Study: 49,000 new homes built last year in Washington not enough

EVERETT — Last year, more than 49,000 construction permits for new homes — from single family dwellings to condominiums and apartments — were issued throughout the state.

At first glance, it seems like a lot.

But it’s nowhere near the number needed, according to a new study by the Building Industry Association of Washington, a nonprofit trade group that represents 8,000 companies.

Washington needs a quarter million new homes just to meet current demand, the report said.

Snohomish County alone needs 25,374 or about 10% of the total to keep pace.

“At this rate, it will take five and a half years to catch up to current demand,” said Greg Lane, the association’s executive vice president.

Last year, just 49,033 building permits for new housing units were processed throughout the state, according to the Washington’s Housing Supply Shortage.

“Anytime we see a shortage of housing units, it increases rent and home prices. It’s the law of supply and demand,” said Andrea Smith, the group’s policy and research manager in government affairs.

And when rents are high, it becomes more challenging for potential homebuyers to save for a down payment on a home, Smith said.

As it now stands, most Washington residents cannot afford to purchase a home, according to the group’s 2022 Housing Affordability in Washington report.

Less than a quarter of state residents can afford a median priced home. (Half cost more, half cost less.) In Snohomish County, where the median price is about $750,000, the percentage is even lower — only 20%, the affordability report said.

To boost the percentages and construction numbers, the group is seeking changes to state laws that govern zoning, the permit approval process and zoning and building codes it deems excessive.

“Policymakers need to ensure that more than just 20 percent of families can purchase homes in Washington,” Lane said. “And that can only be addressed by increasing supply and reducing regulation. This is why permit and zoning reforms were so critical during the 2023 legislative session.”

The Building Industry Association sought changes to state laws this year that would “speed permitting, streamline the processes and clear some regulatory roadblocks.”

When the permit approval process is delayed, it not only holds up construction, but adds to the cost of each home. In other cases, a lengthy permit process can reduce the number of homes that get built, Smith said.

The amount of a construction loan may not be enough to cover the costs associated with a significant delay, Smith said, citing her own home-buying experience.

“The builder I bought my townhouse from was bound by capital from his lender. It took a really long time for our subdivision to get approved. Because of the extra costs, he was unable to build out that number he had planned,” she said.

Statewide, the average permit delay is 6.5 months, adding about $31,375 to the cost, according to the group’s Cost of Permitting Delays report.

In Snohomish County, where the average delay is nearly eight months, it adds some $46,000 to the cost of each home.

Those costs are passed along to the buyer, Smith said. And the dollars add up.

“For every $1,000 added to the cost of constructing a new home, 2,200 families lose their ability to purchase a new home,” according to a National Association of Home Builders report, Priced-Out Estimates for 2022.

Ideally, builders would like to see the permit approval process shortened to 120 days or less, said Josie Cummings, the building association’s legislative director.

That’s not always possible since many jurisdictions are also hindered by staff shortages or don’t have software that can accept digital plans.

A permit reform bill passed this year by the Legislature is expected to help, Cummings said.

Under new regulations, cities and counties must notify a builder if they pause the permit review process. In the past, it was up to the builder to check on the status, Smith said.

“If they’re missing a study or they haven’t filled out the form correctly, this let’s them know right away what’s needed, so they can get it fixed and keep the process moving,” she said.

The group also supported a bill that allows two-story condominium developments with 12 units or less to be built under the residential code, Cummings said.

The building association also lobbied for a bill that supports workforce development and boosts the visibility of trade and technical schools to parents and students, Cummings said.

Plumbers, electricians and other skilled workers needed to keep the construction industry running smoothly — are in short supply. Boosting their numbers helps builders and home buyers, Cummings said.

Real estate sales may be sluggish right now due to high interest rates on mortgages, but the demand for new homes, new condos and new apartments continues unabated.

And the clock is ticking, by 2040 the state population is projected to reach nearly 9 million, up 17% from the current 7.7 million. Snohomish County is projected to gain another 300,000 residents over the next 20 years, pushing the county’s population past 1.1 million.

A report released earlier this year by the Washington State Commerce Department estimated that Snohomish County will need more than 143,000 new homes, condominiums and apartments by 2044 to meet the demand for housing.

Overall, the state will need more than 1 million new homes, half of which are needed to house residents at the lowest income levels.

“Every community in the state is experiencing housing pressures and needs to plan for enough housing so that everyone can live inside,” said Tedd Kelleher, the commerce department’s housing policy director.

“There is no single silver-bullet solution,” said Lane, Building Industry Association vice president. “We recommend all of these strategies to combat the massive shortage of homes available for Washingtonians as soon as possible.”

The Building Association offers the following recommendations:

Accelerate the permit process

Planning departments should consider expediting new housing construction permits. Any innovations that would streamline the process, such as automated software, would help increase housing starts and completions.

Reform the project approval process

‘Not in my Backyard’ campaigns should be balanced against the community’s need to provide housing for all.

Review design standards and building codes

Design standards and building codes that go above and beyond protecting health and safety should be scaled back. Dictating the materials and appliances that must be used in the construction of housing only increases the cost of new homes, pricing out families. In some communities local design boards have jurisdiction over colors and brick size, constraints that can also cause “project hangups,” Smith said.

Janice Podsada: 425-339-3097; jpodsada@heraldnet.com; Twitter: @JanicePods.