Misguided land-use regulations push middle class out of King County

Does it surprise you to know that the middle class is getting squeezed out of King County? Probably not. Latest figures from the King County Annual Growth Report show the middle class dwindling to 45.1 percent in 2004. Median wage earners are leaving Seattle and King County to qualify for homes elsewhere.

University of Washington professor Theo Eicher, the founding director of the UW's Economic Policy Research Center, helps us to understand why home prices are out of reach. His study, built on earlier work done by economists at Harvard University and the Wharton School of Business, point to the same conclusion: Seattle and Washington state's land-use regulations have increased home costs by $200,000, even taking into account inflation and demand. That's a whopping 44 percent of the total price of a $450,000 median home.

To the middle class or a working-class family, an additional $200,000 price increase actually translates into an additional $340,854.89 when you add in interest, insurance and other fees. That's an additional $13,893.78 in one-time payments today, plus $611.37 each month to the bank for interest, $250 each month in property taxes due to higher assessed home values, and other charges.

It's a total $1,147.76 each month for the privilege of living in the great Pacific Northwest.

Now imagine what an additional $340,854 over 30 years could buy the average family:

• 4.27 four-year college degrees at the UW or 12.71 two-year degrees from Seattle Central Community College; and,

• 76 gallons of gas every month for 30 years; and,

• Seven years of health insurance; and,

• A latte every week for a year; and,

• 13 Metro ACCESS bus passes; and,

• Half the cost of a fitness membership for 30 years; or,

• An extra $1.7 million dollars for retirement.

Economists call this an "opportunity cost." We have paid for our clean air, clean water, open space and protected lands with environmental regulations — and now we are beginning to understand the cost of good intentions and some of the unintended consequences.

But, we don't have enough answers yet. More research must be done before we create even more land-use regulations before we know their full financial impacts.

If we don't act soon, we know where this road will lead us. In the Bay Area, median home prices have soared to $850,000, with San Francisco leading the way as the most-regulated metropolitan city in the United States. Seattle is not far behind at No. 6. When it comes to the most-regulated states, Washington ranks No. 7 — even more restrictive than California at No. 9.

When King County passed its critical-areas ordinances in 2005, up to 65 percent of rural land was immediately compromised — stopping some working-class rural families from building their own homes. When Seattle added a $15-per-square-foot surcharge on developers to subsidize low-income housing, that 600-square-foot downtown condominium immediately became at least $9,000 more expensive. Many young, first-time homebuyers were immediately priced out.

We once again urge the Puget Sound Regional Council to more accurately account for financial impacts of land-use regulations in its review of King County's Buildable Lands Report. Other actions we encourage:

• King County's new Permit Fee Task Force should find ways to streamline permitting and reduce costs;

• Executive Ron Sims should more fully analyze the market impacts of the new proposed Comprehensive Plan regulations he recently introduced to the King County Council;

• The city and county should adjust zoning codes to allow for more housing opportunities in urban centers.

Ultimately, most of the cost of land-use regulations stems from how local governments implement Washington's Growth Management Act (GMA). We urge the state Legislature and the governor to do a full cost-benefit assessment on the impacts of the GMA. We can protect our environmental quality of life without giving up the opportunity to own a home in reasonable proximity to our job.

Let's get a grip on our costs before we end up with no middle class at all.

Russell Hokanson is the CEO of the Seattle-King County Association of Realtors. Reagan Dunn is a Metropolitan King County Council member representing District 9, encompassing Southeast King County. Samuel L. Anderson is the executive officer of the Master Builders Association of King and Snohomish Counties.