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 
Student Debt: Required or Optional
by Steve DanaIsn’t it great, Summer is finally here. School is out and everyone is heading for the beach. In spite of the season, I can’t help but think about all the new graduates.
How many young people you know graduated from college with huge debt? Do you believe what’s happening there?
At a time when society seems to be telling young people that they can’t make it in life without a college education, so many of those kids are leaving college with unbelievable debt and very questionable employment prospects. You have to wonder what kind of education they got if they were gullible enough to indebt themselves for life to pay for it.
My dad was a child of the depression so just going to college was still a privilege. After WWII, going to work was a high priority and getting a better education was desirable but not necessary. When my generation of baby boomers came along in the sixties, a college education was more attainable and employment opportunities seemed endless.
My dad always said that if we worked hard and saved our money we could go to college and be anything we wanted to be. I have two brothers and a sister so with a big family, he told us early on that he would help us go to college but he wouldn’t carry the biggest burden. Growing up, he was determined that I be prepared when college came so I worked from the time I was ten years old making money to pay for college. He made me save half of each “pay check”.
When I was a freshman at UW in the late sixties, going to college cost a lot less money and seemed to take less time. We were expected to complete our fifteen credits per quarter and graduate in four years. It seems to me that tuition at the University of Washington was about $450 per quarter in 1968. If you add in the books for another $100 per quarter, rent off campus was $80/month and then there’s food and other miscellaneous expenses, the number is still much less than a thousand per quarter.
I remember that I quit a union sawmill job that paid $2.895 per hour to go to school in the fall of 1968.
So here we are in the 21st Century and in-state tuition cost has gone up almost ten-fold to $4200 per quarter while housing costs have risen about 800% and food is ten times as much in some areas. I remember eating a lot of Chef Boyardi Spaghetti in a can. It cost a quarter a can at the Safeway on Brooklyn.
Looking back, college was a steal when I was a kid compared to the screwing kids take today.
Nostalgia is great, but if we’re trying to figure out how we drove off into the ditch, we have to peel back the onion a little.
I’m sure that before kids go to college today they sit down with their guidance counselors to talk about career paths with corresponding job prospects offering decent entry level pay and opportunities for advancement so when college is done there’s a logical next step.
If you told your counselor that you wanted to be a physical therapist, there was an educational track to get you there in four years. If you said you wanted to be an electrical engineer, a software engineer, a mechanical or aeronautical engineer, there were tracks for you too.
When I went to college in 1968, being there served two purposes; to get an education and to keep you from being drafted into the View Nam War. A lot of us knew we needed an education but we really didn’t know what we wanted to be so we didn’t declare a major at the start. That made the job of setting up a 4 year plan more difficult but it kept us out of the war.
At some point you have to look at education as a tool to get you to a better life. But the tool has to have a purpose. If you have a tool that doesn’t have a productive job to do, it’s not much of a tool. Generally speaking we go to college to prepare us to get a white collar job that can provide a comfortable living but there are some who go for the pleasure of learning without an economic component.
I appreciate the fact that a music major may provide a person with superior skills or knowledge of music, either performing or theory and the endless pleasure of playing an instrument, but there aren’t many jobs for musicians.
The fact that many businesses required all applicants to have a college education but not one related to the work they did suggested to students that a history degree might be useful in some capacity. Many liberal arts graduates became salesmen/people for the guys who got engineering or business degrees.
Currently we are cranking out thousands of college graduates per year who have undergraduate degrees in programs so obscure there is only one job they are qualified for and that is a volunteer at a homeless shelter.
I know that’s not altogether true, but this whole Wall Street protest controversy is driven by young people who paid exorbitant amounts of money for an education knowing full well there were no jobs when they were done. You don’t have to have a degree in rocket science to know better. The counter person at McDonalds or Burger King ends up being a college graduate feeling underappreciated and betrayed.
I only have so much sympathy for them.
I have been a lifelong learner. I take classes in subjects that interest me for the pleasure of knowing the material. I know going in that it’s not about a job. For others like me, we have no illusions about who is entitled and who is going to pay.
Nobody is entitled and we are going to pay. If I borrow the money so I don’t have to work while I am going to school, then that’s a bargain I have to deal with. It’s a choice I willingly make.
An education is an investment we make in ourselves. We are not entitled to a free college education. You can work for it early like I did and pay as you go or you can borrow the money and get stuck with the debt.
It’s a choice you get to make. But whatever choice you make, it’s yours.
Posted in Political commentary | Leave a Comment »