OLYMPIA — The 2007 Legislature will be asked to help bridge the widening gap between the cost of housing and the mortgage a family of modest means can afford.

In Clark County, that gap has become a chasm.

A family earning the county’s median income of about $54,300 can afford to pay $175,000 for a house without squeezing its budget.

In October, the median sale price in Clark County was $256,000 for an existing house and $328,000 for a new house.

The situation is more extreme in the state’s most populated area.

In May, according to the Washington Association of Realtors, housing affordability in Washington fell to its lowest point in 12 years, with median home prices in some parts of the Puget Sound region surpassing $500,000. Statewide, home prices increased by an average of 19 percent between 2005 and 2006, far outstripping increases in median income.

Washington now trails the national average in home ownership, with a home ownership rate of 64 percent in 2003.

In Clark County, median household income increased by just 1 percent between 2000 and 2004, while the median selling price of an existing home jumped by 33 percent, according to the county’s 2005 Comprehensive Plan Monitoring Report.

“That’s clearly an unsustainable situation,” said Steve *Madsen, lobbyist for the Building Industry Association of Clark County. “It is mathematically impossible for the average wage-earner to pay what the average house costs.”

The main factors driving the cost of new houses in Clark County are the price of land and development fees, not the cost of labor and materials, *local builders say.

To address the problem, the real estate industry wants the state to relax regulations that drive up the cost of new houses and give local governments new authority to spread the cost of serving new homes with streets, sewers and water systems. The association has also launched a $1.3 million radio ad campaign to promote affordable housing for middle-class families, declaring that the state is “at a crisis stage.”

“The government is used to thinking only about low-income housing, but the home crisis is a middle-income crisis, and the Legislature can and must do something about it,” Steve Francks, the association’s executive director, said in launching the ads on radio stations across the state.

At the association’s request, Gov. Chris Gregoire and legislative leaders appointed a task force in July to look at the issue. The governor asked the group to consider strategies to spread infrastructure costs; incentives to get communities to meet their affordable housing goals under the Growth Management Act; and ways to standardize zoning and building requirements and make them more efficient and flexible.

Charging developers impact fees for the cost of municipal services, a cost that is passed on to home buyers, helps put home ownership out of reach even for many middle-income families, the task force concluded.

Until the 1980s, local property taxes paid for most streets and sewer and water systems. But now, “a huge amount of infrastructure costs is being placed on new development, which drives up housing costs,” Hugh Spitzer, the Seattle attorney who chaired the Growth Management Housing Task Force, told two legislative committees in late November.

In Clark County, school impact fees have helped push housing costs skyward in fast-growing areas. In Battle Ground, the fee charged by the county to support local schools will reach $8,300 for each *single-family home in 2008, Madsen said.

Spitzer also warned that *constraints on developable land imposed by the Growth Management Act are contributing to the rapidly rising cost of land.

“Our communities have made a choice not to sprawl but to grow wisely, ” he said. “This can put pressure on housing supply.”

The panel focused on obstacles to home ownership, with less attention to the availability of affordable rental housing.

But developers, local government officials and housing advocates question how much the state can really do to increase the supply of affordable housing — and whether there is in fact a crisis.

“The affordable housing *solution will be mostly a *private-sector solution,” Kurt Creager, executive director of the Vancouver Housing Authority, said at an affordable housing symposium in Vancouver last week. “The public sector has a part to play, but it will have to work with developers. ”

It’s important to preserve existing lower-cost housing, Creager added. “The most affordable housing stock is what’s already here.”

Unfortunately, he said, the current tax code “drives everyone to the highest and best use.” That encourages owners of rental housing, for example, to upgrade or sell rather than hold onto their property and keep rents low.

Clark County builder Jon Girod, president of Quail Homes, said at the symposium that the market here demands high-end homes. In 1999, Girod was building 175 to 200 houses per year at an average cost of $140,000 each. Now he’s building 70 houses per year at a cost of $330,000 to $350,000 each.

The basic houses he used to build are no longer in demand, he said. These days, he said, people want sophisticated features in their new houses.

“We’re solution-oriented,” he said. “We want to know what buyers will accept.”

But Madsen warned that if houses in Clark County remain out of reach for middle-class families, those families may look north to Cowlitz County, a 30-minute commute from Vancouver, for homes they can afford.

“Without an adequate land supply, you change how people live, or they go elsewhere,” he said. “Cowlitz County is the only county on the I-5 corridor that does not plan under the Growth Management Act.” That means its supply of developable land is not constrained, he said.

Leslie Caponette runs Vancouver’s Columbia Nonprofit Housing First Home Loan Program. She helps families buy their first home by offering a “silent second mortgage,” a loan the owner repays when the house is sold or the mortgage paid off.

Caponette said the housing inventory in Clark County has increased in recent months, but many of her clients still can’t afford the houses that are coming on the market.

“Most will be able to afford a house between $150,000 and $210,000,” she said. “There aren’t as many on the lower end of the spectrum. And the ones on the lower end do need work to make them more habitable.” Those tend to be in rural areas or less desirable parts of the city, she said.

Teri Duffy of the Home Ownership Center in Vancouver, which prepares first-time homebuyers for home ownership, agreed that the market is much more favorable for her low-income clients than at this time last year.

“There is a lot more housing stock than there was a year ago,” she said. “Most of the folks we work with can afford $150,000 to $225,000. It’s not going to be their dream house. It might be a condo, a townhouse or a very small house with very few amenities. But it’s a way for people to get their feet in the door.”

Managing growth

The Growth Management Act requires cities and counties to set and meet goals for housing density and construction of multiple-family units. But many jurisdictions are not meeting their multiple-family dwelling targets, and especially in desirable city neighborhoods, greater density does not guarantee affordable housing.

“Cities are denser, they have more choices,” Dave Williams, lobbyist for the Association of Washington Cities, told legislators at the Nov. 30 hearing. “The problem is, those choices are not all affordable.”

The GMA also requires cities and counties to make sure they set aside enough land for development to accommodate projected population growth over a 20-year period.

But setting aside enough land to accommodate growth doesn’t guarantee that housing costs will moderate, said Ron Barca, a member of the Clark County Planning Commission.

“Increasing inventory does not guarantee a single affordable lot,” Barca said.

So what can the state of Washington and local governments do to make home ownership a reality for more of its residents?

The task force had some suggestions.

In deciding how to allocate grants from its Housing Trust Fund and other housing accounts, the state could reward developers who build affordable, accessible housing. It could grant them “bonus points” like the density bonuses awarded to developers who set aside open space in subdivisions.

“We think incentives and rewards make a whole lot of sense,” Williams told legislators. The state could “look at grant and loan programs and decide whether the current criteria are appropriate,” he said.

The state also could set up a new Growth Management Infrastructure Account, reallocating a portion of the existing Real Estate Excise Tax and a portion of the state sales tax on construction, to help local governments pay for affordable housing and the infrastructure to support it.

And it could make the GMA more prescriptive, requiring local governments to provide a variety of housing types to meet the needs of “all economic and demographic segments of the community.”

One of the panel’s more controversial proposals would exempt new high-density, mixed-use developments in urban areas from environmental review as a way of streamlining the permitting process.

But Madsen of the Building Industry Association said he’s skeptical that “streamlining” regulations would help as long as the state continues to impose new environmental rules.

For example, he said, the Department of Ecology’s new stormwater management rules will require more monitoring and much larger stormwater retention ponds in some areas.

“It’s not a process issue,” he said. Instead, state agencies will have to grapple with whether they want to reduce environmental protections to keep down housing costs.

Local governments could consider allowing more flexible housing types and more density, taking a page from Vancouver, B.C., and some European cities, said Will Macht, a longtime Portland-area developer and an adjunct professor of urban studies at Portland State University.

At last week’s panel, Macht showed slides of housing made from shipping crates, housing made of stackable units, housing built atop parking lots, housing densities of 52 units per acre.

In Clark County, “We have a lot of land that is incredibly underutilized,” he said. “Household size has decreased, but house size has increased.”

Few developers think the Clark County market is ready for such urban innovations.

What they do agree on is that government at all levels must start thinking outside the box about affordable housing.

“You need to be talking to your elected officials,” Kurt Creager said. “There needs to be a robust community conversation.”

“Everything I’ve heard tonight tells me the county and city are really behind the eight-ball,” Barca said at last week’s symposium. “We have to get out in front of this as public agencies. If Clark County doesn’t do something about affordable housing, it really doesn’t matter what Vancouver does.”

Did you know?

* Washington law defines “affordable housing” as housing that costs no more than 30 percent of a household’s monthly income, including the cost of utilities, except telephone.

A worker earning the minimum wage in Washington has to work 86 hours a week to afford a two-bedroom unit at the median fair-market rental price.

Source:
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