Guest writer: Bellingham’s rules really do contribute to city housing crisis

Everyone agrees housing prices and rents are out of control. Some blame price gouging. Yet home building is a competitive industry with few barriers to entry other than those described further on. In a normal competitive market, high prices would boost construction, eliminating the housing shortage. Prices would level and decline.

But Bellingham, like other West Coast cities, is a highly regulated market that severely restricts supply and raises costs in several ways.

One is by favoring the most expensive housing through single-family zoning. The original purpose was to exclude lower-income folks and people of color from more prosperous neighborhoods. By shunting most multifamily construction to north Bellingham, it still leads to de facto segregation by income that hurts our public schools.

A second is by restricting density and thereby promoting sprawl. Single-family detached homes cover 77% of Bellingham but house less than half our population. Minimum lot sizes, maximum floor area ratios, minimum setbacks, etc., all limit how many homes can be built per acre. That restricts more compact, energy efficient, economical housing types better suited to the needs of younger people and empty nesters, to say nothing of persons of median income.

A third is unnecessary complexity. Navigating Bellingham’s regulations across 480 zoning and sub-zoning districts often requires hiring consultants and lawyers. The back-and-forth with staff and cumbersome public process often prolongs permitting delays beyond a year. Only large builders can afford that cost and uncertainty, and it further raises home prices.

Economists calculate that for West Coast cities like Bellingham, these restrictions roughly double the cost of housing, imposing a de facto regulatory tax of about 100%. That is what makes our housing unaffordable.

We would never tolerate such a tax on any other basic need, so why do we tolerate it on housing?

In part, because it’s a hidden tax, and in part because the big winners are generally older, more politically engaged residents whose home values have soared due to the housing shortage. When they sell their homes, it is mostly this group, not developers, who are realizing huge capital gains — with the first quarter-to-half-million dollars exempt from taxation. Members of this group have historically dominated public comment and opposed reform.

We’ve recognized billionaires are driving growing inequality in America, particularly in the top 1%. But economists report that the largest driver of inequality overall is the housing sector, caused by the growing gap between the huge equity gains of homeowners, and the crushing effect of high rents on the mostly younger generations who have been priced out of home ownership.

Another brutal effect of our housing shortage is homelessness. Comparing metropolitan areas, higher median rents are the primary driver of higher rates of homelessness, while rates of poverty, mental illness and addiction have little impact. The reason a disproportionate number of the unhoused suffer from mental illness or addiction is that, as the least desirable tenants, they are first to end up on the street in a cutthroat rental market. That in turn leads to huge increases in the cost of emergency services.

We can fix this by replacing our unwieldy code with a simpler and more environmentally friendly form-based code, like the SmartCode, with six common-sense zones. Natural area designation (T1) protects parks, legacy forests, waterways and greenways. Rural designation (T2) preserves agricultural land. The remaining four (T3-T6) offer gradations from residential neighborhoods to urban villages to downtowns.

All urban zones are mixed-use, so you can walk to a neighborhood coffee shop or grocery store, reducing auto-dependence. They regulate the external form and placement of buildings, ensuring attractive neighborhoods while enabling greater density, which also reduces the per-household cost of utilities.

Anyone who follows the forms and rules can build by right, slashing permitting delays. That empowers individuals and small developers who cannot afford legal counsel and consultants. It also enables small projects, which usually can’t sustain the added costs.

Switching to the SmartCode can greatly increase infill housing, making home ownership and rentals affordable to a much larger share of our population, enabling better transit, and limiting sprawl that destroys natural and agricultural areas, and causes climate change.

To extend affordability to those with lower incomes we should also establish a mixed-income public housing developer on the successful Montgomery County (MD) model. With a revolving fund, it builds “luxury” rental units, 65% of which are filled at market rate, with the profits subsidizing below-market rates for the remaining 35%. This is publicly owned permanently affordable housing. The more that is built, the more it competes with and controls pricing in the private market, as in Vienna, Austria.

We’ve declared a housing crisis. By fixing its regulatory causes while expanding public sector housing, we can increase affordability and boost construction employment while reducing homelessness, sprawl and emissions.

Andrew Reding is a public policy professional who has served in the U.S. Departments of Justice and Homeland Security. He is presently a Whatcom County Charter Review commissioner.