Arthur Acolin, an assistant professor at the University of Washington’s school of real estate, is optimistic about the theoretical impact that sufficient supply could have on house prices. But in practice, he expects increased supply to mostly help flatten price growth in Seattle.
Although flattened house prices do little in the short term to help people become homeowners, Acolin argued that they could even out the imbalance between house prices and wages, where you could achieve 2% to 3% annual growth in real estate prices. , rather than the current 7% to 10% (or more).
“Prices would rise with income, which you would expect in a functioning market,” he said. “There are many fears that new construction in your immediate area will destroy home value. There is very little empirical evidence that this is the case. But there is evidence that it would moderate prices.
Moderate prices could, in turn, help more people earning at or just below the region’s median income to afford homeownership, whether in the city or just outside of this one.
“For those earning more than 80% of the region’s median income, the market should be able to provide adequately priced housing options in the wider region,” Acolin said. “Then for households earning less than that, there is no solution that does not require a substantial amount of public resources.”
Although economists are skeptical that building homes alone can blunt the effects of Seattle’s decade-long boom, they generally agree that not building more will make matters worse.
“Seattle is at the top of the list of desirable cities for affluent people, so I think it’s going to continue to attract a lot of migration from wealthy and high-income people,” said Redfin chief economist Daryl Fairweather. “I think Seattle is in store for a continued increase. But it makes it even more urgent to build as much housing as possible so the rise isn’t as severe as it might otherwise be. If Seattle were to just maintain the status quo for housing supply, they would end up where San Francisco is.
With a fixed supply of land on which to build, economists say the only way to increase housing supply is to build more densely. “If you can build six or 10 units on the same plot [of land] where right now you can only build one unit, that same land price is divided by six-10,” Acolin said. “Just allowing quadplexes or six-unit buildings to be built on any 5,000 square foot lot in Seattle would split that cost of entry.”
Acolin cites his home country, France, as an example. In Dijon, the city builds mixed-income, mixed-size developments intended to serve a variety of household types. A development he shared is built in a former industrial area. There are small townhouses as well as developments of condos, rental apartments and quadplexes with commercial stores and offices mixed together.
Fairweather said cities can also speed up construction by streamlining permit processes and taking other steps to ease bureaucratic barriers.
In Seattle, however, the idea of denser construction in residential neighborhoods remains a hot topic. Every attempt to do so has met with strong opposition from neighborhood councils and other landlord groups.
Acolin adopts a conciliatory vision of change. “Anyone who aspires to own a single-family home and can afford it should be able to buy it too,” he said. “But we need options for people who can’t afford it or don’t want to.”