Source: King County Department of Assessments
What with Seattle Mayor Ed Murray dramatically backtracking from HALA recommendations that would have allowed denser housing in many single-family zoned neighborhoods, I thought I should take a moment to elaborate on a point I made in my recent affordable housing post regarding the impossibility of making single-family detached housing affordable. “We all need to give up this fantasy that every middle class family can own a bungalow and a yard,” I insisted. And the table above helps explain why.
That’s the past 15 years of tax assessment records for my own bungalow and yard, copied and pasted from the King County Department of Assessments website. And assuming the total appraised value in the righthand column comes anywhere close to tracking the actual resale value, I’ve earned a surprisingly modest return on my “investment” over the past decade and a half: an average of only 4.29 percent a year, just twice the rate of inflation (Consumer Price Index) over the same period of time.
Thanks, Great Recession!
But that righthand column only tells half the story. The truth is, adjusted for inflation, the house itself has actually decreased in value over the past 15 years. Which makes sense. Depreciation. My house is old. It’s the value of my land that has figuratively gone through the roof.
According to King County, the land value of my 6,800 sq ft lot increased by almost 10 percent a year, from $54,000 in 2000 to $224,000 in 2014. That’s a fourfold increase—threefold even after adjusting for inflation. And unless our population growth projections are totally wrong, there’s no reason to expect Seattle land values not to continue to grow faster than the local economy as a whole.
Why? Because the supply of land in Seattle is finite. We can build more housing, but we can’t build more land. In fact, as the HALA recommendations acknowledged, to address our housing needs we really need to reduce the amount of land in Seattle restricted to 5,000-plus sq ft lot single-family detached houses. The mayor’s decision to reject these recommendations may or may not be good politics, but it’s certainly bad policy. Though either way, homeowners like me ultimately win.
If we do nothing to loosen density restrictions, then the value of my land continues to increase as demand for bungalows with yards increasingly outstrips supply. If we rezone my lot to accommodate greater density, then the value of my land probably increases even more, as it could then hold two or more $255,000 homes where it now holds just one. But either way, my land value goes up.
Of course, economics is a lot more complex than that. “Supply and demand” isn’t a law, per se; it’s more like economic shorthand. But while there are many factors that could alter demand, the supply of in-city land can never increase.
“Early growth skeptics would have found it hard to imagine the era of the $1 million bungalow,” Lesser Seattle booster Knute Berger recently bemoaned on Crosscut. But I don’t know why—it was inevitable. For you can build as many duplexes, triplexes, apartments, and condos as you want, and the iconic Seattle bungalow would still remain in short supply.
I dwell on this point to emphasize that when we talk about affordable housing, we’re not really talking about making houses more affordable—at least not those of the single-family detached variety. We’re mostly not even talking about affordable homeownership, what with renters bearing the brunt of the affordability crisis. And yet the pundits and policymakers driving this debate—as well as the reliably voting constituents most politicians tend to answer to—are disproportionately single-family detached homeowners like me.
Which I think tends to color the debate with a glaring lack of perspective.
Look, I love both my bungalow and my yard. And I’m very happy to have been born early enough to be able to afford it on less than a six-figure income. But unless she strikes it rich, I know full well that the only way my daughter is going to own a house like the one she grew up in is if I die in it. So if I really care about keeping Seattle affordable for my daughter’s generation then I know we’re going to have to radically change our expectations about what housing will look like for Seattle’s future middle class.
Seattle needs to grow denser and taller. And if we want to adequately address affordability, we need to grow denser and taller throughout the city. That doesn’t mean eliminating zoning. And it doesn’t mean eliminating single-family zoned neighborhoods entirely. But it does mean making smarter use of the limited land we have as we grow into a city that lacks the space to house the majority of residents in single-family detached homes. All options should be on the table.
So fight to preserve these neighborhoods if you want (politics is an adversarial process, after all), but understand that you are ultimately fighting to preserve these neighborhoods for the relatively well off. And please don’t pretend that there is anything we can do to keep the iconic Seattle bungalow affordable.
[Cross-posted to Civic Skunkworks.]
Need better mass transit
I do agree with up zoning some areas, but when someone’s property taxes or land value taxes increase and they’re forced to sell their homes to developers that will create studio apartments and charge just as much for them as your mortgage that’s not progressive.
I disagree with the Rob Johnson land value tax that will force fixed incomes and the elderly out of their homes. Not to mention people who sacraficed a lot of their income to buy a house in Seattle.The better way to do that is to up zone and implement a land value tax that is only applicable after the first sale.
Then instead of developers waiting for people to be taxed into selling their American Dream of home ownership, they have the chance to make a choice of what’s best for their kids and not have to choose between uprooting their families so that developers can overcharge for studio apartments.
Families matter still and I’m sure the developers would love everywhere to be up zoned and a land value taxed then assessed to make their payments even more unaffordable. But we need to watch out when we are claiming that people who make barely 6 figures are too well off so our plan is to profit the millionaire and billionaire developers instead.
A builder just paid $600,000 for the 22,000 sq. ft. lot next door to my burrow. He demolished the 1950’s house on it, and is subdividing it into three building lots of about 7,000 sq. ft. each. That means he’s paying $200,000 per lot, not including the cost of grading and landscaping, installing water and sewer lines, and laying driveways and sidewalks. With all that stuff, his land cost exclusive of structures probably will be around $250,000 to $275,000 per lot.
@3 Rob Johnson’s land value tax is unconstitutional. Clear violation of the uniformity clause.
The solution for high land costs is to have the major employers like Boeing leave the state. No jobs, no one wants to buy the land, the cost goes down.
1) That appraisal has very little to do with supply and demand. It’s pulled out of some bureaucrat’s ass*, and only vaguely reflects what you would get if you sold it.
2) Look at the first and second columns in 2002 and 2003. The assessor changed his formula to keep the total assessment similar, but change the weighting given to land and improvements values.
So that change in formula skews your analysis to be completely meaningless, even if you do believe the appraisal reflects true value.
You could maybe look at the price change after the formula was modified (say 2004-2015 change), but comparing data before the formula change to your current appraisal to state “Wow! look how much my land is gaining in value!!” is nonsense. They aren’t comparable.
* Not that I have anything against bureaucrats. Or asses.
Disagree. Seattle needs to grow livably.. See Chris Alexander’s “A Pattern Language” for the details.
Do we really want to be Hong Kong?
Seattle has always been, and perched on the edge of the continent near an international border, will probably always be a boom town, a fast buck town.
Amazon, started by a tax averse, libertarian ideologue attests to that.
During the boom cycles, people flood in, and when things go bust flood back out. Denser arrangements are suitable for that and should be supported. Vancouver BC shows us the way!
But for the rest of us hanger ons and die hards we want a livable town to raise our kids with sufficient open space and the crazy towers (that drive some people to jump off bridges) a comfortable distance away. When the kids grow up and want to chase a buck, that will beckon to them.
And yep, we’ll find a way to pay for it. It’s only the cost of “living”..
My parents were avid skiers. Years ago, as they were nearing retirement, they became interested in relocating to the mountains. Among the places they considered was a little town in the North Cascdes called Mazama. At about that time some developers had launched a concept to build a four season resort near Mazama called Early Winters. One day my Mom called and asked me if I could help her with a survey she had.to fill out from the develolment company (I have an educational and brief professional background in Environmental Planning and Resource Mgt). The survey consisted of questions about proposed types of developments for the resort and associated communities. There was quite a lot of concern that the proposed resort might ruin environmental quality in the area. My parents were shocked, however, to learn that my general advice was to favor concentrated high rise development over dispersed detached dwellings. But I pointed out to them that mountain goats and steelhead dont really care about aesthetics. They do care about miles of pavement, traffic, surface runoff, and driveway floodlights. Minimizing the development footprint is almost always better for environmental quality, even if people find it unattractive.
By stubbornly clinging to a low density pattern of residential development, the people of Puget Sound will ultimately destroy the things that attract them to the area.
@9, good comments about development options on greenfield sites. But Seattle’s not one of those; it’s already built up, and the number of vacant and buildable lots in any neighborhood can be counted on the fingers of one hand. Yes, it’s lamentable that those planners and developers really screwed it up in the first half of the last century, but they did and it’s over.
Seattle is what it is, and many people seem to like all those SF neighborhoods, just as we like the Public Market and the Pioneer Square historic district. An earlier generation of urbanists sought to demolish those places too, in the name of density and modernism. But citizens, NIMBYs we would call them today, said no. We want to keep those icons. Seattle can grow in lots of other places, and lots of other ways, without destroying what makes the city special. And those values are at the root of the opposition to the HALA recommendations for SF zoning.
@5 If it was placed on top of the already existing property tax and set at a flat rate it would have a chance of being constitutional.
@11 No it would not (at least not in any reasonable reading of the constitution). The Constitution is clear that taxes must be uniform on the same class of property, and that all “real estate” comprises a single class. And real estate is a legal term that describes land plus structures and other improvements. The constitution then goes on to make some specific exceptions for certain types of land.
If you were to tax just land, you would essentially be taxing improved real estate at a lower rate than unimproved, violating the uniformity clause. Not constitutional.
The proposal by the HALA was really quite modest and nothing more radical than what is allowed in the single family zones in Vancouver and Portland. If anything the changes would likely lead to the preservation of older homes because an owner could add a backyard cottage or split an existing home into a duplex or triplex. Mind you this is the sort of thing an individual homeowner could do with a house they own rather than being the sort of thing only ‘millionaire and billionaire’ developers have the capital for. Furthermore it was about allowing rowhouses which Seattle only sort of allows in multi family zones under condo or apartment rules rather than as fee simple ownership in single family zones.
To those decrying the destruction of single family neighborhoods, blocking changes like the HALA reccomendations (or fighting rezoning more of Seattle for multi family and mixed use development) just means you will see more tear downs where the land is subdivided where permitted and the replacement structures are built out to the maximum building envelope. Note that in a single family neighborhood adding a curb cut for off-street parking takes anywhere from 1 to 2 on-street parking spaces per curb cut depending on the width of the driveway.
@10
Without the HALA recommendations for single family zoning… the only thing that happens in single family zones, is that decaying pre-WWII “Value in land!” bungalows continue to get torn down and replaced with 3-story, 3,000 sqft single family behemoths, one by one.
Those monster homes are quite literally the ONLY profitable thing a developer can build under current SFH rules in Seattle.
Maintaining the rules this way is not “keeping those icons” or preserving “what makes Seattle special.” It turns Seattle, inevitably, into a city of mansions. Broadmoor and Washington Park writ large.
The Seattle I remember is one where anyone could buy a home for a reasonable amount of money. Where the working class and artists could live and work. That is the true “character” of Seattle that is being lost.
Lack @14, you subscribe to that real estate notion from the middle of the last century, that SF homes “wear out” and have to be replaced every 2 – 3 generations. I actually had a real estate attorney explain it to me like that 45 years ago, to justify an upzone he was working for a client.
Yes, some houses get torn down and replaced by McMansions, but the HALA upzone would multiply that by several fold, with the mansion-sized blocks containing multiple unaffordable units. Replacing $400K SF homes with $600K townhouses does nothing for affordability, or for racial equity.
I think you ought to get out in the neighborhoods more. What I see are lots of homeowners taking pride in their houses and fixing them up, not letting them become candidates for teardown.
@15
So 400k is affordable now? LOL.
The well-kept 400k single family home is all but extinct in Seattle. The handful that still exist are not going to get torn down any time soon just because duplexes become legal. It just wouldn’t make financial sense, unless you were building something much larger than a duplex. Under HALA’s recommendations, the most likely thing that would happen to your theoretical 900sqft, 400k home on a 5000sqft lot in a single family zone, is that it might get a second bungalow built in the back yard.
But the more common redevelopment case – a basket-case 300k single family home, neglected by a slumlord for a decade, and allowed to decline into “value in land” tear-down condition? Yes. That’ll get torn down and replaced by a duplex. But under todays rules, that’ll get torn down and replaced by a McMansion anyway.
Reality check here: The vast majority of homes priced at 400k and below in Seattle are condominium apartments. 400k single family homes are so uncommon in comparison to as be virtually non-existent.
The average new-construction Condo unit in Seattle sells in the mid-400’s, and is around 900 sqft.
The average new-construction Townhouse in Seattle sells for around 600k, and is around 1500 sqft.
The average Single Family Home sold in Seattle, new construction or pre-existing, goes for around 1.0 Million, and is over 2500 sqft.
Which one of these construction forms do you want to encourage with our zoning?
I thought this was obvious, but I do NOT subscribe to the notion that a single family home naturally “wears out,” nor would any thinking person. I do subscribe to the notion that a NEGLECTED single family home (usually neglected by a landlord, not an owner-occupier) can easily reach the condition where it’s not worth the money to rehab it.
But I guess if I take the same tack with you, you seem to subscribe to the belief that houses are magically self-maintaining, and that no one would ever tear down a home in any condition, except to build evil townhouses.
Spend some time in rental-heavy neighborhoods. I think you forget that the majority of Seattlites are renters, not homeowners. Most single family homes in Seattle are not owner-occupied… because most renters can’t afford to buy a million dollar house.
Lack @16, re your: “Spend some time in rental-heavy neighborhoods. I think you forget that the majority of Seattlites are renters, not homeowners. Most single family homes in Seattle are not owner-occupied… because most renters can’t afford to buy a million dollar house.”
But the HALA proposal applied throughout the city, not just in “rental-heavy neighborhoods.” Yes, a slight majority of Seattle dwellings are rented, but that’s all types of housing. For SF houses, the data are much different, with a substantial majority being owner-occupied.
@14 — Yes, some houses get torn down and replaced by McMansions, but the HALA upzone would multiply that by several fold, with the mansion-sized blocks containing multiple unaffordable units. Replacing $400K SF homes with $600K townhouses does nothing for affordability, or for racial equity.
Why would you tear down a $400K house to put up a $600K townhouse? That is nuts. That is like tearing down a three story building to put up a four story one. It just doesn’t happen, unless the value of that little piece of land is ridiculously valuable.
Of course the current zoning encourages exactly that. The current zoning is so restrictive that only a handful of areas are allowed to increase density. Not increase height or the size of the structure — just density. This means that you can’t convert a big house in Wallingford to an apartment, no matter what the cost of rent is. So, for those handful of areas (which make up a tiny part of the city) the value of the land is huge. They are doing the equivalent of tearing down three story buildings and putting up four story buildings in those areas, because all of the demand is being squeezed into a handful of areas.
So that is one way in which the changes would reduce the amount of destruction. The density (backyard cottages, additions and conversions) would be spread to more areas and done in ways that are inherently cheaper (such as backyard cottages, additions and conversions).
But there is another reason why SFH owners should embrace density. Consider what happens if someone wants a huge new house. This wealthy person will either buy a house and tear it down, or buy a house and make additions. The former often just makes sense. If you want a huge house, chances are you want a huge kitchen, a huge bedroom, etc. Chances are you don’t want a house with 8 small bedrooms (the original four plus 4 you added). You don’t want your house to be open — not compartmentalized. No one builds a backyard cottage because they want more room.
But if you are renting, the opposite is true. So, back to the $400K house. If you are a landlord, what do you do — throw it away and build a new duplex? Of course not. The house itself — as a detached house — can rent for a lot. Put in another house next to it. Make an addition. Or if the house is big, just convert it. All of these make sense for renting because renters *do* like compartmentalized places. They like having divisions between homes.
Of course, these all go together. If someone adds a backyard bungalow, then it is less likely to be torn down. The house and property are simply worth more. The rich guy just has to settle. Basement apartments, backyard cottages and conversions are all very cheap. It makes financial sense to do those, even when rent it low. This puts downward pressure on rents, and makes the idea of replacing a big house with a similarly sized apartment silly. Yes, maybe you can get a little more (because you have a few more units) but if the market isn’t that hot for that land (and it wouldn’t be, if not for the restrictions) then it just isn’t worth it.
Folks have made the case that the HALA changes would result in more destruction, but it is the opposite. The current rules are bad for renters and bad for people who want to see houses preserved. HALA strikes an excellent balance between the two (it does not allow tall buildings in most of the city) and would be good for both sides.
Dim memories of compound interest charts recall to me modest interest or growth rate produces doubling in eight years. So a house for 200k in say, 1995 would be 400k by 2003. And 800k by 2011. Etc. So how is Goldy increase in land value out of line, even if my numbers are found slightly off, someone lookin at you rabbit, tell us what is his overall average land appreciation compound growth rate per annum?…….6, 7 or 8%?? More? /less?