This is part two of a series. Here are parts one and three.

Earlier today, I promised to take a look at a Seattle Timesarticle about study showing that regulations have added $200,000 to Seattle’s housing prices. Criticizing this article has been one of the most difficult blog posts I’ve written. There are so many confusions, distortions, and half-truths that it’s very difficult to know where to begin or how to proceed. So I’ve settled for the somewhat artless tactic of taking it in order. Ready?

Okay, let’s dig in. The third paragraph is the first place that really caught my eye.

Between 1989 and 2006, the median inflation-adjusted price of a Seattle house rose from $221,000 to $447,800. Fully $200,000 of that increase was the result of land-use regulations, says Theo Eicher [a University of Washington economics professor].

Really? That would mean that nearly all—88 percent to be exact—of the inflation-adjusted price increase in Seattle was due to regulation. That would be pretty surprising during a time when Seattle’s population increased by 66,000, the region’s wealth exploded, and a national housing bubble sent prices skyrocketing. But, okay, let’s read further..

The result [of the Growth Management Act] is artificial density that has driven up home prices by limiting supply, Eicher says.

Huh? What does “artificial density” mean? Density that would not have occurred without the GMA? But why pick on growth management as “artificial”?  Why not when the government seizes private property for freeways and dumps billions of public dollars into highway building? Why is it not “artificial” when zoning laws drastically suppress housing supply in desirable neighborhoods? Why is it not “artificial” when historic preservation laws prevent adding housing supply? And why is it not “artificial” when we prevent building in flood plains and on erosion-prone slopes?

Eicher may have included these in his study—some of which have done far more to affect land use and housing supply than growth management — but it concerns me that his primary target appears to our laws to preserve rural areas. But it’s important to remember that all sorts of things suppress housing supply—safety codes, single-family zoning, industrial zoning, and flood plains, not to mention more general stuff like road building, sewer lines, law enforcement, school-building, and on and on.

When you think about it for even a second, all land use — from urban Belltown to dairy country near Duvall—is “artificial” in the sense that our policies affect it. Still, there’s a fair question here: does the GMA restrict housing supply enough to drive up prices? (Hint: we never find out.) 

Let’s read on…

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  • Long building-permit approval times and municipal land-use restrictions upheld by courts also have played significant roles in increasing Seattle’s housing costs, Eicher adds.

    Okay, that’s a start, I guess. But then:

    Eicher explains that “the statewide growth-management plan gave King County few options but to require that landowners in rural areas that haven’t already cleared their land to keep 50 to 65 percent of their property in its ‘natural state.’ This forced greater density in Seattle.”

    Uh-oh, I smell trouble. Eicher appears to be referring to a small but controversial provision in the county’s Critical Areas Ordinances. This part of the CAOs weren’t enacted until 2004, and then they were subsequently relaxed a bit. They affect only a few rural areas that are mostly far from Seattle and, for the most part, those places were already not exactly ripe for additional housing anyway. It’s very hard to see how, in less than two years, they could have “forced” density into Seattle and affected housing prices during the bubble.

    But I’ve been curious about this stuff in the past, so Sightline wrote up a comparison study of home prices in regulated areas of rural King County. What did we find? That it’s too close to call. Depends on whether you like percentage growth or absolute growth—and even then the difference between strictly regulated properties and lightly regulated ones was small at best.

    But let’s keep reading…

    Sjoblom [staff economist for the Washington Research Council] says that makes sense: “People with higher incomes want the kind of amenities that regulation provides,” he says. “If you’re a homeowner and growth controls are imposed and housing prices shoot up, you’re grandfathered because you own the place. In theory people will say it’s [rising prices] a bad thing, but in practice it’s not hurting them.”

    Sjoblom says that’s why making the changes that would foster affordability are so hard to get past the public, some 68 percent of whom are homeowners. “When you bring up specific things, like allowing multifamily housing in their neighborhood, they have misgivings.”

    But wait: I agree! I’m guessing that Sjbolom and I have different ideological perespectives, but he’s exactly right here. Single family neighborhood zoning, sometimes called the third rail of Seattle politics, clearly plays a role in suppressing housing supply in the very places where people are clamoring to live. It’s “artificial” low density!



    Keep going?

    Last summer, King County’s potential first-time buyers earning the median family income ($75,143) had just 37 percent of the financial wherewithal to buy the median-priced single-family house ($477,000) at the prevailing interest rate (6.47 percent). Five years earlier, when King County’s median-priced house cost $282,500, median-income, first-time buyers possessed 72 percent of the income needed.

    Yeah, take that growth management! Cities without growth management held the line on affordability, right?

    Um, no. The steepest price appreciation is in the anything-goes Sunbelt. For all of our onerous regulations, Seattle’s price increases appear to have actually lagged behind the national average. Go read part three to find out how.