Government Hinders Affordable Housing
For all the grandstanding that Seattle's city government loves to do about "affordable housing," you would think that they would want to make it as easy as possible for builders to actually build housing. Of course, if you think that, you're quite wrong.
"We must dramatically increase access to decent, affordable housing," said Mayor Greg Nickels in his State of the City speech March 6. "Most of it will be produced, not by government but by the market through private investment."I can think of more than a few city government habits that aren't very friendly, toward businesses, tourists, drivers, homeowners... pretty much everyone. It's almost as if Seattle's government would be happier if everyone just left Seattle and never came back. So hey, at least they're putting a crimp on both the supply and the demand side of the equation—that way it all balances out.
The mayor is correct. Most lower-cost housing is old private housing. The best way to open up old private housing is to build new private housing. The city should encourage that — but the people who create new private housing do not believe this city does. They say Seattle is unfriendly. If you want a place that welcomes builders, go to Spokane. Go to Tacoma. Go to Renton.
...
In each of these stories, money matters, but in each of them time matters more. It's harder to put a number on it, but it's real. The builders are the supply side of the economic equation. The denser the regulatory air, the slower they work and the fewer units that get built. Over time, that affects the supply of housing and its price city people have to pay to move to Seattle.
I love Seattle, but when I think of the government around here I have to hold back the bile.
(Bruce Ramsey, Seattle Times, 05.31.2006)
21 comments:
Here is a nice little CraigsList Seattle tidbit: (thanks to sleepless_in_seattle, over at Ben's blog) -
My question is this:
If everything is so rosy (hey Meshugy), why do we have listings like this?
http://seattle.craigslist.org/rfs/166619649.html
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$675000 - INSTANT EQUITY IN THREE OF MY HOMES
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Reply to: caseyc@nwloancenter.com
Date: 2006-05-31, 2:25PM PDT
I have three homes for sale!!! I am a real estate investor that needs to liquidate. I will do a FSBO for your benefit. This way you can enjoy instant equity! I own a mortgage company and will do a no fee loan for you as well.
All three of these homes are newly remodeled, just look!
7529 Braemar DR., Edmonds, WA 98026 listed originally for $850k, now listed for $800k, and I will sell to you for $770. This house will appraise for 850k! 170k in this remodel.
19939 SE 27th PL, Sammamish, WA 98075 listed aggressively for 705k, dropped to 699k, I will sell to you for 675k. This house will appraise for 735k! $150k in this remodel!
907 E Howe Street, Seattle, WA 98102, listed for $1,500,000 and just dropped to $1,400,000. This house has comps going up to 1.8 million but was originally listed for it’s true value. $350k in this remodel!
Please call or email if you’re serious. All homes can be found on MLS.
Casey Camby
Mortgage Consultant
Northwest Loan Center, Inc.
President
CanBe Investments, LLC
P: (206) 660-2039
F: (425) 650-6764
caseyc@nwloancenter.com
A friend's brother is an infill developer. I drove by one of his houses in North Seattle that he bought in 2004 with plans to subdivide the lot.
It's been sitting vacant for 8 months, and I noticed a "For Rent" sign.
Apparently he's been unable to get any permits issued, so he's stuck holding well beyond the time he'd intended. This has happened alot.
Why is this the status quo? My best guess is 1) the city knows this will push up prices and tax revenue, and 2) it'll do so without them needing to spend money on infrastructure.
anon 9:09-
I'm not familiar with the Edmonds or Seattle areas, but I can tell you that Sammamish house is overpriced at $675K. It would have been overpriced at $675K last year. It is just a tired tri-level. Looks like some flipper overpaid for it last summer and now realizes it.
This Craigslist guy is just looking for a Greater Fool (GF) to come along and bail him out.
Frankly, it is disgusting. American's thought patterns over the past few years has been to "borrow our way to riches."
This is NOT how the world works, does anyone remember the saying: "There is no free lunch?"
My dad used to tell me that all the time. I am looking forward to the day when some sanity returns to the thought patterns of smug Americans.
We will have to go through a tough recession to get back to sanity, but we will be stronger for it in the end.
Interesting (and discouraging) post!
Hmm, but maybe some of these decisions are what differentiate Seattle neighborhoods and density from Renton, Tacoma, Spokane? Not to come off like some sort of snob here, but sorry, I'm not going to move to any of those other places even based on their affordability -- which I'm not convinced has much to do with lack of regulations. How much cheaper/easier is it to do these kinds of projects in say, Renton, anyway? I'd actually like to see the comparison, which was left out of the article.) In fact, some of the decisions that have lead to those places becoming what they are are precisely what make them less desirable than Seattle.
I'm not always a fan of the government around here, but they *are* attempting to balance some complicated things, trying to retain what makes Seattle er, "Seattle", while trying to aim towards responsible growth and some measure of "affordability".
Some of the permitting and things sound fairly ridiculous in the article -- and I don't mean to defend those. But I do believe that a well-managed city does need to keep an eye toward environmental/neighborhood quality/traffic management issues in order to avoid having to fund very expensive solutions in the long run. Look at some of the developments in regions that did not take traffic effects into account. In the past decade, it at least *appeared* that developers crapped out a bunch of toothpick structure subdivisions in the middle of nowhere, sold 'em off, and sat back to let the state (ie, the rest of us) sit back and deal with the ensuing traffic nightmare and redesign of roads that weren't up to the capacity. I can think of a couple developments in surrounding areas.
And really, nothing a local government can do matters one iota against a massive, rotting bubble of cheap credit -- easy debt -- when even the average numbskull can take out loans to buy a house approaching $500k (half a MILLION dollars, can you believe it?) and gladly does so.
"Deregulation" is gonna change anything? The city is awash in rental property, and will have even more when some of these non-owner-occupied luxury condos come online in the next couple years. (Can't wait for the panic to set in on those)
Also, I'd like to know what kind of "hassles" someone like Paul Allen gets when he brings his megabucks to bear... does stuff like this just trip up the little guy? Could be interesting to know.
I'd love to see additional thoughtful posts on the state of affordable housing in western WA -- not just future projects, but the state of various nonprofits, state agencies, and other entities that tackle this sticky problem. Can they survive the bubble? Do they even have a place anymore in an economic spaz-out zone where affordability of even the median home is basically nil for a "working" family?
Capitalistchristian,
Your analysis concurs with mine...I think what you said makes a lot of sense. Thanks for taking the time to write that...
'm
No, housing prices won't bust like the stock market did in 2001...it'll take a year or so. That's what the "stickiness" of the housing market buys you. But it'll be just as painful when it happens.
CC, your analysis makes a number of questionable assumptions, but one thing that you consistently assume is that all of those people who aren't out spending money (because they're bogged down in mortgage hell), won't negatively affect the economy.
If the housing market does start to turn on a large scale, and that, in turn, slows the economy, it's going to be a bloodbath. Imagine the post 9/11 economic slowdown, only this time, everyone will be carrying an additional $500 grand in mortgage debt.
You simply can't draw parallels between this housing bubble and those of decades past...there's just too much excess liquidity in the market right now.
see the excellent video lecture linked under another thread on this board. The lecturer is the senior economist at USC (I believe).
You're talking about Christopher Thornberg...he said in that video that prices will go flat and not drop.
'm
CC and Meshugy, two peas in a pod. Freakin, incredible...
Real estate will drop forty percent and even more here. CC says it hasn't gotten crazy here, no??? How about over 400K for a Ballard piece of shit? Crazy...???
Also, CC is in the biz, so is his wife, so what do we expect him to say?
This entire episode has been so blown out of proportion because of the underlying structural lending imbalances, these will reverse when lenders start to lose on borrowers, already happening.
As for a govt. bailout, good luck. The Fed is on record as to TARGETING asset prices for a decline. They realize that they let the cat get WAY out of the bag with runaway asset prices.
You guys truly crack me up. It is as if you have NEVER seen what a boom/bust cycle looks like. Well, look around, you are about to live through the latter part of that cycle...
I'm losing faith, fellas! I just got back from a long vacation and am shocked to see LESS houses on the market and undeniably higher asking prices. I'm really wondering if we should start bargain shopping before the interest rates go any higher. The bubble is not popping, and it should have by now if any of our logic holds water. I'm beginning to feel foolish.
My number one, super-duper, extra vital, big kahuna question: why is inventory this terrible? Prices will never go down without an extraordinary increase in supply. What is going on, and when will it change? I don't think it's like this anywhere else.
ts, you need to chill out. This is classic bubble blowout nonsense, this type of foolishness always ends in tears.
Simply, the math doesn't work and people are simply speculating in real estate, sit back and enjoy the fun ahead.
P.S. This is taken from Doug Kass, it came out yesterday, Kass is one of the smartest investors out there:
"Many (myself included) have cautioned that the growth
and size of the hedge fund industry represents a
significant bubble-like market risk.
I have repeatedly written that bubbles are almost
always based on the same set of conditions:
1. Debt is plentiful.
2. Debt is cheap.
3. The egregious use of leverage becomes commonplace
and accepted.
4. A new and growing asset class raises asset prices.
The above circumstances led to the Internet stock
bubble in the late 1990s, to the real-estate bubble in
2003-2005"
bili,
Thornburg does say many times that prices won't drop and will remian flat. He spends a lot of time on that actually...explaining why housing is different then stocks. Watch it again..you'll see.
'm
I found this amusing:
Low-income families who want to escape poverty face a barrier in Federal Way: Rents often swallow up too much of their monthly income.
Moderate-income families, meanwhile, have few opportunities to make the leap from renters to homeowners because home prices are too high, according to a city report.
...
`I think we're (the city) probably going to have to bite the bullet and look at subsidies, at helping people make down payments to get into housing," Stead said.
According to an earlier study, only about one-third of the city's households could afford to buy the average home in Federal Way at today's prices.
Sound familiar? The really funny thing is that came from a Seattle Times article October 17, 1991.
Here's some news from Boeing:
Boeing continues to add jobs in Puget Sound area
Lots of good comments, though I don't know how I got lumped into the Meshugy category?
CC, you'll find that if you say anything on this list other then "MASSIVE PRICE REDUCTIONS," you'll get labeled a troll. I'm not a housing bull, I believe there are serious problems with the market. I just don't believe there will be a huge crash. It will go flat, and some less desirable areas might see some small reductions.
But I'm open to other opinions.....even economists admit it's very hard to say exactly what will happen. I respect the opinions of people who think there will be a crash. It could happen, but I don't think it's likely in Seattle.
'm
IS THIS BLOGGER MADE UP OF REAL BUYERS WITH AVERAGE INCOMES OR IS IT ALL REALITORS AND SHYSTERS HOPING TO KEEP FLIPPING OVER-PRICED LAND LIKE PANCAKES?
I can't belive the garbage I read in this Blogger, have you guys forgotten Economics 101?
Start reading what the NEUTRAL LENDING INSTITUTIONS are stating about the NATIONAL HOUSING BUBBLE that hit Seattle recently, turn your Pravda (Seattle Times) propaganda off and TELL US THE TRUTH for once, but of course you won't, what's a few lost retirement accounts and foreclosures to you WOLVES.
Tell us about the rental houses packed with 18 renters and van in the driveway to take them to their sweat shop. Tell us about the property landlords that have to pay more to repair the damage these "GROUP TENNANTS" do to house investments than the equity is worth.
I do get straight stories from realitors, after I get a martini or two down them; they all tell me the same thing, housing sales have slumped!
HOW COME I WATCH FOR SALE SIGNS COME DOWN THIS SPRING ALL OVER THE PLACE, WITH THE SAME OWNER CUTTING THE LAWN A MONTH LATER????????
I think if you want to cover up the current housing bubble in Seattle, keep your mouth shut and hope we're blind and deaf.
MORE HOGWASH IN THIS BLOGGER: BOEING HIRING MORE PEOPLE IN WASHINGTON ST....HA HA
http://www.boeing.com/employment/employment_table.html
http://www.boeing.com/employment/employment_table_2000.html
Since the hogwash authors don't offer written proof (verbal allegations), I did, open the proof up, it came from Boeing.
In 2000 we had 77,900 Boeing Employees in Washington State.
In 2006 we're 64,175, that's an 18% drop in Boeing employment in Washington State the last 6 years.
Oh, for you hogwash bloggers with your head in the sand, I'll toss you a bone. We did see a modest 2% "hiring back" of the 911 layoffs since January of this year. Hopefully they weren't all temporary green interns with Boeing salaries that wouldn't rent a Studio Apartment in Seattle.
Oh, have you heard Boeing is closing down its Wichita facilty and opening up an outsourced India Plant. I know you hogwash bloggers don't believe me, so here it is in writing:
http://www.rediff.com/money/2006/jan/31boeing.htm
I hear an engineering degree in India and China is comparable to one from the University of Washington now, of course wages are 80% lower for engineers in India. Ask Bill Gates too, he'll agree with me.
Welcome to the Housing Bubble Seattle, whether you like it or not.
Oh,
Capitalistchristian-
It was not me who took you to task for saying prices would not drop 40%. I'm the one who thanked you for your insughts into the lending industry, I believe it was, or maybe the realtor industry.
I have never been so bold as to state how far I think Seattle prices would fall. That said, I certainly would not be shocked if they fell 40%. When a 300K home sells for 600K the next year, probably anything is possible. Talk about destabilizing a market!
If the market drops considerably, I will be one of those who will be more than a little angry at ANY gov't bailouts.
If depression is needed to wash this mess clean and get this "get rich quick" (for doing NOTHING!) garbage out of the American psyche for the next few generations, then I say bring it on.
Do I want to HELP these bozos who CAUSED this mess?? No Way!!
softwarengineer-
Welcome aboard! this blog NEEDS more people like you!
t.s.-
there are a couple of places where inventory is actually LESS than seattle. Check out the bubble markets tracking site on front.
Orange Cty is one I think. And, if I'm not mistaken, the median is going down there.
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