Spokane Journal of Business

Commentary

05/11/2017

 

The Journal's View: Home-lot shortage weighs on housing market

 

One of the great pluses of living in the Inland Northwest, along with the abundant nature and the myriad recreational opportunities we enjoy, is the comparatively low cost of living.

That benefit seemingly could be weakened, though, unless developers and regulators find a way to address an increasingly worrisome shortage of lots available for building new homes.

An insightful story by Journal reporter Mike McLean cited concerns among developers here that new-home construction is outpacing the supply of available land to build homes on. That, in turn, is contributing to rising home prices and the dwindling inventory of existing homes for sale, developers contend.

Jim Frank, CEO of real estate development company Greenstone Corp., told Mike he’s concerned that lot shortages and resulting price increases are excluding a growing percentage of young people from the homebuying market. That trend, Frank says, is creating a generational issue that might only get worse here for another decade.

Housing developers raise affordability concerns periodically during market hot stretches and when they’re feeling particularly beleaguered by increased regulatory constraints, and those comments might be perceived by some as self-serving.

This time, though, conditions seem potentially more intractable. The real estate market has been on an extended—and much welcomed—upswing since the devastating 2007-09 Great Recession that brought the real estate market to a near standstill.

Since 2009, as Mike noted in his story, nearly 3,000 more building permits have been created for future home construction in Spokane County, meaning developers are depleting the inventory of buildable land throughout the county.

One might expect this far into a surging local real estate market that lot creation now would be starting to catch up with demand, but that isn’t happening. Just last year, for example, more than 1,800 building permits were issued for single-family homes in Spokane County and the cities of Spokane, Spokane Valley, and Liberty Lake, while only 1,450 new lots were created throughout the county, according to data compiled from multiple sources.

The big question now is whether an anticipated softening in real estate demand, which could begin to occur later this year as the market starts its cyclical downswing from its recent giddy highs, will materially ease those home price pressures.

Frank doesn’t seem optimistic. He made clear that he doesn’t expect land availability to catch up with demand for many years.

Land availability in Spokane County is restricted by its state-required urban growth boundaries, which are designed to encourage in-fill development and limit suburban sprawl and are another key factor in this whole discussion. Some development proponents believe those boundaries need to be expanded, which theoretically would help boost lot creation, but the requirements and process for doing so are onerous.

For the time being, it appears, developers simply will need to be creative—and more expedient—in carving out new lots within those boundaries.