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Good going so far, but what’s ahead? Guest Column
By Gary Franklin
So far, 2014 has been a busy year for real estate sales. We’ve doubled the number of transactions for both homes and vacant land over the same time period last year.
We’ve seen the average median price of homes sold on San Juan Island rise from $399,000 during the first half of 2013 to $424,000 for the first half of 2014 and our inventory of homes in many price ranges is dwindling.
Demand is rising and supply is falling. One might expect a “building boom” for the islands, in order to keep up with the demand.
But challenges to providing more supply of island housing are many. Buffer setbacks, zoning restrictions, permitting fees, ferried-in material costs are the big ones. Without increasing supply, prices can continue upward, passing the affordable mark.
When interest rates rise sometime next year, even fewer buyers will be able to afford an island home. Each 1 percent interest rate increase reduces a home’s affordability by 10 percent (If you qualify for a $300,000 home at 4 percent, you’ll only qualify for a $270,000 home at 5 percent).
Today, about a third of us are year-round islanders. But a lack of affordable homes and rentals will decrease that number. There soon may come a time for community intervention.
“Higher housing costs and displaced local residents… should we pay attention?”
When the supply of housing can’t keep up with the demand for it, because of external factors, it’s called a “housing market failure”. If it happens here, the result will be higher home prices, a lack of affordable housing (including rentals) and ultimately fewer businesses and employees to attract tourists.
What kind of external pressures might do this?
Obvious ones include second-home demand by buyers from elsewhere, growth management regulation, land-use and zoning regulations, and the fact that we’re surrounded by water. The inability of those seeking housing to shift to another community – meaning, off island- affects housing prices. When home buyers’ choices are restricted to an island, higher prices can be expected.
“We can’t have our firemen living in Anacortes and commuting in. It won’t work.”
Growth management, zoning and land-use regulations also limit the housing supply and result in increased housing costs. Second-home buyers from other economies bid up home prices and ultimately price locals out of the housing market. So, while we’re grateful to be busy in such a paradise, we’re also looking ahead.
If we recognize that housing affordability is important; that is if keeping our service community intact, with firemen, teachers, store owners and their employees, waitresses, barbers, construction workers and so many others, we may soon consider intervention strategies modeled from other communities under similar circumstances, such as Martha’s Vineyard.
Some of these strategies include; understanding housing issues; articulating a vision for the community; developing an infrastructure to support affordable housing (including rentals); creating multiple paths to provide housing; and changing land use and zoning regulations to support affordable housing.
But it all starts with awareness.
Keep living the dream as an islander and let others know you’re grateful to have them here, doing what they do. That’s the Island Friendly Spirit.
— Editor's note: Gary Franklin is the owner/broker of Windermere Real Estate, in Friday Harbor, and president of the San Juan County Economic Development Council board of directors.