Over the past 12 months, between February 2020 and February 2021, home prices increased 21% in Spokane County. To date, median resale price sits at $325,000 and median new construction, which serves as a predictor for future resale prices, is $412,000. So, what is behind this spike?

Certainly, demand for housing is partly responsible for the increase in cost. The Spokane region tops the latest lists of highest growth destinations for people moving from more urban areas like Seattle, Portland, and California. Couple that with a study recently released by Spokane Association of Realtors (SAR), showing that the Spokane region was already underbuilt by 32,000 units before the Coronavirus pandemic, and it appears there is no end in sight to the current escalation in cost.

However, increased demand is not the only cost factor driving home prices. The cost to build a home can be broken down into three general categories: land, labor, and lumber (supplies). In each of these areas, recent trends push the cost of housing ever higher.

The cost to purchase a plot of land has roughly doubled in the past two years, with three key factors continuing to drive this rise. Chiefly, Washington State limits the amount of land that can be built on through the Growth Management Act. First adopted in 1990, the resulting Urban Growth Boundary was originally intended as a truce between development and agriculture to keep farming land costs manageable.

Over the years more and more special interests added restrictive regulation resulting in an arduous and slow-moving process to increase the amount of land available to development. Enter in the preexisting pent-up demand and the sudden increase in transfer growth and the artificially limited supply exponentially intensifies the problem.

Another key component of home building, lumber, has increased 375% between April 2020 and April 2021, according to a recent Forbes report. Here again limited supply and exponential demand combined to create a precarious situation. Due to coronavirus-related restriction and misjudged demand projections, sawmills across the country significantly decreased production. However, a strong housing market and massive influx in DIY projects by those stuck at home contributed to a stronger than anticipated demand. Similarly, a shortage of skilled labor means projects take longer and competition for workers means labor costs increase.

Lastly, local government regulation on the size of lots and restrictions on housing types means that attainable housing for median income families has significant impediments. Energy codes passed in 2018 by the Washington State Building Codes Council added an estimated $20,000-$30,000 when it went into effect February 1, 2021. Proposed impact fees for road improvement projects uniquely affect new construction, putting the cost of new homes out of reach for more and more families. In fact, for every $1000 in cost, 189 families in Spokane are priced out of the housing market.

As more and more families in our community are prevented from owning a home, our community faces an important question. How many of our friends and neighbors are we willing to look in the face and tell them they don’t deserve the opportunity to own a home because government restriction on who can live where is more important?
To find out more about this issue and what the Spokane Home Builders Association is doing, and how you can help, please contact Isaiah Paine, SHBA Government Affairs Director at 509-532-4990.