The Economy of Housing Growth
Seattle is in a housing debt. In 2010 we had 5% more houses per people than we do today. You may see cranes all over the skyline, new apartments opening up, and new Land Use Action signs in your neighborhood, but the truth is we aren’t building enough homes.
By undoing land use restrictions, and setting goals to add 70,000 homes in the next five years we will add $1 billion in affordable housing revenue, enough to build 3,500 rent controlled homes to house over 7,000 people struggling with housing insecurity.
This will also create $35 billion in real estate value, which will maintain thousands of construction jobs and make your realtor salivate at the opportunity of selling more homes. The new homes will generate $350 million in annual property tax revenue, which will help us grow and expand services like King County Metro & develop more park space. The City of Seattle would benefit from growing to 861,000 people, while building affordable housing, and have the market relax so the new residents live comfortably. On average, Seattle generates $131 per person in annual tax revenue, so the new homes will generate almost $10 million in revenue, which will help us build more equitable neighborhoods and safer streets.
In 2010 Seattle had 1 home per 1.97 people. We were a city of 608,000 people with 308,000 homes. As we can see from this housing vs population graph, we added more people than we built homes for over the decade. We now have 1 home per 2.02 people, a city of 761,000 people with 368,000 homes. The shortage of 10,000 homes sounds small, but the impact is enormous. The average home price in 2010 was $409,000 and average rent was $1,375 per month. In 2020 these grew to $749,000 for an average home and $2,000 average rent per month because we were short these homes.
To meet 2010’s housing per person ratio, we need 386,000 homes; we are 10,000 homes short of that in 2020.
In order to erase this housing debt, we need to add 10,000 more homes than population growth over the next five years. If we assume a population growth of 60,000 over the next five years, that means we need to add 70,000 homes. It sounds simple, but realize this, we would need to build 14,000 homes in *each year* just to erase the debt if this population growth projection is accurate. The best year of housing growth this decade is short of that, with just over 11,000 more homes built in 2019. Over the last 5 years we have averaged just under 9,000 new homes with a population growth of nearly 20,000 per year. If we safely presume that population growth will slow, both with the housing prices exploding in Seattle and with Amazon now occupying more space across Lake Washington, we still need to build a lot more homes than we ever have in each of the next five years.
It sounds daunting, but that’s mostly because we assume new homes are large apartment buildings and high rise towers which install hundreds of homes at once. Yes, they are part of the solution, but not the only solution we should leverage. Housing growth is often only perceived as urban growth because it’s the only place it is allowed. If Seattle removed single-family zoning and upzoned the whole city to allow sixplexes, we would only need to convert 2,300 single family homes into a sixplex each year to meet this goal. Before you clutch your pearls, that’s only 2% of the single family housing stock. That’s 2 homes per 100, or, 1 home every two blocks. Your neighborhood will barely notice and it will still feature plenty of the craftsman bungalows everyone goes apeshit thinking will be erased.
We currently have 500 homes listed for sale, and Seattle has averaged a demolition of 300 homes per year that have been replaced by a new single family home. The more we chip away at this reality, the more realistic this goal becomes. Developers are going to buy some of these homes for sale, and right now they’re only permitted to build a single-family home and a detached additional dwelling unit (DADU, for short). If those 3,000 homes the last 10 years had become sixplexes, we would have gained 15,000 new homes, enough to house one-quarter of the added population this decade. We would have slowed the housing crisis and built more equitable communities, but hindsight is 20/20. We need to look to the future.
The bottom line is, an upzone is not only smart for housing us and growing the population, it’s fantastic for the economy. We will add $35 billion in real estate value, $350 million in annual property tax revenue, generate $1 billion in affordable housing revenue, and boost the city’s tax revenue by $10 million each year. Not only does this operate tons of construction jobs as we build ourselves out of this problem, it will do enormous wonders to the local business economy. Right now, it is hard for businesses to operate within neighborhoods. Part of that is another absurdly dumb zoning restriction — which Seattle is set to undo — but also because there aren’t enough people. Two people can support 10 square feet of retail, so your average corner store and cafe will benefit with more people in the community. Our bus network will grow in ridership, revenue, and have the justification for upgrades.
If we don’t do this, we are literally forfeiting this economic opportunity, forfeiting jobs, and making the city more unaffordable. What politician can possibly stand for that? Let’s build ourselves out of this problem and reap the benefits of this positive change.
