In 1997, Apple was about 90 days from going broke. Today it is valued at $1 trillion, more than the combined value of Boeing, Bank of America, Walt Disney, Volkswagen, Ford and a dozen other familiar companies. The story of how they did it is the stuff of legend in entrepreneurship circles.
We might say the housing affordability problem in Seattle and surrounding communities is at the same broken point today.
Creativity and collaboration were key ingredients to Apples’ turnaround as people in the company with different interests and disciplines came together to begin forging a new direction. Managing the supply chain to respond to demand once they got traction with their new direction was itself a mind-boggling effort. Before all of that, though, everyone had to buy into the notion that they could get there.
The complicated and expensive process of supplying housing in all forms is a similar challenge and really at the root of the affordability problem. But for some reason, the actors in the real estate play are viewed differently than suppliers of other products, like Apple. In this drama, the developer is too often viewed as the villain.
A creative starting point would be bringing real estate developers to the table to help elected officials take a fresh look at the Growth Management Act and to reformulate regulations with a mandate to more closely tie the supply side to the demand side in the housing equation.
From start to finish, a typical apartment building in Seattle might take three to five years to deliver to market. That long lag time from concept to completion forces suppliers to speculate on demand. By the time the market catches up, it might be too late and a bubble of supply will have hit the market.
When rents swing up and then suddenly pull back in the bubble, as they are doing in Seattle today, it’s unhealthy for everyone. The costs of housing for consumers ratchet up several notches, only pull back one or two. That pattern repeats itself too often, and a major reason is the artificially high cost of limited land inventory designated by local communities for development under their Growth Management Act mandates.
Political leaders at the local and state level are challenged in this space. Few have any real experience in the private sector and even fewer understand the challenges developers face trying to deliver an affordable product. Like many of their constituents, some still view developers as the bad guys and don’t want to be seen hugging up to them or their lobbying groups, even in good conscience.
The genius of the Apple turnaround concerned who was at the table. Facing its demise in 1997, the company had no choice but to get everyone in the room to agree on a new direction. That, more than anything, is what the housing affordability problem needs today.
There’s a middle ground between the current circumstance and unregulated growth, but we can get to it onnly if things are choreographed together. A scrub of the Growth Management Act might be the right venue for the first act.