Recent reports show housing prices are down about 3% month-over-month, which is about $30,000 for a $1 million house/condo, despite a significant drop in listings. worksite. Rents are also falling or rising at a much slower pace, although rents are a lagging indicator due to rental conditions and because high mortgage rates are preventing tenants from buying, putting pressure on the rental market . Meanwhile, the number of sales jumped.
When you look at the three main zoning methods, you can see what influences “affordability,” although almost none of the new construction is less than 100% AMI and will likely require a two-income household.
1. Minimum lot sizes. Although population growth began in earnest on the east side around 1970, many areas were already covered in slabs and used as summer residences. This led to large lot minimums and smaller summer homes (like what my family moved into in 1970). This was the basic model for the east side even though the population continued to grow due to size: Renton to
Bothell in North Bend. Many of these areas were farms or vacant land prior to development. The price of land depends on location, schools, public safety, and location, but as Ross notes, it has become more expensive, especially on the east side.
2. Relationship between the size of the house and the area of the land (regulatory limits). A lot of people who moved east moved there because they had families. As I noted yesterday, MI still has an average household of 3.1 today, even including multi-family areas. As someone who raised two kids, it’s pretty hard to do this in less than 3000 square feet. Many summer homes were smaller than this and over the years have been renovated or replaced more recently, and most towns have worked hard to prevent the McMansion. But a small house on a big lot does not increase the number of housing units or dwellings, although a bigger house with more bedrooms allows more people to live on that lot (including children , which urban planners do not quite understand). Ross is right that the marginal price of construction goes down per square foot, say 2000 to 4000 square feet (and remember most eastern towns need 2-3 covered garages than most buyers require), which is why building a DADU is generally not economical, but the cost per square foot of construction has skyrocketed with the price of land. New codes (the International Building Code adopted in February 2021), sprinklers, green mandates, efficiency mandates, etc. dramatically increased the cost of construction per square foot.
3. Use. The big differences between “stacked dwellings” (which are just multi-family dwellings) and townhouses are not the bill of materials but: 1. regulatory limits, as multi-family dwellings generally need extra height and lower yard setbacks and have a higher GFAR than a townhouse, and is more economical to build with very large lots; and 2. common ownership. One of the biggest factors in condo affordability is HOA fees. Not too long ago, I posted about a new development in SODO that couldn’t sell its affordable reserved units because the HOA fees were over $1000/month. Recent regulations regarding the inspection of older condos after the collapse in Florida have also increased HOA fees for older condos.
From what I’ve seen from the GMPC hearings, cities in the east will be able to meet their future GMPC housing growth targets without changing their zoning (even a city like Bellevue which has, I believe, a growth target of 35,000) despite the population estimates which I think are too high, because there is so much land on the east side already zoned for housing but still vacant, unlike Seattle, large commercial areas to allow housing, and these cities will continue to segregate uses quite strictly except in commercial areas where housing is now permitted. Townhouses are more attractive and desirable than a condo or apartment, but also more expensive.
I agree with Ross that Montreal is a pretty city. It also separates the uses quite strictly. What Montreal has of its history of converting industrial buildings into housing is a small, average (2-4 story) housing market (with courtyards) that places like Seattle don’t have, with nice historic architecture, not the shlock you see in Seattle.
The way to create this type of intermediate housing is not to zone SFH areas even if politically possible because the lots are too small, but to microzone parts of UGA and multi-family areas for this intermediate housing. The two biggest hurdles to this are that it represents a downhill area for multi-family property owners that is never popular once upzoned, and townhouses or townhouses would be quite expensive, especially if they are close by good shops like U Village.
MI has been fighting for “townhouses or townhouses” for quite some time. Owners in the commercial or multifamily area don’t want to build them because it’s a top-down area unless very very upscale ($4 million if new), and the SFH areas are adamantly against it. Studies show that even with a higher GFAR than allowed for an SFH (and some believe these townhouses should have a lower GFAR and be quite small), a 1000 square foot townhouse on a 2000 foot lot squares (which is 10% more GFAR than in SFH) would be: A. very expensive, especially if new, well over $1 million; B. risky for a builder because there is a small market for an expensive small house on MI. MI actually has a code layout to allow for such a subdivision, but to this day developers avoid it because they earn more on a full-sized, complete house, and it requires a dedicated public green space, and the city basically has lacked subdivisions plus more than two lots.
What the GMPC has learned that some on this blog miss is increasing housing supply by replacing older, more affordable housing with newer, more expensive housing, exacerbating the affordability problem. . Seattle, for example, will impose a levy on the November ballot. The GMPC wants to require its housing targets to be distributed along the AMI bands, such as 0% to 30%, 30% to 50%, etc. requiring half of new housing units to be 0% to 30% AMI that no one will ever ask to build so eastern cities get the smallest housing growth they want.
The number of dwellings and the type of dwelling have an effect on the price, but it is only one factor among many others. With the new mortgage and borrowing rates, we will see a sharp decline in new housing starts over the next five years or so, as well as a decline in housing prices, although far from affordable, but maybe within reach of a two-income household with 100% AMI which for Seattle today is around $230,000/year combined. If you love your home and plan to live in it for many years, it doesn’t matter what it’s worth. If you are an investor, it may be time to sell.
