Uncategorized • February 9, 2022

Market Update February 9, 2022

by Christian van Waasen

WASHINGTON’S PROPOSED ZONING CHANGES
There have been some rumblings as of late due to a couple of bills that are making their way through the State Senate and the House. Both of these bills seek to introduce denser housing types into single-family zoned neighborhoods… and we’re not just talking King County here… these bills will be a statewide initiative.

Gig Harbor now has a population of over 11,000. Meaning that we’re now large enough for these bills to directly impact our zoning. Here are the proposed changes for cities with over 10,000 people:

Senate version: would require allowing duplexes on all lots that today allow only single-family homes.
House version: would allow duplexes on lots larger than 4,500 square feet that do not already have ADUs.

In the quest for affordable housing, the government is doing what it does best, and that’s applying a top-down, one size fits all approach to tackle and issue that requires nuance.

Despite the most well-intended notion behind building more affordable housing, the fact is affordable housing is not created from new construction. Aging and existing construction is what is affordable, and ironically we’re tearing it down because of up-zoning to ameliorate housing costs. New construction demands top dollar (rent) to make it a financially viable investment.

So, does this mean that all your neighbors will have their houses bulldozed and a duplexes put up?

Read more to find out.

THE MISSING MIDDLE
The premise behind this move is represented in the main image above. Basically, we (King and Pierce) have lots of single family houses, and thanks to lazy zoning, we lack the “middle housing” types that are so common in cities with older housing stock. But since this is Gig Harbor, and not Tacoma, I’ll shelve the lecture on why it’s good to have variety in an urban fabric.

However, I would like to point out that “Middle Housing” is a feasible development model for local small-scale developers. Meaning if you’d like to keep the look and feel of an area without stifling its growth, this is a great way to have organic growth, variety, and keep profits reinvested within the community.

FORM FOLLOWS FINANCE
When it comes to non-profits building new “affordable housing,” they of course focus on larger projects due to economy-of-scale. Duplexes or four-plexes are too small and nuanced for these large entities

This is why most small multifamily units (2-4 units still qualify for a conventional mortgage vs commercial mortgage) are mostly owned by mom-and-pop investors for the purpose of making a small profit.

Let’s take the “worst-case” scenario, and the bill passes and duplexes are allowed everywhere. What could happen?

Duplexes are built specifically for investment purposes. Meaning that their profit would have to be substantially higher than any other course of action for the property.

So that begs the question, is it profitable to bulldoze your neighbor’s houses and put up a duplex?

How much is your neighbor’s house worth?
How much would it cost to buy it?
What would be the demo costs?
How much would it cost to increase the utility services?
Then construct a brand-new duplex and successfully rent it out with positive cash flow?

Unless your neighbor’s property is a derelict, and the person who buys it is an investor, and not a spec home builder, or homeowner looking to build their own custom home, then no, it wont ever become a duplex.

In fact, we already have a handful of existing duplexes scattered around Gig Harbor – from downtown to Artondale. If it was economical to build them all this time, many more would have been built!

Here’s a dirty little secret. The majority of Gig Harbor is unincorporated – meaning the zoning is up to Pierce County. 99% of unincorporated Gig Harbor is zoned R10, R5 and RSR. What does this mean? Duplexes are permitted in every single one of these zones already.

Ok, so what about Gig Harbor proper? (click on the link) As you can see R-1 makes up much of Gig Harbor’s residential area. R-1 does not permit duplexes… except for when some files for a variance and gets their property to be upzoned to R-2… and voila. (See all those duplex northeast of Soundview and 64th, condos of Dolphin Reach, Heron Pointe, and those brand new white duplexes on Pioneer Way.)

Building a duplex in Gig Harbor doesn’t really require a new law to be passed at all. Where there’s a bill($), there’s a way.

…And if you do happen to get a duplex built next to you, chances are it be nicer than most houses you drive by in order to attract the kind of person who is willing to shell out +$3,000 a month to live in a duplex.

All in all, nothing will change to Gig Harbor if any of these new bills get passed.