As state lawmakers address housing affordability this legislative session, they should heed calls to revise laws and regulations that create barriers to homeownership.
Such is the case with the Washington State Condominium Act of 2009, which should be reformed. As an unintended consequence, the act eliminates condominiums as an affordable housing option and dissuades many developers from creating condos at any price point.
The act may have been intended originally to apply to high-rise condominium development at the time in the Seattle area, but it has hindered condo development here and throughout the state, with the result that condos are mostly an option for high-end developers, mainly on the West Side.
Following the implementation of the act, the number of condo permits issued within Spokane County and the city of Spokane fell to zero by 2011 and are still far below prerecession levels, while building permits were issued to construct over 8,000 apartment units in the last seven years.
Small homes help meet a low-cost need for first-time homebuyers and retirees, and removing the condominium option as a low cost home increases pressure on apartment rents.
The Condominium Act now is seen as the biggest reason for lack of condominium construction in recent years, and that dearth is gaining more attention as the median price for a conventional single-family home sold through the Spokane Association of Realtors Multiple Listing Service in 2018 rose to $235,000, up nearly 12 percent over a year earlier, and out of the reach of many potential homebuyers.
Developers contend the Condominium Act imposes development standards on condominium construction that aren’t applied to other types of residential construction. Those standards include inspection requirements beyond Uniform Building Code standards, and extended warranty requirements that increase liability for developers, contractors, subcontractors, and architects.
All of that adds significant costs, making condo development infeasible for the entry-level and empty-nester housing market.
The problem isn’t just an inconvenience for the residential construction industry. As it contributes to the strain on the market for entry-level homeowners, it also can make it more difficult to attract and recruit new employers.
It also reduces multifamily options for the Spokane area to meet infill requirements and achieve the density thresholds set forth by the state’s Growth Management Act.
As one prominent developer, Greenstone CEO Jim Frank recently told the Journal, “It’s a bad thing for cities and communities to have all multifamily developments be rental housing.”
Joining developers in supporting Condominium Act reform are local governments and business organizations here, including the cities of Spokane and Spokane Valley, Spokane County, Greater Spokane Inc., Spokane Valley Chamber of Commerce, Spokane Association of Realtors, and Downtown Spokane Partnership.
Options that should be considered by the Legislature include reforming the definition of construction defects, adjusting warranty requirements to encourage developer-buyer cooperation rather than litigation, and allowing local jurisdictions to adopt their own condominium regulations that better fit their markets. Another option is to introduce a minimum threshold regarding how many stories or units should be required for a project to be fully subject to the Condominium Act.
In the face of rising costs and declining affordability, we need to ensure all options are available for those who pursue homeownership.
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