09/19/2005: "Affordable Housing: Why does it cost so much?"

Islanders are suffering a "growth crisis" and a "housing crisis" and the Bush Administration does nothing! But seriously, why does housing in the San Juan's cost so much? Here's why.

Every new tax diminishes the possibility of affordable housing. Every new regulation on land use erodes the chances for affordable housing. Strict building codes have become a major barrier to affordable housing.

Ironically, advocates for more taxes and regulation in our county are the same people who are demanding that the rest of us pay for subsidized housing by instituting a new Housing Bank tax. After creating the problem with well-intended government solutions to the growth crisis the same people are demanding we do something about the housing crisis before it's too late. It may be too late already.

We know higher taxes make it difficult for many people to live here but we keep raising them anyway. The majority of voters seem oblivious to the connection between taxes and affordable housing. Our County Commissioners continue their reckless spending forcing taxes skyward. We have a conservation tax, recreation tax, school tax, hospital tax, land bank tax, etc. Now a new Housing Bank tax is being proposed. Some argue that these taxes are essential but at some point long-time residents can't afford them. They are forced to sell out to new people who pay high prices for the property. If the Housing Bank goes forward these new people will pay even more. This inflates home prices intensifying the unaffordable housing crisis.

The "law of supply and demand" is a significant factor in higher housing costs. New regulations and "feel good" programs have helped create a situation where demand has exceeded supply. Fear of growth produced the down zoning that recently took over 15,000 potential parcels off the map. If the supply of buildable land is restricted in the face of growing demand the price will go up. The Land Bank and other programs that take buildable parcels out of the inventory and extinguish development rights on other parcels adds significantly to the price of the remaining available land. The artificial scarcity of buildable land under such programs drives up land prices and thus drives up housing prices.

The complexity of processing a permit has significantly increased the cost just to apply for one. Regulations on land that slopes or contains a wetland or is near water require engineering and environmental studies that can be very expensive. The cost of compliance and permits for designing and building septic systems have dramatically increased in the last 10 years. Water availability permits and the cost of drilling and registering a new well has increased considerably because of regulation. Many of these restrictions on new development were put in place to discourage growth. Instead these restrictions fundamentally changed who could afford to live here and who could not.

Delays and uncertainty in permitting also add to the costs for construction. Applicants are forced to pay interest on construction loans when permits are delayed. Restrictive building codes add time to construction and increase costs. Loss of contractors who can't wait for permits to be processed further compounds the problem. After years of wrangling over the Comprehensive Plan in order to streamline permitting, the process remains slow, expensive and uncertain. (Don't even think of building a guesthouse!)

Interestingly, advocates of the Housing Bank proposal are counting on favorable treatment by the County. They anticipate leniency in zoning requirements and in other areas. They need to increase density beyond what exists in order to build more homes for less money. They also know for a fact that it would cost less if they could avoid some of the more expensive studies and regulations that everyone else must pay when they build a house. The rest of us get no special treatment. That is another reason why our homes cost more.

The Housing Bank supporters think that they are only taxing new people. Here is what their literature says about that, "The best solution, in our view, is a real estate excise tax, levied on the purchaser of homes. There is some justification for this approach since it is levied on the new purchasers that are creating the inflated housing prices in the first place". (See above. Taxes are actually the root cause of that).

Tax the new people? This idea is so naïve. The proposal for a Housing Bank will be mean a new tax for every islander. It creates even more bureaucracy adding new administration and staff. The Executive Director is expected to be a paid County staff member. Other County staff and resources will necessarily be required. These are direct costs to the taxpayers.

Not only are we expected to pay the taxes required to subsidize housing we will also pick up the tab for additional property taxes on the Housing Bank land that becomes tax-exempt the day after the county purchases it. If San Juan County owns this land then those taxes will shift to existing residents.

They already anticipate more debt. According to their proposal the county commission will issue more tax-exempt bonds to pay for land purchases. With the approval of the BOCC this organization expects to "act as an agent of the government in making spending decisions". Hold on to your wallets!

Let's not forget that new residents who inhabit subsidized homes will create increased demand for county services and will not pay any property taxes, while another class of new people would be taxed just for buying property. Many of the rest of us will be thinking about selling out for a high price because our taxes outpace our income. It seems to be a vicious circle.

Now, having made housing unaffordable for many citizens, this well-intentioned group of Housing Bank advocates wants to use government, at taxpayers expense, to provide a relative handful of people with housing that is almost as affordable as it would be if the government had left things alone. Fewer taxes and less regulation are proven solutions. Let's not loose sight of that fact. A new tax is not the answer to affordable housing. Another government program is not the solution either.