North Idaho Slow Growth
A Critique of the “Housing Availability Study”, Part I
A group of civic leaders have recently released a Housing Availability and Affordability Study for Kootenai County. Predictably, it advises regional governments to facilitate high density development in order to reign in sky-rocketing home prices. Its advice, however, is based on false assumptions and a desire to disguise the hidden agenda of local investors. The fact is, the current housing mania is unstable, unsustainable and does not in any way resemble a normal or healthy housing market. Simplistic laws of supply and demand are not adequate to explain the situation we are in or justify dramatic changes in housing policies.
The CdAEDC report provides many useful facts, about housing statistics in Kootenai. The problem is not that it is uninformative, but that it is not frank. Like all documents that advocate for Smart Growth, it fails to make clear distinctions between “housing prices” (i.e. rents), and “home prices” (i.e. ownership), and makes no mention of the legitimate concerns or preferences of existing residents. In short, the study recommends densifying in order to accommodate more high density investment properties, but disguises its intentions.
The goal of this critique of the study is twofold. First, to challenge the assumption that increasing the housing supply in Kootenai county, will have any significant influence on home prices. Second, to frankly discuss the outsized influence of large investors in housing policy and make it clear that elected leaders in Kootenai County can serve the interests of their constituents, or of investors, but not both. We will begin by identifying the causes of skyrocketing home prices, and dividing them into categories.
A. The following are nation-wide economic and political factors contributing to the housing frenzy. Most are irrational, irregular, and unsustainable.
- Low interest rates and high inflation have fueled enormous demand for all forms of real-estate.
- Covid moratorium on foreclosures has led to complicated refinancing schemes, kept foreclosed homes off the market, and incentivized “The Fed” to keep home prices high.
- Urban chaos, and badly governed states have caused home-seeker flight to rural areas.
- The chaotic market has made existing home-owners hesitant to sell, further reducing inventory.
The combination of poor government in coastal cities and states, vaccination mandates, urban riots, high inflation, low interest rates, and has fueled a frantic, real-estate bubble that cannot possibly continue. The housing market is so crazy, and the social, political, and economic situations causing it are so irregular, that it is unwise to make long term housing policy changes under current conditions. It is impossible to know how long these intolerable conditions will continue, or what will follow, and Kootenai leaders would do better to postpone any major changes to housing policy until they abate.
B. The following factors contributing to housing demand in Kootenai County are likely long term.
- Many out-of-state buyers are house-rich, and not sensitive to high home prices.
- Kootenai will remain an attractive place for retirees, second home buyers, and individual investors. These buyers often prefer detached homes or townhouses on smaller lots.
- As more people are able to tele-commute or work at home, the trend of movement from urban to rural communities will likely continue. Working families moving to rural communities usually seek single family homes with good sized yards.
- Institutional investors have zeroed in on North Idaho as an attractive investment opportunity. Investment firms prefer “multi-family” or “mixed-use” rental complexes.
Upward pressure on Kootenai home prices from out-of-state buyers will likely continue, but it is important to note that there are at least three completely different types of properties sought by different buyers. Land that is zoned for multi-family corporate rentals does nothing to relieve housing pressure on buyers seeking single family homes.
C. The following factors increase pressures on city governments to develop high density investment properties in preference to owner occupied, suburban homes.
In the last two years, the majority of housing units developed in the area have been multi-family rentals in spite of over-whelming demand for single family homes. Why is this?
- Low interest rates have shifted enormous amounts of investment capital into rental properties because in the current market, rental income is more profitable than mortgages.
- Subsidies for “Low Income Housing” that is paid directly to rental property owners have greatly increased in recent months, causing a massive push for more LIHTC development .
- Newly built apartment complexes are invariably managed by large firms (i.e. Rudeen, Kiemle Hapgood, etc.) who manage thousands of other units and collude to keep rents high. In other words, area rents are safely in the hands of a highly profitable de facto rental cartel.
- Low income families who are priced out of home ownership in the area are forced into subsidized rentals that further enrich already wealthy investors. Unaffordable housing is highly profitable for those who are paid by government to provide “affordable housing.”
All these distortions of the housing market explicitly favor investors over home buyers, reduce availability of single family homes, and raise, rather than lower the cost of housing. Developers, property owners, and financial institutions all favor corporate-managed apartments over single family homes. This preference for rental investments is the underlying cause of a great deal of recent activity in the housing market, and corporate investors are behind the nationwide push for high densities and Smart Growth. And in spite of feigned concern for the plight of “low income families”, the push for “affordable housing” is not intended to reduce the cost of owner-occupied homes, it is to provide “investment opportunities” for wealthy clients. Generous government subsidies for “low income housing” make this problem worse, and feed into a corrupt system that increases the payout to wealthy property owners every time they raise rents.
D. Additional factors that drive up the cost of housing that are never discussed.
There are several other factors that in a normal market, would also contribute to high home prices, but they are complicated and cannot be easily addressed in the short term. Land use policy and legislation has an enormous impact on the availability of land, and current laws have been written to favor large, wealthy, land owners. These laws and subsidies fuel land scarcity and justify high home costs. Representatives that seek to lower housing costs should consider legislation that would address the following distortions.
- New home building monopolized by large developers: Most undeveloped parcels in Kootenai county are controlled by large, corporate developers who exert enormous control over all aspects of tract home development. In previous decades, when undeveloped land was rezoned and platted, owners sold undeveloped lots, rather than monopolizing development of entire neighborhoods. In the long term, changing the terms on which large parcels can be subdivided and breaking up development monopolies would increase the quality of new homes and provide a much wider variety of options for new home buyers.
- Artificial scarcity of land: There is an artificial scarcity of land throughout the west due to tax laws and government subsidies that favor wealthy land-holding corporations, including billionaire investors and foreign countries. By concentrating ownership of land in few hands, the abundance of land in rural areas is transformed into a shortage, and land prices are raised beyond the means of ordinary people. The problem of land trusts must be addressed.
The "Housing Availability" survey is a quasi-official report, funded by the “investor” class that attempts to make an objective case that facilitating high density development is the best path forward, in spite of resident preferences. But its review of factors influencing housing prices is incomplete; it avoids discussing issues of investor vs. home-owner preferences; and its central claim that increasing zoning densities would bring down prices is false. As I have proven elsewhere, densification drives home prices up, not down, and unless cities make specific provisions to favor owner-occupancy, all “multi-family” properties built in the area will end up in the hands of investors
The problems with the chaotic housing market and skyrocketing home prices are painful and local renters are bearing the brunt of the problem. But the housing market cannot possibly stablize until some of the nationwide economic conditions driving up home are resolved, and there is so much uncertainty about how they will be resolved it would be foolish for civil leaders to make significant changes at this time.
Sometimes not making things worse is the best way to make them better. This is one of those times.
JR says (Jan 27, 2022):
Oregon here. I believe we have been the incubator for this satanic garbage since the early 70's. Everything is a complete lie as you have written about. Designed to put money in everybody's pocket, but the citizen. And grow more government and control of citizens. |Also designed to break up communities and cohesiveness. These scumbags need to be kicked to the curb. Follow the money somebody getting dough in their pockets. About to be run out of our second home in thirty years. You should contact Owen Benjamin he lives in the Sandpoint area and is on Gab.