Why do cities with the fastest-growing economies—including Seattle, San Francisco, New York City, and Austin–suffer from a growing imbalance between job growth and housing supply?
A panel at the ULI Spring Meeting in Seattle examined why hot-market cities are failing to build enough housing for new workers, often by staggering ratios. The result is skyrocketing rents and housing prices that exacerbate regional inequality, feel unaffordable even to highly paid new workers, and strain transportation networks as the workforce moves farther out in search of affordable housing.
“The development of housing is falling further and further behind the need—and not just for affordable, not just for urban downtown, but also for suburban ring” communities, said panel moderator Stockton Williams, ULI executive vice president of content and executive director of the ULI Terwilliger Center for Housing. Acknowledging the overflow crowd in the room, Williams said the issue “has become a mainstream priority item across the country.”
The panel speakers focused on the need for planning, changes in politics, and real estate strategies in order to address the problem and create opportunities for developing new housing.
Seattle is experiencing a surge of job growth and migration, noted Alan Durning, founder and executive director of the Sightline Institute, a Seattle-based nonprofit research and policy organization focused on sustainability, housing, transportation, and climate change in the Pacific Northwest.
Between 2010 and 2015, 40 people and 35 jobs arrived in the city daily, but only 12 new housing units opened, and those rates are increasing, he said. Ten thousand apartments are being built in Seattle this year, but that is not enough to keep up with job and population growth, and rents are rising, he said. Stories abound of homebuyers paying $100,000 over asking price, with all-cash offers and a dozen bidders. “We’re becoming like San Francisco.”
Durning said some cities such as Houston and Chicago are building for growing populations without experiencing spikes in housing prices. So why can’t other cities build to match job growth? Research that indicates factors such as population size, more people bidding for the same space, higher incomes, and lack of land for development explain only a small part of housing shortages, he said.
“It comes down to one word: zoning,” said Durning. “Seattle, San Francisco, and other cities impose many limits on zoning and homebuilding. At a fundamental level, it’s a matter of politics.”
Half of all multifamily housing in Seattle’s three-county area is being built in the city, within three miles of the downtown core, said Durning. Washington state requires cities and counties to locate growth within urban-service boundaries and around transit infrastructure, and Seattle’s comprehensive plan locates urban development in urban centers, in urban villages, and on transit corridors. “This is smart growth happening now,” he said.
But Seattle is also constrained by water, hills, and “the way we’ve zoned our city,” he said. “We have now well over half of all buildable land in single-family homes on lots of 5,000 to 8,000 square feet [465 to 745 sq m]. Only 18 percent of land is zoned for multifamily homes, and all multifamily housing is competing for that.”
The Seattle City Council in 2016 passed legislation recommended by Mayor Ed Murray’s Housing Affordability and Livability Agenda (HALA) advisory committee calling for a mandatory inclusionary zoning plan requiring developers to create low-income housing in some neighborhoods or pay in-lieu fees. The city is starting to determine up-zone areas to allow developers additional density in exchange for building more affordable housing.
The affordable housing/greater density solution is leading to a different political alignment, said Durning. Seattle’s affordable housing advocates–long aligned with “incumbent” slow-growth homeowner and neighborhood interests in what Durning called the “NIMBY-Trotsky coalition”—are now aligning with urbanists, including private developers and smart-growth advocates, in calling for more affordable housing and a more livable city. Durning noted that similar alliances pushing for housing of all kinds are active in many cities as a result of the millennial-led YIMBY (“yes in my back yard”) movement.
“If we can stop talking about buildings and start talking about people, we’ll do a whole lot better,” in winning over density opponents, he advised. He cited the “Humans of New York” campaign and using pictures of density that might be one step higher than what residents are used to, to advocate for more housing. “Talk about people and engage the ‘neighbor’ aspect, the welcoming and generous part of our brain, rather than the ‘homeowner’ part of the brain that tends to be cautious and risk averse.”
“Demand drivers are huge for new housing, but supply constraints such as low-density land use, zoning, and regulations are preventing an adequate supply,” said Clyde Holland Jr., chief executive officer and chairman of the Holland Partner Group, a Vancouver, Washington–based developer of multifamily housing in Seattle, Portland, Los Angeles, Denver, and other hot markets. He said the challenge is to put the right housing in the right location.
A lot of housing is being built in the United States, but the demand is in the urban core, where workers want to collaborate and enjoy the amenities of a dense urban lifestyle, noted Holland. “If we take 5 percent of land for high-density residential around transit areas, we will bring the right housing to the right places, leverage transit infrastructure, and shift the cost of housing down 24 percent,” he said.
Holland said another factor contributing to the housing deficit and rising development costs is the increase in time it takes to get projects built. In Seattle, the typical entitlement through construction process took five years a decade ago, but now takes up to ten years. “A five-year delay increases the cost of building housing by 45 percent,” he said, which makes building affordable housing particularly challenging for developers. “If you build around transit in the urban core, you don’t have to spend the costs on infrastructure, and the cost of delay is wiped out.”
The United States has a 3.5 million shortfall in new housing units, part of a trend that began in the 1980s and was exacerbated by the Great Recession, Holland noted. The country also is missing $2.1 trillion in annual gross domestic product due to underinvestment in residential development. The fiscal benefits associated with investing in new housing, such as additional jobs, retail space, and property taxes and fees, could solve the housing shortfall, balance the federal budget, and even provide a surplus, he said.
Kathleen McCormick, principal of Fountainhead Communications LLC in Boulder, Colorado, writes frequently about sustainable, healthy, and resilient communities.