WA homebuilding is slowing down, unlikely to keep up with growing need

Despite a building boom in recent years, Washington is not on track to add enough housing to meet residents’ needs over the next two decades, a red flag for the state’s affordability crisis. 

Developers across the state built an average of about 46,500 homes per year from 2020 through 2023, roughly in line with the number of new homes needed every year for the next 20 years under state projections.

But that level of construction was the highest point in the decade and a half since the 2008 financial crisis and is not likely to continue, according to a new state report. More recently, high interest rates and construction costs have slowed the pipeline of housing projects.

The report is the latest to highlight the significant challenge ahead as state officials project Washington will need more than 1 million new homes of varying income levels in the next two decades.

Although overall housing development, including apartments and single-family homes, soared between 2020 and 2023, that level of homebuilding is “very not representative of what’s happened since 2007,” said Tedd Kelleher, housing policy director at the Department of Commerce, which published the report.

As in the rest of the country, housing development in Washington cratered after the 2008 Great Recession, then slowly returned to needed levels in 2021 and has since come “crashing back down” with the rise in interest rates, Kelleher said.

Applications for permits have dropped statewide, an early sign that the production of homes of all price points will dip in the coming years.

The drop could worsen the scarcity of affordable homes. While overall housing production soared in recent years, construction of affordable housing has not kept pace with the need.

For people with the lowest incomes, the gap is stark: Statewide, there are only 34 subsidized affordable homes for every 100 renter households making half of the median family income in their area or less, about $67,000 for a household in King County, according to the report. 

In other words: For every subsidized affordable unit in the state, there are three low-income households that need that home.

No county in Washington has enough homes for people with low incomes, according to the report. 

Rural areas like Garfield, Whitman, Mason and Ferry counties fared worst. King County recorded the highest number of subsidized homes — nearly 66,000 — yet there are still only 41 subsidized units for every 100 households that need them.

Affordable homes typically require substantial government funding to subsidize the lower rents. State and local officials have dedicated historic levels of funding to construction of affordable housing in recent years, but the cost of building those homes has soared, too.

State lawmakers have poured hundreds of millions of dollars into the Housing Trust Fund, the state’s main funding source for affordable housing, but more affordable housing projects apply for funds every year than there are funds available.

Seattle voters last year approved a $970 million housing levy, triple the amount of the prior iteration of the property tax measure. But because of rising construction costs and other factors, that levy is not expected to provide triple the number of affordable homes.

Together, the slowdown in overall housing production and the shortfall of affordable homes indicate that without more regulatory changes and more funding for affordable housing, construction in the coming years may not keep pace with the state’s projected need for 1.1 million homes by 2044. Nearly half of those homes need to be affordable to people with the lowest incomes, according to the projections released last year.

“If we reach 1.1 million units, that’s not really the point. The point is that they be affordable,” Kelleher said.

The report, produced by a state committee representing local governments, nonprofit housing developers and others, recommends that government agencies allow more state housing funds to be used to purchase existing apartment buildings, rather than construct new ones.

Recommendations also include providing more funding to preserve manufactured home communities, a source of affordable housing in some rural areas; expanding credit repair and debt mediation programs to help people buy homes; increasing financing options for affordable housing; providing more technical help for local governments planning for growth; and boosting job training and apprenticeship programs in the construction industry.