply. Supply and demand is still a market force that reflects shortages or surpluses in product or in this case, land.
When the government creates shortages through regulation, the cost goes up faster than in an unregulated market. Urban Growth Boundaries arbitrarily pick winners and losers. The politics of urban growth designations add a layer of cost that compounds as the process evolves.
The process of dividing land required by local and state laws make $40,000 lots into $140,000 lots.
The other factor in the cost of housing is the skyrocketing increases in direct government regulatory cost through permitting, hook-up fees, mitigation fees and associated regulations from state regulatory agencies. The Growth Management Act empowered cities and counties to collect mitigation fees supposedly to offset the cost of future development rather than to address existing deficiencies. Without inventorying the deficiencies at the time, cities and counties went about collecting fees and spending money to build schools, roads and parks. The burden of growth is supposedly borne by the new development. Do we need to collect park impact fees if we have enough parks already? How many parks do you need? Can you use mitigation fees for anything other than purchase of the land?
School districts must develop a capital improvement plan to predict where and when new facilities should be built. They analyze where schools are today and compare that with where students are coming from to know where deficiencies exist to be mitigated by new facilities. In our district, there haven’t been school impact fees for a while since we built or remodeled schools through a huge bond issue. That should establish a legitimate baseline for future growth to be paid for with mitigation fees.
Hook-up fees have become commonplace in the last twenty-five years as utilities discovered that they could sell the privilege of connecting rather than granting it for free as a property owner in the service area. Hook up fees supposedly allow collection of funds that can be used to expand the physical delivery system in advance of growth. I don’t think it’s happening that way in practice. New pipes in the ground are now paid for by developers. Under certain circumstances, they can recover a portion of the capital cost of the installation through late comer fees.
On top of that add Storm Water Collection and conditioning fees authorized/mandated by the state.
The science of sanitary sewer service is driven by federal and state laws which translate into higher sewer rates. In recent years, clean water standards have driven up the cost of increasingly smaller incremental improvements in quality of the effluent released into the river.
The Shoreline Management act limits how property owners can use their land if it is within 200 feet of a significant waterway in the state.
Critical Area regulations also play a huge part in limiting the supply of land and how much of that land can be used for a designated purpose.
Currently we are developing local code language to address a mandate from the state to regulate archaeological aspects of privately-owned property that could substantially increase the cost of housing if there is a suggestion that artifacts are on the property. Not proof that there are artifacts, but suggestion.
The bottom line for those clamoring for the government to do something, the government is doing something, they are driving up the cost of housing. If the private sector is to be the solution to the problem, the government needs to cut the permit fees, mitigation fees and other fees while offering credits and incentives to the developer if the end use is committed to subsidized housing for low income or senior tenants.
Affordable Housing will not happen with government playing such a significant part in regulating housing in general.
The housing market is a hugely complex dynamic creation that cannot be explained in a couple hundred words. The takeaway should be that every level of government regulation compounds and adds to the cost of housing for consumers. Relief will only come from peeling away those regulatory requirements away.
No Loss for Words 
AFFORDABLE HOUSING…Not Gonna Happen
by Steve DanaIn pursuit of answers regarding Affordable Housing, our investigation should consider all aspects of the problem. I will include a few I know about.
The term “Affordable Housing” isn’t well defined so it can be considered in the context of properties for sale and properties for rent. Rental properties can be privately-owned, government owned like the Snohomish County Housing Authority or NGO owned (non-government organizations typically non-profits) like Cocoon House or Housing Hope subsidized by government. These properties are for rent to people with varying income levels.
If you believe that public private partnerships might be a way to create affordable housing, they are working in some areas. We approve property tax relief for some projects if there is an aspect of affordability incorporated into the credit agreement. It’s not clear what qualifies for affordability in this scenario.
Section 8 has been a way to incent private landlords to rent to low income tenants, but the pool of money and the applicable regulations haven’t kept pace with demand. There are anecdotal accounts of huge fraud within the Section 8 program that might warrant investigation. It was reported recently that there is an eight year wait for Section 8 housing with the current inventory of properties.
Private sector property owners cannot be expected to cut rents out of the goodness of their hearts so if the government wants access to the property, they need to kick in enough to cover the differential between appropriate rent for low income tenants and market rent for the landlord. There might be other incentives for landlords that would also make participating worthwhile.
If affordable housing is only for rental properties our focus could be on them, but home ownership is still the American dream. How can we keep buying a home within the range of young families?
Let’s take a look at why buying a home is so expensive.
There are a few components to housing cost consistent with all segments; land cost itself, driven by local and state/federal regulations, building regulation driven by local permits and fees and construction cost of the building.
From the standpoint of housing cost at a structure level, the cost in our market is comparable to other places in the country. Framing materials, plywood, roofing, drywall, carpet and fixtures are generally the same price across multiple markets. A home built in Boise, Idaho should have approximately the same component cost as a home built in Snohomish, Washington.
So, for the most part, factors effecting housing cost for consumers is driven by something other than the structure. It appears that government regulations are the driving force.
Right out of the gate, the government controls the zoning of the land that might meet affordability requirements better if more was set aside for multi-family development rather than single family detached housing. Encouraging condominium construction might address a deficiency for housing where ownership is a priority. Condo construction comes with its own set of obstacles also created by the government we cannot begin to address here.
When the state passed the Growth Management Act, it created a tool to limit the amount of land available to developers which we knew would artificially drive up the cost of developable land. Areas outside Urban Growth Areas would be down-zoned to rural density in the One Dwelling Unit per Five acres range while land within UGA’s would immediately escalate in value because of the finite supply. Supply and demand is still a market force that reflects shortages or surpluses in product or in this case, land.
When the government creates shortages through regulation, the cost goes up faster than in an unregulated market. Urban Growth Boundaries arbitrarily pick winners and losers. The politics of urban growth designations add a layer of cost that compounds as the process evolves.
The process of dividing land required by local and state laws make $40,000 lots into $140,000 lots.
The other factor in the cost of housing is the skyrocketing increases in direct government regulatory cost through permitting, hook-up fees, mitigation fees and associated regulations from state regulatory agencies. The Growth Management Act empowered cities and counties to collect mitigation fees supposedly to offset the cost of future development rather than to address existing deficiencies. Without inventorying the deficiencies at the time, cities and counties went about collecting fees and spending money to build schools, roads and parks. The burden of growth is supposedly borne by the new development. Do we need to collect park impact fees if we have enough parks already? How many parks do you need? Can you use mitigation fees for anything other than purchase of the land?
School districts must develop a capital improvement plan to predict where and when new facilities should be built. They analyze where schools are today and compare that with where students are coming from to know where deficiencies exist to be mitigated by new facilities. In our district, there haven’t been school impact fees for a while since we built or remodeled schools through a huge bond issue. That should establish a legitimate baseline for future growth to be paid for with mitigation fees.
Hook-up fees have become commonplace in the last twenty-five years as utilities discovered that they could sell the privilege of connecting rather than granting it for free as a property owner in the service area. Hook up fees supposedly allow collection of funds that can be used to expand the physical delivery system in advance of growth. I don’t think it’s happening that way in practice. New pipes in the ground are now paid for by developers. Under certain circumstances, they can recover a portion of the capital cost of the installation through late comer fees.
On top of that add Storm Water Collection and conditioning fees authorized/mandated by the state.
The science of sanitary sewer service is driven by federal and state laws which translate into higher sewer rates. In recent years, clean water standards have driven up the cost of increasingly smaller incremental improvements in quality of the effluent released into the river.
The Shoreline Management act limits how property owners can use their land if it is within 200 feet of a significant waterway in the state.
Critical Area regulations also play a huge part in limiting the supply of land and how much of that land can be used for a designated purpose.
Currently we are developing local code language to address a mandate from the state to regulate archaeological aspects of privately-owned property that could substantially increase the cost of housing if there is a suggestion that artifacts are on the property. Not proof that there are artifacts, but suggestion.
The bottom line for those clamoring for the government to do something, the government is doing something, they are driving up the cost of housing. If the private sector is to be the solution to the problem, the government needs to cut the permit fees, mitigation fees and other fees while offering credits and incentives to the developer if the end use is committed to subsidized housing for low income or senior tenants.
Affordable Housing will not happen with government playing such a significant part in regulating housing in general.
The housing market is a hugely complex dynamic creation that cannot be explained in a couple hundred words. The takeaway should be that every level of government regulation compounds and adds to the cost of housing for consumers. Relief will only come from peeling away those regulatory requirements away.
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