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Anchorage doesn't have enough homes to meet demand

Devin Kelly
Bob Hallinen

Climbing the staircase to the second floor of her family's South Anchorage duplex, Ashley Hood glanced over at the toys scattered across the living room.

"You see why we need to move?" she asked. 

The Anchorage hairstylist and her husband, Shawn, an aircraft mechanic, moved into the three-bedroom, townhouse-style unit in 2011, several months after the birth of their first child. It was a good fit for the family of three and a calico cat named Bugsy.

Now Dylan is 3, an observant toddler who repeats phrases he overhears. Last July, a second child, Ethan, was born.

"This has been a great first-time-buyer home," Hood, 28, said in a recent interview, balancing Ethan on her lap, "but we've outgrown it."

The couple earns about $80,000 a year. Every day, Hood checks the Trulia app on her phone for homes for sale in their price range.

The results are frustrating.

"There's just, like, nothing," she said. "It seems like people are holding on to what you want."

The Hoods' situation reflects the increasingly visible problem of "housing gridlock" in Anchorage. People at all income levels can't afford to move up in the market, so the buyers below them can't move up, either.

Not enough houses and apartments are being built to meet current and future demand, analysts say. Housing costs are rising, forcing families to make tough financial decisions.

Local business leaders are warning that the trend threatens to hurt the local economy. When it comes to housing, Anchorage is the 20th most expensive city in the United States, according to a recent national cost-of-living survey. Businesses large and small say the cost of housing is making it more difficult to hire and keep workers.

A growing pool of data compiled by United Way of Anchorage consultants hints at the scope of the problem. Some examples:

• An Anchorage household must earn $100,000 a year to afford an average-priced home, $65,000 a year to afford a condo and $50,000 a year to rent a two-bedroom apartment.

• According to the U.S. Department of Housing and Urban Development, "affordable" is defined as paying 30 percent or less of household income for housing. About half of Anchorage renters pay 30 percent of their income in housing. A fifth of Anchorage renters pay 50 percent or more.

• Workers in 21 of the 25 most common jobs in Anchorage cannot afford a two-bedroom apartment, and workers in 18 of these jobs cannot afford a one-bedroom rental apartment.

• The average sale price for a home in Anchorage in 2013 was $346,977, a 7.8 percent increase from 2011, according to data from the Multiple Listing Service. Between 2008 and 2012, the median cost of an Anchorage rental increased 13.2 percent.

• The housing stock is deteriorating. Ten percent of Anchorage's rental housing stock was built before 1960. More than half of it was built before 1980.

• Construction of new housing, particularly multi-family, has slowed overall since 2007 and currently falls well below the projected need. In 2013, for example, analysts projected a need for 418 multi-family units; just 72 were built.

Exactly how Anchorage reached the point of housing gridlock is complex and open to debate. But there is growing recognition from analysts that the problem exists, and it's poised to get worse.

One key study, the 2012 Anchorage Housing Market Analysis, projected that the Anchorage Bowl will need about 18,000 new housing units by 2030. The analysis observed that without more dense construction and increased rates of redevelopment, the Anchorage Bowl will meet less than half that demand.

Based on the projections, the Anchorage Bowl needs to gain about 909 new units of housing per year. For five straight years, Anchorage has fallen well short of that mark, building fewer than 350 new housing units a year. A surplus of land exists in Chugiak and Eagle River but the 2012 report concluded that neither area is an ideal location to meet the Bowl's needs for urban multi-family development.

The last time per-capita housing production was this low, analysts say, was in the 1980s, on the tail end of a recession and exodus that reshaped the state. In the wake of a crash in oil prices and the collapse of the housing market, the Anchorage population plunged from 248,000 people in 1985 to about 219,000 people in 1988. The vacancy rate vaulted to 25 percent.

Nearly three decades later, the situation is reversed. The economy is humming, interest rates are low and the vacancy rate, 3.3 percent in 2013, is below the healthy average. The city has more than made up the lost population of the 1980s, with more than 301,000 people and counting.

But there has been relatively little building activity in recent years, particularly among private developers and in multi-family rental units.

DEVELOPING IN ANCHORAGE

In the last six years, Anchorage's private developers pulled back on housing construction. Only five private developers built more than 100 units of housing in Anchorage between 2007 and 2013. Most of those units were pre-sold, an indication of high demand.

The construction of new multi-family rental developments has been chiefly taken on by the public sector and not-for-profit developers, with the help of government programs and subsidies. Public money, however, will not be enough to meet the production demands of the future, and greater activity among private developers will be critical, analysts say.

But much of the easy-to-develop land in the Bowl is gone. And developers describe the building and permitting process in Anchorage as burdensome, time-consuming and expensive.

"There's so many barriers," Andre Spinelli of Spinell Homes, a member of the Anchorage Neighborhood Development Commission, said in a January interview. "Too many to list."

Cost, which increases the longer a project lasts, has been identified as one of the most fundamental obstacles. According to United Way, builders and developers currently confront, for various reasons, a 25 percent to 50 percent gap between the cost of building multi-family rental housing and what the majority of Anchorage renters can afford.

Regulators say the municipality is already adopting changes to address issues of expense and density, pointing to the sweeping rewrite of the Anchorage land use code that took effect on Jan. 1. The rules include a new zoning category meant for denser projects, and ways to allow developers to reduce the number of required parking spaces, often a big cost driver in multi-family developments.

"Our city is going to become more urban but that's a sensitive process," said Jerry Weaver, city planning director, in a recent interview.

He said the planning division has been working to talk more with developers before a project starts, and is examining ways to introduce tax abatement tools to ease high construction costs.

Meanwhile, in Midtown -- an area viewed as one of the hot spots for future growth, along with Spenard and Fairview -- an early test for the new code has cropped up. Weidner Apartment Homes, one of the city's largest private owners of rental properties, wants to add more than 250 units and some commercial space to an existing apartment complex under the new regulations.

The project is being closely watched as something of a litmus test for how denser development will play out.

But within the development, social services and financial communities, there is a growing sense that much more needs to be done to jump-start production. It's led to the launch of a campaign, with a name meant to catch the attention of policymakers: Housing Anchorage.

HOUSING ANCHORAGE

An awareness of the critical need to kick-start housing production dates back to 2009, when Mayor Dan Sullivan convened a "kitchen Cabinet," or task force, to address homelessness. A series of recommendations followed, as well as a striking new understanding about the severity of Anchorage's housing shortage.

"We basically said, 'We cannot truly make progress on homelessness if we don't address this underlying insufficient stock and unaffordability,' " said United Way President Michele Brown, a task force participant, "because there is no place for people to go."

Four years and various reports and work groups later, the rising sense of urgency has fostered a new coalition that involves public and private developers, lenders, builders and community and government organizations and officials.

The coalition, which calls itself Housing Anchorage, is led by United Way, Cook Inlet Housing Authority, the Rasmuson Foundation, the Anchorage Community Development Corp. and the Alaska Housing Finance Corp. A $250,000 grant from the Rasmuson Foundation is underwriting the coalition's activities, which include the coordination of team members, the development of outreach materials, and research, said Jordan Marshall, the foundation's external affairs manager.

In coming months, the coalition plans to convene work groups and hold public community discussions. The chief goals: Find ways to boost construction of all types of housing, especially multi-family and work force housing, and remove barriers to development, through financial incentives or regulatory changes.

Much discussion on housing production has swirled in recent years. But Brown, of United Way, said the Housing Anchorage campaign is intended to break down the regulatory, policy and infrastructure challenges more systematically than ever before.

"We're not here because we have solutions," Brown said recently. "We need to have a process by which we have a very thoughtful, data-driven, rigorous community discussion on these key issues."

A PRICE TO PAY

The call for comprehensive action comes amid mounting concern that the housing shortage is hurting the city's economy.

Anchorage is already a pricey city -- the 23rd most expensive in the U.S. overall, according to the 2013 cost-of-living index published by the Council for Community and Economic Research, which surveyed about 300 cities nationwide.

In the housing category, Anchorage ranks 20th, 55 percent more expensive than the national average, Bill Popp, director of the Anchorage Economic Development Corp. pointed out at a recent panel.

"That's a real headwind for attracting new investment in our city," Popp said, noting that the city's housing placement in the survey is an all-time high.

In a recent survey conducted by AEDC, nearly 60 percent of employers thought the cost of housing in Anchorage had become a detriment to hiring or retaining workers, a particular concern for members of the finance industry.

"When you do get so tight in an economy that cannot facilitate growth and employment, you are at a point you cause inflation," said Joseph Beedle, president and CEO of Northrim Bank, which supports the goals of Housing Anchorage. "You cause challenges for business to grow."

It ties back into the effect of families feeling the pinch. Over the last several years, a rising number of families have reported going without at least one basic need a month, Brown said. Between 2008 and 2012, rental costs increased 13.2 percent, while the median household income of renters increased 4.7 percent. And spending more on housing means spending less on food, health care and other goods and services, as a 2012 housing task force report pointed out.

Hood, the South Anchorage resident, said she looked recently at listings and spotted a house that interested her. A day later, it was off the market.

That house was probably more than she and her husband could afford, Hood said. "But that just goes to show," she said, "we'll probably buy a house that's more than we can afford."

We'd like to hear about your experiences with housing in Anchorage. Share your stories with reporter Devin Kelly at dkelly@adn.com

 


By DEVIN KELLY
dkelly@adn.com