Home / Commentary / ’75 new homes for every 100 new households’: Treasure Valley facing severe housing shortage

’75 new homes for every 100 new households’: Treasure Valley facing severe housing shortage

Statistically, we are in the second longest economic expansion since World War II (and will be the longest in history by June). But despite this fact, the average American hasn’t felt the benefit of the past 10 years of economic growth.

Why is this? Annual GDP growth is anemic relative to past expansions. Annual GDP growth across the U.S. averages 2.3% in the current expansion, versus 3.6% per year in the 1990s.

In the 1990s, “it was the economy stupid.” And in 2010s, “it’s just housing stupid.”

We fell way behind after the global financial crisis triggered by easy lending and a real estate capital markets implosion. And nationally, since 2008 we have not built nearly enough housing to keep up with our extended period of economic and population growth.

University of Chicago economists Hsieh and Moretti determined in their influential 2015 research that U.S. GDP has been severely impaired by a lack of housing. Their research found that eliminating the impediments to housing in the 10 largest cities across the U.S. would increase U.S. GDP by 9.5% (or just under $2 trillion).

If they are right, GDP growth in our current economic expansion would be on par with the economic prosperity of the 1990s.

Up for Growth’s research shows that the U.S. has a 7.3 million home shortage that holds back economic growth, makes housing unaffordable, increases homelessness, puts more cars on the road, and limits economic and employment opportunities for all Americans.

In communities throughout the country, over 30% of the cost of housing has nothing to do with building housing.

Despite Tokyo’s population growth from 12.1 million residents in 2000 to 13.8 million in 2018, the Wall Street Journal recently reported no housing crisis – housing cost is essentially the same today, as it was 18 years ago.

The reason is Japan adopted policies to enable housing to meet demand. Tokyo is consistently building a lot of housing, enough to keep up with population growth, job growth and household formation. As of 2018, Tokyo’s housing starts per capita are double that of comparable population centers in America.

Those pragmatic solutions are what we need to eliminate the housing shortage and bring about affordability and economic prosperity for all Americans.

This is a conversation that both sides of the aisle are having because they know that they need to have it.

The housing crisis is bleeding throughout America, with Idaho now ranked in Up for Growth’s Housing Market Stress Level Index as Severe, the second highest category of housing market distress.

This is because in the Boise Metro region population, household and job growth is outstripping housing.

How do we manage this growth most productively so that we can attain increased job creation and economic output, as well as increase affordability, improve and maintain a rich quality of life, create efficient transportation options and generate environmental benefits?

Up for Growth’s Housing Market Affordability Indicators Dashboard shows that in the Boise Metro, 40% of renter households are cost burdened, meaning they pay more than a third of the gross income on rent. In the City of Boise, 45% of renter households are cost burdened, and a full 25% are severely cost burdened, paying more than half of their gross paycheck on rent alone.


From 2010 through 2016, the Boise Metro only produced 75 new homes for every 100 new households formed. Think about that for a moment. What is happening to each of these extra 25 households?

And for-sale homes aren’t getting any cheaper either. Because of growing NIMBY opposition to housing, development has become more complicated, cumbersome and unpredictable.

The average home price has increased from $158,000 in 2010, to $245,000 in 2018 – a 54% increase in home price.

This isn’t a bubble. This is the net result of not enough homes getting built in the face of increasing demand.

Sadly, the trajectory is not promising. Based on Up for Growth’s analysis of population growth, household growth, and housing production – not only is the Boise Metro on track to hit over a million residents by 2040, it is on track to hit an over 43,000 home shortage – a quadrupling from a current shortage of 10,000 homes in the Treasure Valley alone.

Looking at the data, without meaningful changes to the regulatory framework, the Boise Metro is on track to be in worse shape than many communities throughout the West Coast and the Northeast, with renter cost burdening exceeding 50% of all renters, sprawl erasing farmland throughout Ada County and beyond, and the homelessness epidemic tripling from current levels.

At the current rate of job and population growth in the Boise Metro, this community could very well exceed the depth of Seattle’s housing crisis levels in just a short six years.

Everyone by now has heard that Seattle is becoming the next San Francisco. Tech employees are leaving Seattle in droves. Amazon is steering future growth away from Seattle to Bellevue, Washington, a more business-friendly suburban jurisdiction across the lake – and of course to the Washington, D.C. area – winner of the HQ2 process.

Because housing has not kept up with job growth, renters in Seattle are facing skyrocketing rent increases, first-time homebuyers face a severe lack of inventory, and a decreasing quality of life with over 60,000 residents commuting at least 90 minutes each way every day – often times driving until they can qualify for just a place to rent, never mind a home to buy.

Guess what – from a hyper local perspective and in the short run this is good for Boise! This is why Boise is the fastest growing city in America, with a whopping 3.1% population increase in 2017 alone.

But from a broader, political, lens, pressure to do just something – anything – about this housing crisis builds up. Political leaders, without the support of an engaged group of practitioners, can and often do move wacky and counterproductive policies.

Just down I-5, the City of Portland is arguably becoming the next Seattle. With a 15% increase in rent in just one year, Portland’s housing affordability crisis hit a tipping point, bleeding deep into the middle-class and reflected in egregious tales of economic evictions, homelessness, and crushing traffic congestion.

So is Boise becoming the next Portland? And is that a good thing or a bad thing?

SPUR, a prominent urban planning think tank based in San Francisco and member of the Up for Growth National Coalition, wrote once that “most planners see the Portland region as one that has tackled the problem of suburban sprawl more successfully than any other region in the United States.”

But Portland seems to have recently lost its way. In the mid-2000’s, anti-developer sentiment grew in Portland, culminating with the termination of a “developer giveaway” tax abatement program known as the Transit Oriented Area Development Tax Exemption Program.

This was, in Portland, the beginning of an anti-growth and anti-developer public narrative that I believe undermined the very things that made Portland an icon of progressive urban planning, community engagement and urban design.

Take, for example, The South Waterfront, a new community, thoughtfully planned in the Portland way. Transit oriented, the intersection of Portland’s Aerial Tram, connecting to Oregon’s major medical university and hospital – the bridgehead of the Tilikum Crossings Bridge – a car-free bridge exclusively built for transit, pedestrians, bikes – and the intersection of Portland’s Light Rail and Streetcar Systems.

And the result? What the city sold as eliminating a “developer giveaway” undermined its own decades old vision and ultimately cost the City and State over a billion dollars in lost tax revenue.

Lenders and equity investors couldn’t make sense of the construction cost of planned density without the city’s financing tool.

Development slowed, and what got built instead were low density, wood frame over concrete podium structures in place of the planned higher-density and more-units-to-the-acre high-rise, mixed-use towers. Retail struggled in this new neighborhood, because there wasn’t the density of population, to make a mixed-use neighborhood vibrant.

The 1,800 homes planned in the South Waterfront, which would have sat on 6 acres, didn’t get built. People got back in their cars and went to the suburbs, chewing up 300 acres of natural resources with low-density suburban homes.

More broadly, the confluence of the global financial crisis and growing anti-developer, anti-business sentiment led to a severe underproduction of housing in Portland. While building slowed, folks didn’t stop moving to Portland.

From 2008 to 2016, building housing continued to become more challenging. The layering of artificial barriers to housing accelerated, with rapidly escalating impact fees, delays associated with neighborhood review and design review processes, and an often arbitrary and byzantine system of reducing legally entitled height and unit density easily gamed by NIMBYs.

Predictably, after years of housing production not keeping up with household formation, rent growth exploded. The state now has one of the highest housing shortages in the U.S.

The policy response in 2016 was inclusionary housing: Put simply, a requirement that developers proffer 20% of any residential project at restricted rents based on low-income levels established by HUD without adequate subsidy from the city.

Unfortunately, this poorly calibrated program has created yet another barrier to housing. Annual production under the policy has resulted in a dramatic 64% decline in annual building permits — relative to before the policy was passed.

The additional policy response in 2019 that made national headlines was statewide rent control. We are now seeing equity investors and lenders literally walking away from investments in needed housing throughout Oregon because they don’t believe the rules won’t change again to something more restrictive.

We’ve even heard whispers from builders who routinely access capital from Public Employee Retirement Systems that they are not able to rationalize investing in housing development in Portland given the combination of the accumulation of barriers and regulatory actions recently taken by the city and legislature.

Just last week, a major Wall Street investment analyst noted that “the tougher the rent control laws are enacted, the worse the housing situation would be as supply likely plummets.”

Most recently, the City of Portland City Council tried to pass an ordinance that would require all landlords to accept tenants whose income meets a 2-times rent test. Putting vulnerable renters in a 50% cost burden situation is eerily reminiscent of the loosening underwriting standards that triggered the mortgage meltdown 10 years ago.

A recent national gathering of over 300 publicly traded and large privately held developers and investors in residential communities from around the country, unanimously agreed that “legislative risk” tops “recession risk” as the biggest factor that could grind the building industry to a halt.

In some ways, Boise is making the same sorts of smart moves that Portland made in the 1970s and 1980s and can serve as a leading example for other American cities to follow.

For example, the city recognizes the infrastructure efficiencies of building more dense, walkable, urban infill residential and tries to incentivize such development by reducing per-unit impact fees for residential projects over 4 stories by 40%. Not dissimilar from Portland’s Transit Oriented Area Development Tax Exemption Program, this represents an innovative approach and is a way for the community to realize its vision for the future.

What about all of those empty parking lots surrounding one of Boise’s largest employers, the State of Idaho, and many major corporations in Boise’s downtown core? Wouldn’t it make sense to increase density on those lots, and encourage vibrant mixed-income buildings with restaurants on the ground floor and living above?

With height restrictions, it is difficult to make this happen.

One such model might be found in Oregon’s recent legislative proposal, Senate Bill 10. The proposal sets minimum standards for allowed housing density in the one-half mile ring around priority transit stops.

To some extent, Boise might be putting the cart before the horse with regard to a transit discussion. It could right now be formulating policies that get at transit supportive densities through smart policy, growing the fiscal pie, so to speak, to fund transit investments in the future, when a concentration of population, both of housing and jobs, are established to support future alignments.

But Boise must continue to innovate to change the course of the housing underproduction trajectory.

The current and past White House, under both President Obama’s HUD Secretary Shaun Donovan and President Trump’s HUD Secretary Ben Carson, agree that “artificial and accumulated barriers to housing” including impact fees, project delays or off-street parking requirements, add unnecessary cost to housing and reduce supply – exacerbating our housing crisis.

Our Calculator graphically illustrates the trade-offs inherent in policies and regulations that touch housing economics. Not expressed as how much more or less developers pay, but rather in terms that are most relevant – the likelihood that a community gets built, the direct effect on the renter and overall citywide implications.

We look forward to working with Boise’s public and private sector partners as we roll this research and this tool out to help inform pro-housing policy in 30 cities throughout the U.S – including Boise.

Finally, Idaho’s prohibition on local option levies represents an impediment to developing sensible local solutions to community growth. We can’t fully address the housing shortage and affordability crisis without having a serious conversation about how we fund projects and who pays for it. But the fact of the matter is, when cities can’t raise their own money – with the support of their own citizenry — to address something as critical as housing, bad policies can result.

If reasonable solutions are not found, communities like the Boise Metro might find themselves with poorly calibrated inclusionary housing and rent control on the table. And Boise might find itself losing population and jobs in Gov. Brad Little’s third term in office to towns such as Billings, Montana, or Fresno, California.

As Gov. Little said in his inaugural state of the state speech in January, he will be “making decisions through one lens: the lens of ensuring the best possible opportunities for us, our children and grandchildren to remain in Idaho and enjoy our unparalleled quality of life.”

He didn’t mention housing in his speech, but there’s no viable way for his vision to be fulfilled without addressing the housing crisis growing in this state, particularly within the Boise Metro.

A lot of folks in the housing space talk about “changing the conversation.” The hard reality is that without innovative solutions – and without real results – the conversation will never change.

Fortunately, in many ways our housing crisis is a self-induced crisis. And the good news about a self-made crisis, driven by one set of policy choices, is that it can be reversed by making a different set of policy choices.

It’s a problem that has solutions. They might not be easy; they might not be immediate. But these challenges aren’t impossible to overcome. They simply need leadership.

Mike Kingsella is the executive director of Up for Growth Action, a nonpartisan Washington D.C.-based public-interest advocacy organization. This commentary is taken from a presentation Kingsella gave at the Boise Metro Chamber of Commerce’s leadership conference at Sun Valley Resort on April 29.

Call for commentaries The Idaho Business Review is always looking for commentaries from business leaders on topics of local interest. For more information, contact Editor Kim Burgess at kburgess@idahobusinessreview.com.

About Mike Kingsella