Wednesday, May 30, 2018

Housing affordability for first time home buyers is getting close to a record low in Thurston County

Thurston County is growing, but we aren't building enough housing to keep up with the increase in population. So, housing affordability continues to fall and housing affordability for first time home buyers is approaching an all-time low.

The Rustad Center at the UW recently posted up to date housing market data for the first quarter of 2018 showing how a constricted housing market is driving up costs in Thurston County.

First of all, our population is slowly growing out of our supply of housing in Thurston County and we aren't producing enough to keep up.

Since 2012 we've only built 6,000 housing units in the county, while our population has increased by 20,000. Obviously, more than one person is going to end up living in each unit. But our ratio of person to housing unit has also changed from 2.34 to 2.39. Still slow, but it is going in the wrong direction.

When we look out how we're building housing, we're still very much depending on expensive single-family homes. Only once since 2012 did the number of multi-family units come close to single-family units. In 2016 over 900 multi-family units were built in Thurston County, while over 1,000 single family units were. In most other years, single family-units outstripped multi by at least three times.

At the same time, we're seeing a drop in housing affordability, especially for first time home buyers. The current condition for first time home buyers in Thurston County is already dire, well beneath what would be considered affordable overall. 

According to the Rustad Center, this means that a household earning 70 percent of the median household income (like first time home buyers) had only 67 percent of the income required to purchase a typical starter home in Thurston County. The starter homes that exist are unaffordable for people that would otherwise buy them. This is notable because (as has been pointed out elsewhere), proposals like the Missing Middle in Olympia is aimed at buyers between 80 and 120 percent of median income. While 80 percent is not 70 percent, it sure does get us closer than single-family homes that are much more expensive than low-density multi-family homes. 

Tuesday, May 22, 2018

What happened after we downzoned and the middle went missing in Olympia?

In the last post I showed how a series of zoning changes in the 1980s and 1990s

But Olympia continued to grow. Where did all those people move?

It seems obvious to point out, but they moved it mostly single-family zoned neighborhoods.

More people came to Olympia, so if we weren't getting denser, we sprawled. This map shows every parcel that had a new structure in residential type (even including multi-family) after the 1988 downzone. I pieced it together from a series of webmaps from the Thurston Geodata Center.

Instead of densifying the places where we'd already built, we expanded our footprint over the last few decades, cutting down more trees, paving over more open land. People continued to move into town, and as our interior neighborhoods "stabilized," new neighborhoods continued to be cut out of the woods and farms around Olympia.

Here is the Google engine timelapse from 1984 to today, you can see the exact same thing.

Southeast Olympia:


I hope this doesn't really need pointing out, but if we're worried about the impact of new growth or preserving natural resources, we would be concerned about sprawl. Again, not new news guys.

From City Observatory:
Cities incur substantial expenses to build roads, transit systems and parks to enable development in a neighborhood. Downzoning automatically increases the per capita costs of all of those investments, because each road, park and bus line can serve fewer people. It also pushes additional development to the urban fringe, where some municipality must build entirely new infrastructure at high cost, and where not incidentally individual households will have to drive more, creating more pollution and congestion plus incurring more transportation costs. Ultimately, downzoning is a recipe for more sprawl: if you can’t build as many apartments, you’ve got to build more single family homes, and you’ll end up consuming a lot more land in the process.
Even if the new roads and utilities we used to enable the post-downzone sprawl was paid for at one point with impact fees, we designed a system to fail. The impact fees only pay for the initial setup of these road and utility systems. Eventually, they'll reach the end of their useful lives and we'll have to pay to replace them. At that point, we've cooked into our zoning a limit on how many taxpayers will be on the hook to replace them. We're essentially pushing the expense of low-density, unwalkable single-family neighborhoods onto the next generation.

Monday, May 21, 2018

When Olympia downzoned and gentrified

In the early 1960s and through the 1970s, most of Olympia's residential neighborhoods allowed housing types that are now included in the city's Missing Middle proposal. The most common of these zones was the RD (Duplex) zone that allowed for single-family homes and duplexes in the same neighborhood. In various generations of Olympia zoning codes, this later became known as R2 and then R 6-12 (meaning six to twelve dwellings per acre). 

In an earlier post, I pointed out how Olympia (and Thurston County) saw its largest influx of new residents in the late-70s. Even the yearly migration of today does not match the spike in new residents between 1977 and 1979. Before and during the 1970s, the construction of 2-4 unit housing pretty much tracked with population growth in Olympia, but in the early 80s, they became unhinged.

This is because Olympia downzoned a series of once density friendly neighborhoods, pushing new growth into largely single-family home zoned neighborhoods on the fringe of the city.

Through the 80s and 90s and to today, the city decreased to the area duplex-friendly zoning covered. This led to examples of places where duplexes had been built, but they weren't actually technically allowed by the zoning rules. In fact, because of persistent downzoning in recent decades, there are literally hundreds of examples of non-conforming missing middle housing throughout the city. 

According to the city's tally, there are over 200 non-conforming duplexes, 462 non-conforming tri/fourplex units, and 89 non-conforming 5-12 unit apartments. All of these were allowed under zoning rules when they were built, but the rules changed over time.

Here is a great example of two non-conforming duplexes at Legion that were allowed in 1978, but not a few years later:

It's worth your time to watch how the zoning maps changed over time. In 1962, the Eastside duplex zone stretched from Eastside up to McCormick.

Then twenty years later (as R-2 zoning), it became much smaller, stretching only to Boundary.

In 1994 it expanded again, but..

It (this time as R 6-12) shrunk back down in 1995 through to today.

We can see the same thing on the Westside. The duplex zone dominated most of the hillside over there in the 1960s and 70s.

Then in the early 80s, the zone shrunk as most of the area downzoned.

And, again in 1994...

But in 1995, the area for duplexes expanded again, taking back a bit of what it used to be.

The most interesting downzone example was in 1988 when the city, downzoned a portion of each of these neighborhoods from a zone that would allow duplexes to a single-family home only zoning. 

There is nearly zero coverage of the 1988 downzone, the only real reference I found to it was in the city minutes. It seems odd to me that of the 18 people that testified on the downzone, 13 were against it. Despite the opposition, the massive downzone went from the planning commision to approval by the city council in four short months.

Here is a map of the downzoned areas:

According to the ordinance, the reason for the downzone was to align the zoning in those neighborhoods with this policy in the then Comprehensive Plan: "Older neighborhoods which are predominantly single family should be zoned single family to encourage home ownership and rehabilitation."

In terms of how people remember downzones of that era, this checks out. Here is Jim Keogh talking about the Eastside:

The neighborhood stabilized. It became nicer. It also (seemingly) became more expensive. 

Taken from a different perspective, what happened to the Eastside is called gentrification. 

Jim doesn't really go into why this would happen, but it seems like once you stop allowing more residents to move into a neighborhood and make housing the more exclusive, the neighborhood becomes more gentile genteel.

The result of this sort of zoning experiment would be a mystery if we haven't seen it play out on a grand scale across the country. For example, Los Angeles conducted this sort of downzoning writ-large over the same timescale as Olympia:
The city of Los Angeles has tested this theory by downzoning the city to permit fewer dwellings. In 1960, the city was zoned to support 10 million people. By contrast, today the city is zoned to support only 4.3 million people — just slightly more than its current population. So if excluding housing made housing cheaper, Los Angeles land prices would have fallen, causing rents to fall. And yet rents, adjusted for inflation, have risen by 55 percent, while median renter income has grown by only 13 percent. Rather than declining, land prices quintupled, from just over $86,229 per house in 1984 to $483,692 in 2014.
Less access to housing over a finite area leads to a higher cost to access that housing. Seems pretty simple. The purpose and the result of the downzoning in Olympia was the gentrification that we've seen over the last few decades. Rather than allowing the neighborhoods to absorb the growth that was coming, we allowed it to do something totally different.