Are Regulations Choking Seattle Housing Market?

For many years, people of all income levels were able to buy homes in the Seattle housing market because there were houses available within whatever price ranges were necessary for them to do so.

Today, a shocking proportion of the population is excluded from the housing market because Washington mortgage costs are just too high.

What happened? Edwina Johnston, a member of the Citizens Alliance for Property Rights and a guest columnist for The Seattle Times, has an idea.

Since the early 1990s, the trend, nationwide (and worldwide), has been for governments to adopt the environmental schema of the U.S.-U.N. “Agenda 21″ agreement of June 1992, espousing the concept of “smart growth” (forcing all new growth into the cities) and “sustainability” (maximum use of urban owners’ lands, with restoration and preservation of rural owners’ lands).

The results in this locale are selective interpretations of the 1990 Washington state Growth Management Act, urban growth boundaries (”UGB”) that define urban areas beyond which little growth may occur (”smart growth”); and regulations to implement environmental “sustainability.”

Unfortunately, recent government predictions and provision of available land within the UGB were not sufficient for the reality of the ongoing increase in jobs and population.

Future human activity is hard to predict. Consequently, as Seattle mortgage demand soars, urban land was not available to build housing to satisfy it. This causes land to become ever-more scarce and, so, ever-more expensive.

In order to recoup the cost of the resulting expensive land, home builders had to build larger, more expensive homes, instead of smaller affordable ones.

Besides that, the many stringent environmental building regulations and their time delays (time is money) affected construction and cost for both single- and multi-family home units.

Add to all that the use of veto power when neighbors coalesce to keep high density out of their neighborhoods and you can understand why there is an affordable housing shortage and spiraling home prices in this area.

In centrally controlled markets, builders have to work within parameters set for them and cannot increase supply independent of government; whereas in free markets, when prices rise because of demand, builders will choose to increase supply, which will decrease prices.

In their analysis of that phenomenon, several experts note that physical cost of construction as a percentage of home prices has diminished over previous years and that it is the rising cost of land and the regulatory permitting process that have effected that.

Officials emphasize that the inelastic cost that raises price is regulation, which limits supply by determining the timing and cost of production. As population increases, home builders do not have control over speeding up the permitting process and/or lowering costs.

Consequently, supply does not keep up with demand and home mortgage costs invariably rise. This will continue as long as demand rises, regulation restricts supply of land, and regulatory permitting costs remain a significant portion of the cost of production.

Here in the Northwest, the result of central planning is a large bloc of happy voters whose homes have appreciated hundreds of thousands of dollars during this government-created, spiraling-home-price bonanza.

However, there is also another large and fast-growing segment of voters who cannot participate because they are effectively priced out. Do we want to keep doing the same thing under the banner of environmentalism?

In order to rescue both the local environment and people, let us return to the free-market policies that made this a nation of economic opportunity for all and a nation of freedom secured by strong property rights.

SOURCE: Seattle Times