by Jodi Wilke
We can all agree that a housing crisis exists, both relating to availability and cost of housing. Supply and demand are the primary cost drivers of Real Estate yet government regulations, zoning, buildable land, and taxes, all create the conditions that hurt the housing market. One builder in Sequim stated that $27-30,000 in permits, impact fees and connection fees are required, and for a $60,000 lot it costs $100,000 to break ground – IF he didn’t also end up in court over a wetland dispute.. This places a modest starter home in the neighborhood of $250,000 best case scenario. Unaffordable for most middle-income people.
The unfortunate cries of the public moan about having “Affordable Housing” and often they look to the same government entities that caused this problem to somehow solve the problem. But a closer look at the way government approaches the issue of unaffordable housing reveals some disturbing facts.
Government Managed and Operated (GMO) housing programs are designed to support and sustain more GMO housing projects, OR to fund closely affiliated Non-Profits who build or operate them. These entities operate outside the free market system and are not constrained by profit and loss, or thrifty execution and management that the free market demands. They are supported by tax money and “matching grants” which is code for more tax money or bonds the public pays for in the form of higher taxes – sales tax, real estate excise tax, and property tax
Neither are these programs designed to level the playing field and support free market solutions. Many of them identify and wave the above barriers to low-cost housing, but only for their programs. These practices favor the government projects and non-profit organizations unfairly and in fact maintain conditions that inhibit the free market. What’s good for the goose should be good for the gander.
GMO Housing programs perpetuate the housing crisis and hurt the people they are supposed to help – the low-income person who is trapped in project housing, too poor to move up, and unable to earn more for fear of pricing themselves out of the home they have. Trapped in this cycle, they will never enjoy the benefits of their labors in equity gained of a Non-GMO property they own.
Taxes required to fund GMO Housing also hurts the people who are the real unsung heroes – those who have worked hard all their lives and given everything to hang on to their Non-GMO homes. Seniors on fixed incomes suffer under increasing property taxes driven by a scarce market. Young families sacrifice every day to keep a home for their children. Veterans on fixed incomes linger in poverty. No golden retirement for them, no thanks for their years of service as rising property taxes push them closer to the edge.
As the tax-exempt public and non-profit housing projects take taxable land off the grid, it forces other taxpayers to make up the difference. There are many ways government and land trust programs remove taxable land from the public tax rolls. A short list might include the aforementioned housing projects, public buildings, land rendered unbuildable by shoreline management laws, land used as mitigation for water rights, land lost to the Department of Natural Resources, Department of Ecology, or Department of Fisheries whether bought or claimed through statute, Trust Lands, and land held in private holdings as exempt forest land. One of the biggest limits on land use is our Growth Management Act which seeks to limit the density of dwellings by the acreage specified for an area.
It is clear that the government constraints that caused this housing crisis cannot also SOLVE the crisis. We must level the playing field and give the same advantages to our house building experts that GMO Housing programs wish to keep for themselves and their friends. Governmental restrictions and “cronyism” has decimated the pool of contractors on the Olympic Peninsula, shrunk the labor pool, and grown government overreach to such an extent that the fees, taxes, and uncertainty deters most contractors from participating. If they do, it is on housing that is custom, expensive, and with large profit margins and contingencies. In these market conditions, low-cost housing will never exist. These conditions actually hurt the housing market, and it is necessary to change our views and our approach if we are to remedy the housing shortage. It’s time to think about housing differently. In the words of one famous politician, Government isn’t the solution to our problem, government IS the problem
Following are some of the effects of legislation on the housing market:
- Increased regulatory burdens, unpredictability of the costs and requirements of these burdens, unpredictability of resolving these regulatory burdens and the timeline required.
Examples: Contractor DM – Storm water mitigation added 100k to each lot and forced shutdown of the housing development in west PA. In Jefferson County, Pleasant Harbor Resort and housing project has been litigating for over 10 years now.
- Increased taxes are required to create and support GMO Housing, touted as “Affordable housing” programs. While this may be an important safety net for the certain part of the population, it should not be the mainstay for low-cost housing.
Example: SB 6371 HB 2364 increased the debt limit for Housing Finance Commission (HFC) from 6 to 8 billion . Half of that increase – 1 bill is directed towards administrative costs
- GMO housing is not always oriented to optimize costs and opportunities, in fact often are wasteful and create further burden to the communities they are supposed to serve.
Examples: Cherry Street project in Port Townsend is an example of a housing project gone bad that will cost taxpayers around $2million for 8 – 1 and 2 bedroom apartments. Port Angeles Housing Authority. Wasted between 15-20 existing homes, destroyed to make way for their apartment complex in phase 1. Will they repeat this mistake on phase 2? If so, a total of 76 homes will be deposited into the landfill.
- Exempt lands (land that is exempt from paying property taxes) can take a large majority of geographic area out of the tax rolls. This increases the burden to the non-exempt property owners, namely private citizens and businesses. Government housing projects are generally exempt and has the effect of increasing taxes on everyone else.
Example: In Grays Harbor County, over 90% of the total land is exempt from full value property taxes. As a result, business property taxes in Aberdeen are higher than in Seattle! This discourages businesses from coming there, adding to their economic plight.
Scarcity of buildable land and restrictions on portions of property make finding places to build housing difficult. The GMA limits the number of units on every property, the size of business facilities allowed, the size of lots and whether they can be subdivided among other restrictions. The Shoreline Master Plan removed 150 feet of all shoreline from use in Jefferson County, decreasing the assessed and real value of these properties and increasing the tax burden to all other taxpayers in the county. This triggered a reassessment of the remainder of the county and increased taxes on homeowners.
The GMA also has the effect of encouraging restrictive litigation by activists and govt entities against developers and home owners vis a vie local planning commissions, county governments and the Growth Management Hearings Board. Again, worth mentioning here is the Pleasant Harbor resort in Brinnon whose fate now lies with both a judge in Kitsap County and with the Growth Management Hearings Board in two separate suits. The potential for litigation makes builders shy away. The process resembles Clint Eastwood in his movie, The Gauntlet
In most “Affordable Housing” projects we can find language that defines these inhibitive policies. By virtue of the program parameters, the government acknowledges the factors that deter building, yet refuse to address them in the realm of the free market. These benefits only apply in the interest of “Affordable Housing” which is code for GMO Housing:
- Financing conditions – Loan Programs, Grants, Non-recourse, low-interest available to Govt and Non-Profits only (SB 6371, HB 1616, HB 1627).
- Zoning modifications (HB 1987)
- Waiver of impact fees (HB 2538),
- tax incentives (HB 2444),
- Proposed waiver of permits (local Prop1 Jefferson County)
Our current Representative Mike Chapman voted Yea for all of these bills (except the one in Jefferson County)
These conditions combine to create an unfair competitive disadvantage against private business, narrowing the creation of low-cost homes into the realm of government-supported housing programs and away from private free-market enterprises. The government programs operating outside the parameters of free market rules are designed to be “sustainable.” Let that sink in. The object is not to lower housing cost in the free market, but to corner the market on “Affordable Housing,” and to perpetuate the GMO Housing empire.
It will take a paradigm shift and some very brave legislators buoyed by public support to effect a change before we will see a leveling of this discrepancy. Non-GMO Housing should play a central role for a truly healthy housing market.
Opportunities missed:
- Could have barged or driven military homes to PT for placement.15-20 homes, only 6 saved. Still have phase 2, will we repeat the same mistake?
- Foreclosed homes – Opportunity for low-cost housing? Can we have govt guarantor open to experienced investors as was suggested for the Cherry Street Project in Port Townsend?
- Zoning for mobile home parks – Can we revive this concept?
- ADU restrictions (counted as 2br even if only 1) Septic systems claimed inadequate by DOH. Can we be flexible? Realistic?
- Park models / RV Parks – (Defined as affordable housing) but some counties require new septic systems for replacement units. Can certified systems be grandfathered in?
- Home moving options – Those affluent property owners who wish to upgrade homes often destroy smaller domiciles to make way. There are many restrictions to this cost-effective way of establishing low-cost housing. Can these be reviewed?
Things that can be done to help the rental market:
- Address the same barriers above for investment in apartments as well as low cost homes.
- Remove the paradigm that low rent housing needs to be government-controlled (GMO housing)
- Look at innovative rent-to-own programs (e.g. pair renters with investors)
- Can we bring state guarantor into picture for building? For high risk rentals?
- Amend condominium laws to reduce builder liability
- Can we amend landlord-tenant law to allow flexibility for house mate or group rentals?
Jobs:
Lack of family wage jobs inhibit citizen’s ability to buy homes and forces potential home owners into the rental market. Lack of low-cost homes tightens the rental market and raises the cost of rents.
Things that can be done to help the job market:
- Infrastructure
- Sewers (listed below plus others)
- Broadband
- GMA restrictions / County restrictions on
- commercial building size
- Urban-style UGA requirements
- County/health dept restrictions
- Septic requirements – ultra conservative? High cost? Can we have a grandfather clause for approved, inspected and fully certified septics? (situation in Quilcene)
Sewer / community septic systems needed:
- Hadlock/Chimmicum
- Dosewallups – 12 businesses want to hook into system
- Quilcene – needs sewer and water
- Sekiu
- Port of JeffCo Airport
Incentives to attract businesses (nothing new here)
- Tax incentives
- Permit wavers
- Fee waivers (hookups)
- DCD and Port Authorities should be on top of this.
(Jodi Wilke is currently a nurse, but in her previous work she was involved in a start-up boat factory, worked as a union construction laborer, went into business as a contractor pouring slabs and foundations for homes and businesses, worked in the engineering dept of a large national yacht manufacturing company, and worked for several years in the mortgage industry, with a focus on investment real estate and construction loans. This experience gives her an important perspective on the housing industry, especially concerning construction loans, investors, and real estate. She is currently a candidate for Washington State Representative, Position 1.)
