There’s not enough designated developable land here to meet demand for housing through the next two decades, says Michael Luis, a Seattle-based economic and public policy consultant.

The current process that’s used to set boundaries for urban growth areas in Spokane County, called land quantity analysis, overestimates the developable land and likely underestimates population growth, Luis says.

“To make urban growth areas, you have to make sure there’s enough land that you don’t get a price distortion,” he says. “That’s what the land quantity analysis process is about.”

Luis, who was hired by the Spokane Association of Realtors to conduct a study of residential development capacity in Spokane County, presented his findings last Friday, Sept. 8, at the Spokane Housing Summit. The event, held at the Lincoln Center, was put on jointly by the Spokane Association of Realtors and the Spokane Home Builders Association.

The study includes unincorporated Spokane County and the cities of Spokane, Spokane Valley, and Liberty Lake.

“The four jurisdictions I covered are about 85 percent of what’s going on” within Spokane County urban growth areas, he says.

Luis’ study warns in its findings that the combination of overestimating feasible development capacity and underestimating population growth leaves the county in a position where it might not be able to accommodate growth during the next 20 years.

That likely would would lead to increases in housing prices at a higher rate than income growth, which would threaten Spokane’s attributes of high quality of life coupled with low cost of living, he asserts.

An extreme example of that imbalance between housing demand and supply is in the Seattle area, where steep price increases in housing are excluding a growing proportion of people from the homebuyer market, he says.

Urban growth areas are the centerpiece of the Washington State Growth Management Act, which requires counties and cities to establish growth boundaries to encourage infill development and limit urban sprawl, Luis says.

The act also requires that the urban growth boundaries accommodate anticipated population growth looking ahead 20 years.

Luis says the current urban growth area boundaries for the four jurisdictions estimate a combined surplus of 48,101 developable living units. That estimate, however, doesn’t account for a number of factors that likely eat into that projected surplus, he says.

Chief among those factors, he contends, is that a significant portion of the land considered available for development within urban growth areas is composed of a scattering of small parcels with fragmented ownership that aren’t desirable for builders.

“A chunk of available land consists of single lots,” he says. “That’s a really hard kind of land to get into the marketplace.”

The land quantity analysis doesn’t factor in scale of economy, Luis says.

“Builders don’t like to work at the lower end of the market,” he says. “They want to have lots of units going at once.”

Many builders and developers would prefer to work in clusters of 20 lots or more, he says.

He adds, however, “There’s just not a whole lot of it out there.”

Luis recommends that the land quantity analysis process be adjusted to deduct some of the smaller parcels it currently counts as developable.

He also suggests that more research should be conducted into whether some of the land currently designated as developable should be considered impractical for development due to rocky conditions that add to development costs.

“Try to make some adjustments in the land quantity analysis to account for those things that are known to the industry, but aren’t part of the official process,” he recommends.

Luis also says it appears the Spokane County population forecast adopted by the four local jurisdictions is too low.

The forecast, which is taken from the state’s Office of Financial Management midrange projections, predicts that the county population will increase by 26 percent, adding 122,000 people for an average annual growth rate of 0.79 percent between 2010 and 2040.

That’s lower than the historic growth rate, Luis says. 

In the 30 years from 1980 to 2010, which includes two recessions, the county grew in population by 38 percent, adding about 130,000 people at an annual growth rate of 1.1 percent. 

“In-migration is up,” Luis says. “There’s all sorts of reasons to believe that Spokane County is going to do very well (economically) in the next couple of decades, and the housing supply needs to accommodate that.”