Snohomish County saw its most dramatic housing price increase ever in 2021, capping a a five-year run of rapidly inflating prices. Despite 37% population growth since 2000, yearly houses for sale in many parts of south Snohomish County have actually decreased in the past two decades, and little relief is in sight.
Housing inflation hurts not only renters, whose rent increases year after year and whose dreams of homeownership flee ever farther from sight, but also homeowners whose property taxes continue to rise. Further, while homeowner portfolios see a boost on paper, they only become locked in their house as all other house values rise with theirs– many can no longer afford to move even if they wanted to. The only people who benefit are those leaving the state and realtors. We need policies which benefit Washingtonians, not soon-to-be Idahoans or Texans.
Swiftly rising housing costs stem from both high demand and relatively limited increases in housing supply. While rising demand is a result of being an attractive place to live, supply failing to keep pace is an intentional policy choice. The answer to rising housing prices isn’t rent control. It’s abundance.
Housing supply is restricted by zoning laws and the Growth Management Act (GMA). Some in Olympia have pushed for a statewide ban on single-family residence zoning, allowing apartment complexes, townhouses, and other attached residences to built anywhere statewide. I do not believe this is an appropriate course as it does not respect the characteristics and capacities of local neighborhoods. However, I do support reforms to zoning which encourage development and increasing housing.
As an economist, I believe in specialization: let cities be cities, let suburbs be suburbs, and let rural areas be rural. Instead of a blanket approach, let’s allow local communities to make these decisions, but require that they actually do make them.
Let’s amend the GMA and subdivide Urban Growth Areas into two types: fully urban and suburban. Fully Urban UGAs would see no restrictions on the scale and density of residences, no building height restrictions, relaxed parking requirements, and incentives for mixed use development. Which areas are designated as Fully Urban will be locally determined, but areas near mass transit would be prioritized. Suburban UGAs would maintain current limits on development.
Most importantly, all municipalities and counties which fully plan under the GMA will be required to designate at least half of their residential UGA parcels as Fully Urban. Should a municipality wish the designate less than this, they would be allowed to “trade” Fully Urban parcels with another municipality within their county for a negotiated yearly fee paid to the city taking on the additional Fully Urban parcels. This creates a market where areas which wish to limit development and drive up the cost of housing must internalize the costs of doing so.
High input costs to construction limit the quantity of new housing and push developers away from building starter homes and affordable apartments toward luxury developments they can make a profit from. Some of these high costs stem from supply chain issues while others are the result of policies which should be changed. For example, construction costs increased after the Legislature passed an excise tax on house paint in 2019. Voters voted to repeal this tax, but it remains nonetheless. Another example is HB 1770, sponsored by Rep. Berg, which mandates all new construction be “net-zero ready”, which increases housing construction costs by 5-10%.
One of the largest cost increases related to housing construction has been lumber costs. Washington’s lumber mills have largely been driven out of the state through aggressive environmental policies which have actually worsened our wildfire risk. One proposal might be to implement more active forest management where increased targeted cuts are allowed to be milled in Washington into usable lumber for Washington housing under streamlined regulation.
Property tax assessments are currently based on both the unimproved land value of a parcel and the value everything built upon it. This means additional costs for homeowners who make upgrades to their house, including environmental upgrades or solar panel installation.
Let’s shift property tax assessment ratios toward unimproved land value by exempting improvements. Land is an essentially fixed resource, and land value is entirely determined independent of individual use– meaning taxes on land are some of the most efficient forms of taxes in existence. In addition to no longer punishing home improvement, shifting taxes toward land value incentivizes denser development of currently-owned land (which lowers apartment rents), stabilizes tax revenue across the business cycle, decreases incentives for unproductive land speculation, helps tenants by removing punishments for rental maintenance, and claws back unequal gains from industrial outsourcing.
There are many anti-competitive practices within the real estate industry which serve to drive up fees and costs to homebuyers with minimal gain for sellers. Policies which address these practices include:
- Prohibiting listing agents from setting buyer agent fees
- Prohibiting “pocket sales” by requiring all properties to be listed on their local MLS or an equivalent service within one day of the seller committing to their broker
- Increasing scrutiny of anti-competitive restrictive covenants
Another competition issue arises when landlords acquire monopolies on available rental units within a relevant geographic area. This is especially prevalent in college towns such as Pullman with high rental demand and very few major corporate landlords who control most of the off-campus rental housing supply. Another example is the practice of corporate purchasing of entire neighborhoods of single-family homes to be converted to rentals while lobbying local governments to protect their rate of return by prohibiting new construction nearby.
Real estate and housing issues are often overlooked by antitrust enforcers. It’s time this changes.
“Single-room occupancy” (SRO) housing provides an affordable housing option to low-income workers, the homeless, and single individuals just starting out their careers. Despite this, Seattle banned SROs because they hurt the “character” of otherwise unaffordable, elite neighborhoods. Let’s drive down rental costs through supply-side competition and give an actually affordable option to urban workers and those looking to make the jump out of homelessness by legalizing SROs in cities statewide.
Let’s lower the upfront barrier to entering housing for the homeless by creating an insurance program for low-income and homeless rental applicants which guarantees their last month’s rent payment to their landlord. Any tenant who walks away without paying last month’s rent would be permanently ineligible to participate in the program going forward.
Let’s break up Seattle’s spatial monopoly on local jobs by providing businesses with tax incentives to relocate to or open satellite offices in lower density parts of the state such as Monroe or Snohomish.
Let’s make working from home as easy as possible with a low-cost public option for internet access.