Welcome to the Bellingham City Council Town Hall June 13, 2017
Affordable housing and homelessness June 2017
Affordability and homelessness Since 2012 What happened? Next steps
Housing prices are growing Washington State Source: http://www.zillow.com/home values/
Housing prices are growing Texas Source: http://www.zillow.com/home values/
Rents are growing Washington State Source: http://www.zillow.com/home values/
Rents are growing Whatcom County Source: http://www.zillow.com/home values/
Rents are growing Salt Lake City Source: http://www.zillow.com/home values/
Rents are growing Dallas Source: http://www.zillow.com/home values/
Rents are growing Vancouver, WA Source: http://www.zillow.com/home values/
Washington s rental vacancy rates are below average 2010 2012 2014 2015 United States 8.2% 6.8% 6.3% 5.9% California 5.9% 4.5% 3.9% 3.3% Massachusetts 5.8% 4.5% 4.0% 3.5% Oregon 5.6% 4.7% 3.6% 3.6% Texas 10.6% 8.5% 7.3% 7.0% Washington 5.8% 5.3% 4.2% 3.3% Clark County 8.2% 3.4% 2.4% 2.2% King County 5.2% 4.1% 2.5% 2.6% Pierce County 6.6% 5.4% 5.7% 3.3% Spokane County 4.0% 7.2% 5.5% 3.7% Yakima County 3.1% 4.5% 5.1% 3.6% Island County 6.7% 6.5% 0.9% 2.8% Whatcom 3.9% 5.5% 4.1% 1.8% Seattle 4.0% 3.5% 1.2% 2.7% San Francisco 4.4% 2.8% 2.5% 2.5% Houston 15.9% 11.2% 7.2% 7.7% Source: American Community Survey 1 Year Estimates http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=acs_14_1yr_dp04&prodtype=table
Vacancy rates and rent increases are inversely related 6.5% Vacancy rate 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% Annual rent change 3.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0.0% Vacancy rate Median contract rent change Source: American Community Survey 1 Year Estimates
Rents are growing with the economy, but middle & low income growth lags % change inflation adjusted $ 20.00% 15.00% 10.00% 5.00% 0.00% 5.00% Median rent +18% Median income +3% Lowest quartile rent +13% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 10.00% 15.00% Low incomes (bottom 20% of households) +0% Data sources: U.S. Census Bureau American Community Survey 1 Year Estimates; inflation adjusted using the Bureau of Labor Statistics CPI U.
Rents have grown faster than incomes in Whatcom County 35.0% 30.0% Rents 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Income 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: American Community Survey 1 Year Estimates, Whatcom County
Affordability what is too expensive? Cost burdened : >30% of income for housing costs Severely cost burdened : >50% of income for housing costs Affordable home ownership : <25% of income for mortgage using following assumptions: Source: State of Washington Housing Needs Assessment, January 2015 commerce.wa.gov/housingneeds
Cost burden is an issue throughout Washington
Affordability by income Source: State of Washington Housing Needs Assessment, January 2015 commerce.wa.gov/housingneeds
Home purchase affordability Source: Runstad Center for Real Estate Studies / University of Washington, Washington State s Housing Market
Affordability is a driver of homelessness Every $100 increase in rent is associated with: 6% increase in homelessness in metro areas 32% increase in homelessness in non metro areas This relationship between rent and homelessness means all things being equal in Washington +$100 in rent = 2,900 (+14%) more people experiencing homelessness at a point in time. Source: Journal of Urban Affairs, New Perspectives on Community Level Determinants of Homelessness, 2012
Change in homelessness accounting for population increases (per capita homelessness) Change in prevalance of homelessness 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 0.8% 0.4% 2006 2007 2008 2.5% 2009 2010 2011 2012 2013 2014 2015 2016 4.2% 15.1% 15.9% 18.1% 23.8% 23.9% 27.4%
Since 2012 Rent appears to be the only significant driver of change in homelessness Other factors are stable or improving: Educational attainment/skills Family stability/structure (divorce, out of wedlock birth, teenage pregnancy) Overall alcohol and other drug dependence Percent of people employed (not recovered to 2006 level, but higher than 2012)
Why are rents increasing Combination of interplay between: Jobs/People moving into the state Very low vacancy rates statewide Construction industry hobbled by recession not capable of meeting demand Local land use and other regulations limiting the number and types of units that can be built Infrastructure not keeping pace with growth
Washington s economy is growing Real GDP 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 1% 2013Q1 2013Q2 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 WA +8.0% US +5.8%
Why are rents increasing WA #1 in GDP growth
Bellingham a leader in GDP growth https://www.bea.gov/newsreleases/regional/gdp_metro/2016/pdf/gdp_metro0916_fw_highlights.pdf
Growth in number of housing units lags job growth in Washington State + 1% Number of jobs (population) = 0.95% rent increase Change in number of jobs 9.7% +1% Incomes = 1.74% rent increase 4.3% 6.5% 3.6% 4.8% +1 1.6% 0.7% 2.5% 1.5% 2.5% Change in number of housing units 2012 2013 2014 2015 2016 Sources: WA OFM postcensal estimates of April 1 housing units, WA ESD Nonagricultural wage and salary employment, not seasonally adjusted
Rough estimate of key drivers of housing price increases San Francisco 1965 2015 + 1% Number of jobs (population) = 0.95% rent increase +1% Incomes = 1.74% rent increase +1% Supply of housing (number of units) = 1.70% rent decrease http://experimental geography.blogspot.com/2016/05/employment construction and cost of san.html
Bringing incomes and rent back in sync Question: Is there enough leverage in local and state land use policy, other regulations, and infrastructure policy to keep median market rate rents in sync with median incomes over the long term?
Any supply helps Even expensive new buildings are critical: Rent depreciate in real terms about 1.9% each year Source: American Economic Review 2014, 104(2): 687 706
Today s expensive units are tomorrow s affordable units $709/month, 394 sqft Filtering works Year Rent depreciating at 1.9% annually Affordable rent, full time minimum wage 2016 $709 $675 2017 $696 $675 2018 $682 $675 2019 $669 $675 2020 $657 $675 2021 $644 $675 2022 $632 $675 2023 $620 $675 2024 $608 $675 2025 $597 $675 2026 $585 $675 in markets where the supply is adequate
Let the market build some of the low end again Supply of any kind helps with affordability, but a supply of small units helps more In most places it is illegal to build the affordable housing of 100 years ago small units
In the past, there were more unsubsidized housing options at the low end Duplexes could be build anywhere; built in 1901:
State Housing Affordability Response Team Draft recommendations to Governor 1. Provide funding and support to local governments to plan for housing at every income level, especially for lower income levels. 2. Provide funding to local governments to assess land capacity through buildable lands reports 3. Provide broad based education to assist communities to facilitate the development of more affordable housing.
State Housing Affordability Response Team Draft recommendations to Governor recommendations continued 4. Seek responsible changes to development related statutes and regulations to facilitate housing development. Small changes to statutes such as the Project Review Act, Subdivision Act, the State Building Code, impact fees, multifamily tax exemptions, community revitalization financing, and prevailing wage determinations could add up to make a difference. 5. Provide stable and dependable state funding for housing, by providing predictable funding to the Housing Trust Fund, making document recording fees permanent, and encouraging local adoption of local housing levies. 6. Ask public agencies to consider underutilized publicly owned property as an opportunity for affordable housing. 7. Continue this work into the future by finding opportunities to collaborate with existing work groups and projects to carry these ideas forward.
Presented by: Tedd Kelleher Managing Director Housing Assistance Unit 360.725.2930 www.commerce.wa.gov 35