Sue Lani Madsen: Need the right metrics to steer response to Spokane’s dual housing crises

Somewhere in the drive for more housing and more affordable housing, Spokane is losing its way, according to Realtors, builders and landlords. Spokane is finally on the right track with new tenant-landlord ordinances and higher impact fees to pay for infrastructure for an expanding city, according to some City Council members and tenant advocates.

So who’s right? The best way to evaluate any plan is to monitor for early signs of failure and make a timely course correction. The first challenge is agreeing on what metrics will measure positive and negative impacts. The second is having leadership in place willing to see flaws and make corrections.

For starters, Spokane has a housing quantity problem. According to the Spokane Association of Realtors, national averages indicate a healthy housing market has 1.14 housing units for every household. The city of Spokane only has about 89,000 housing units when it needs 114,000 to meet that average, counting everything from studio apartments to single-family homes.

New units have not been built fast enough to keep up with population growth, much less reduce the outstanding housing deficit.

“The easy metric is tracking housing starts,” said Tom Hormel, president of the Realtors association. “In the city of Spokane, I think housing starts are going to drop off, and we were already down over 20% in new homes last year because of the volatility in interest rates and inflation. Spokane is helping the smaller towns surrounding the city, which perpetuates traffic issues.”

Jacob Clark, government affairs coordinator for the Spokane Homebuilders Association, suggested tracking building permits issued in Kootenai County.

“It’s so easy for builders and developers to move across the state line and find a better building environment,” Clark said.

Increasing connection fees in the city will impact quantity and affordability. A “spec” builder taking out a construction loan at 10-12% interest is taking a big risk on being able to sell that house with a reasonable profit margin. Hormel predicted a decrease in spec housing, although presold custom builds will be less affected.

“The problem is going to be getting appraisals to satisfy the bank,” Hormel said.

Appraisers rely on sales of comparable existing homes to set the value of a house as collateral for the mortgage. Comparable homes in a neighborhood built before the impact fees jumped will have sold at lower prices, and “the bank is going to say $25,000 more for a new home doesn’t represent added value,” he said

It will require an increasing scarcity of housing to justify higher prices driven by dramatically higher impact fees as adding value to a newly built house. The added value would be the privilege of owning property inside the city limits.

Hormel also pointed out flaws in the ordinance allowing waiver of some fees but requiring a permanent deed restriction to the home.

“It works against building generational wealth,” Hormel said.

Selling a house costs money, typically about 9% of the sale price. If the median income rises less than 10% and the sale price of the house is deed restricted, the seller could be underwater on the sale.

Developers and builders won’t be paying these fees. Everyone who buys a new house or moves into a new apartment building will be paying these fees either wrapped into their mortgage or added into their rent.

That’s also true of the added expenses under the new tenant-landlord ordinances adopted by the Spokane City Council. Tenants are the only source of funds to cover expenses of their housing. The goal of the new tenant-landlord ordinances is not affordability but housing quality, according to Terry Anderson of the Tenants Union.

“When we stop getting calls about no heat in the winter or repairs not done, then we’ll know it’s a success,” Anderson said.

She is focused now on outreach to tenants to advise them not to be so fearful about calling the landlord.

“It gets ingrained to be afraid, knowing that fear is gone will be a success,” she said.

Tracking calls to code enforcement and calls to the Tenants Union might be the best metric available.

“We say our tenant stories are our data set,” Anderson said.

The Spokane City Council needs to establish baseline numbers and internal tracking systems now, if it hasn’t already, to give the feedback members will need to adapt and modify as needed. The Washington Center for Real Estate Research at the University of Washington tracks a variety of housing statistics for objective comparisons.

Meanwhile, builders are telling their stories. According to a Realtors association poll of local builders, 78% of responding builders were shutting down housing projects in the city of Spokane, representing 2,100 units of missing housing. That’s going in the wrong direction. But it may well be a boost to the surrounding towns and counties. Traffic trends on Interstate 90 coming into Spokane from east and west, and on major north-south routes will reflect shifts as buyers and builders adapt to the new fees.

Contact Sue Lani Madsen at [email protected].