In Anchorage, many of us have experienced difficulty finding quality housing within our budgets, or else we know someone who has. To afford rent for the average two-bedroom apartment here, a household would need to earn more than $50,000 annually. And the most common occupations in Anchorage (retail sales, office clerks and service industry positions) often earn much less than that.
Anchorage is currently stuck in a "housing gridlock" that is detrimental to our economic vitality. People living in lower-end rentals can't afford to move up and free those units for others. The families who have outgrown their two-bedroom apartment can't afford to move up to a single-family home.
Northrim Bank finances approximately 70 percent of Anchorage's current residential construction, so we see first-hand some of the challenges. We receive phone calls from companies hoping to grow and relocate employees to Anchorage and can't find available housing. We see developers who can't operate efficiently due to our permitting bureaucracy, builders who are out of work because of construction delays and appraisers who are losing business because development isn't happening.
While the housing gridlock problem is complex, there are a few ways to help ease the shortage and allow our economy to grow:
1. Focus on land use and redevelopment.
Since 1998, Anchorage has seen a 30-40 percent decline in the amount of available residential land, according to a 2012 housing market analysis conducted by the McDowell Group. Because the city is bordered by mountains, ocean, Joint Base Elmendorf-Richardson and Chugach State Park, we are running out of places to expand. But the McDowell Group forecasts a need for 18,200 new homes built over the next 20 years to meet projected population growth. Without increasing density or redeveloping land, Anchorage will lack available land for 8,900 of these units.
"Density" doesn't need to be a dirty word -- gone are the days of the eyesore site condo developments. Planned higher-density neighborhoods can offer all of the privacy and charm of their more spread-out counterparts. Current zoning regulations generally do not allow single-family lots to be smaller than 6,000 square feet. Increasing the allowable density of redevelopment is one of the key ways the municipality can help overcome the land shortage.
2. Generate additional capital and incentives for development of multi-family rentals through tax credits.
One of the best and most efficient ways to supply needed housing is through the development of multifamily rentals. But for most local developers, these types of developments are simply not financially feasible in today's market. They are much more difficult to finance because of the larger down payment and reserves requirement to offset the higher risk of default -- developers are relying on rental income from, say, 30 different households that in turn are dependent on a healthy economy. Moreover, there is a financial gap, typically ranging from 25 to 50 percent, between costs of development and rental income available to repay long-term debt.
3. Cut through the red tape for developers.
Residential builders are having a difficult time obtaining needed building permits from the municipality. A single point of contact at the municipality to see projects through from beginning to end is one way to help. Overall, a streamlining of the permitting process is necessary to make development projects attractive to investors and builders. If Anchorage does nothing, housing costs may increase faster than they otherwise would, and Anchorage and its business may see stunted growth.
We've identified some measures that will go a long way in easing our housing gridlock, but Anchorage's business, government and agencies must first come together and recognize that a lack of affordable housing affects all of us.
High housing costs makes it more difficult to attract a quality workforce and it decreases the amount of disposable income that families would otherwise spend on entertainment, goods, health care and food to support local businesses.
Joe Beedle is president and CEO of Northrim Bank.
By JOE BEEDLE