Why can’t we build enough housing?

This is the fourth in a 5-part series about how the Washington metropolitan area can provide housing options for its growing workforce. Read part 1, part 2, and part 3.

Almost everyone would agree that we have an affordability problem here in the Washington region. We have argued that localities are neither planning for, nor facilitating, a sufficient supply of housing at all price or rent levels. What are the obstacles keeping us from getting enough affordable housing built?

Demand for housing in the region continues to grow. More than 80,000 households moved into the region last year. Home prices continue to escalate; they are up 8% regionwide in October. We need to build nearly 40,000 new units each year until 2030 simply to keep up with job growth, yet we’re only on pace for about 15,000 new units in 2012.

Why? There are dozens—if not hundreds—of factors that complicate housing development in the region.

We suggest 5 here, and look forward to reading your discussion of these and others:

Burdensome local processes: The local process for getting residential projects approved and built is complex, costly, time-consuming, and uncertain. Fees and proffers can add between $30,000 and $50,000 to the cost of a housing unit.

The developer also is required to provide many “extras” that may not specifically have been among the items demanded by the buyer. The most recent buyer ends up paying for amenities that the entire neighborhood enjoys — parks, bike racks, benches, and walking trails, among other benefits.

Contrary to popular belief, it is not necessarily the developer who pays; the extra costs usually are incorporated in the final sales price or rent amounts. If the cost is more than what the market will bear, the project simply won’t get built.

Neighborhood opposition: As the nature of housing demand changes to favor more urbanized areas served by transit, development of new units often is confronted by massive opposition from existing residents. Understandably, they are concerned about a change to their way of life and are not eager to invite potentially more traffic to their neighborhood. They haven’t always received enough information to understand that new development, when designed properly, may actually lead to less traffic and more community-serving amenities.

When demand is already being felt in an area, but the locality’s comprehensive plan and zoning haven’t been updated, an individual development proposal encounters the strongest headwinds. It may take 18 to 24 months for a new neighborhood or sector plan to be prepared, and to overcome opposition.

When zoning has not been recently reviewed or updated, it effectively prevents newer housing designs by requiring obsolete lot sizes, unit sizes, and configuration of parking spaces; and mandates too much parking, doesn’t allow enough height, doesn’t allow retail under residential units, and a multitude of other “don’ts.” Often densities are too low in areas where local leaders and staff agree that mixed use development or mid- to high-rise housing development is desirable.

All this means a good project can be prevented or delayed until the appropriate zoning framework is in place. By then, time has passed, costs have increased, and the market window may have closed. The needed housing units are not built.

Demand: Strong job growth and high wage earners push housing prices up across the region. Proximity to jobs, access to transit and other transportation, high-quality housing construction, and diverse neighborhood amenities are all associated with relatively higher housing costs.

We know that income growth has not kept up with the increase in housing costs; however, we live in an area where many households have very high incomes. Higher income households that can afford to pay more put upward pressure on rents (and home prices) in high-demand neighborhoods. As a result, lower income households—for example, the half a million households in the region making less than $50,000 per year—face two options: 1) spending more than 30% of their incomes on housing to be close to jobs and amenities or 2) moving further out and enduring longer and more expensive commutes.

Household income and affordable rent: DC metro area, 2009-2011
Household income	Estimated # households	Maximum monthly rent*
Less than $50,000	546,000	$1,250
$50,000-$99,999	605,000	$2,500
$100,000 or more	896,000	n/a
Median household income of $87,653		$2,191

Federal and state regulations: In addition to local regulations, a variety of state and federal regulations relate to new home construction. States have transportation and environmental regulations that apply to new projects. for example, a requirement to conduct traffic impact analyses when traffic is expected to be over a certain threshold, and the power to deny curb cuts or access to state roads.

At the federal level, water quality regulations are controlling runoff to local watersheds, pre-empting local decision-making on the right location for new housing units. The developer has to work not only with local planning staff, but often also with a range of state and federal agencies and reviewers during each development application.

As there is no one who can coordinate agencies at different levels of government or unify their comments on a development application, there is the potential for prolonged back and forth on certain requirements where different governmental levels have regulations that conflict with those of other levels.

Regional non-coordination: A lack of regional coordination has exacerbated the housing supply problem in the Washington region and has contributed to an inefficient geographic allocation of housing. Each local jurisdiction employs its own process for approving new housing developments. Not only are the processes complex, they vary widely from jurisdiction to jurisdiction. In all cases, local elected officials focus assiduously on the desires of their constituents and the impacts of new development on their current residents.

Jurisdictions across the region constantly compete with each other—to attract jobs, to build better amenities, to have lower taxes—and it is in their self-interest to focus very narrowly on their own priorities, rather than the regional good, when approving new housing.

The problem of a lack of coordination is heightened in the DC metro area, where we have three state regions — DC, Maryland and Virginia, or four, if we count the one county in West Virginia that is part of the metropolitan area.

There is no regional governing body with the authority to coordinate efforts to plan for and get constructed a sufficient supply of housing, of the right types and in the right places. Virginia and Maryland have some combined coordinating bodies, for example the Northern Virginia Regional Commission and the Maryland National Capital Park and Planning Commission, but these don’t cover all the jurisdictions in the metropolitan area.

The Metropolitan Washington Council of Governments and other organizations convene groups of local leaders to discuss regional issues, but without legal or regulatory authority. The regional discussion tends to culminate in the signature of “compacts” which are broad philosophical agreements, but true coordinating action in housing or transportation is hard to come by.

All this adds up to big problems

These, as well as other issues not highlighted here, are obstacles to providing a sufficient amount of housing and the appropriate types of housing this region will need to support population and job growth.

Local officials are well aware of these issues, but in the daily travail of meeting their budgets, maintaining their bond ratings, and satisfying their constituents, they are hard-pressed to focus on long-term regional goals, instead meeting challenges as they arise, one at a time. This is exhausting for all concerned — elected officials, local staff, developers and home builders, and the citizens who try to keep an eye on each new proposal.

Is it possible to step back, and take concrete steps that would help us achieve our regional housing goals? In our next post, we will present some initial solutions.