By Emily Hamann
The Bellingham Business Journal

Whether you’re renting or looking to buy, it’s getting tougher to find a place to live in Bellingham.

Inventory is tight, which is pushing prices up and making it difficult for even qualified buyers and renters to land a home.

Bellingham renters face one of the toughest markets in the state when
looking for an apartment. The University of Washington’s Runstad Center for Real Estate Studies publishes a biannual report on the statewide apartment market. The report found that Bellingham has a .6 percent apartment vacancy rate. It was the same last year, as well. According to the report, if less than 3 percent of apartments are vacant, that means there’s a shortage of rental units.

For spring 2016, the average rent is $862 a month, or $1.18 per square foot. That’s up slightly from $1.13 per square foot at the same time last year.

This trend is happening around Washington, with the statewide vacancy rate falling to 3 percent this spring, from 3.3 percent last year. The statewide average rent is also up.

Those looking to buy a house are also facing fewer options and more competition.

There are just three months of inventory left in Whatcom County, according to the Northwest Multiple Listing Service.

That means that if no new houses went on the market, but people kept buying at the same rate, it would only be three months until there were no houses left.

Between four and six months of inventory is considered a balanced market.

“It’s pretty slim pickings,” said Mary Kay Robinson, a broker at Windermere Real Estate and this year’s president of the Whatcom County Association of Realtors.

As inventory has gone down, prices have gone up. Five years ago, Robinson said, the median price for a single-family home in Bellingham was $275,000. This March it was $343,500. That’s a 22.7 percent increase.

Statewide, there’s an average of 2.6 months of inventory for single-family homes, and prices are up 7.62 percent over last year, according to the NWMLS.

Some of the issues causing the housing shortage in Bellingham are the same ones affecting cities around the state and the country.

The recession caused a lag in building that continues to plague the state’s
housing marking.

But Bellingham has its own issues as well, that have put builders and planners at odds as they try to figure out what the future Bellingham is going to look like.

Recession leads to building slowdown

The lack of housing could be a vestige from the recession, when new construction came to a screeching halt. Now, builders are trying to make up for that.

“The whole community is kind of in catchup mode,” said Chris Behee, a senior analyst in the city of Bellingham’s planning department.

In 2004, the city granted permits to build 333 new units of single-family housing and 762 units in new multi-family buildings. After the housing bubble burst and then the recession hit, those numbers took a nosedive. By 2009, the city only gave out permits for 50 new single-family homes, and just 27 units on multi-family
properties.

That dramatic slowdown in building wasn’t just in Bellingham — it was all over.

In 2011, the the number of units of new housing approved by permits across the country fell to the lowest point in decades, according to U.S. Census Bureau data.

Since then, the rate at which new housing is being built has been creeping back up.

Last year Bellingham granted building permits for 158 single-family units and permits for 424 units on multi-family properties.

More housing is being built all around the country, although the housing market hasn’t fully recovered — builders still aren’t constructing as many homes as before the bubble burst.

Housing consultant Rick Jacobus says the issues started long before the recession.

Over the course of many cycles in the economy, building has failed to keep up with the demand, at a national level, he said.

“The thing that’s driving up housing cost has more to do with demand than supply,” he said. He’s the principal at Street Level Advisors, an urban development advising firm based in Oakland, California.

“There’s more people, and there’s more jobs,” he said.

 

Running out of room

As Bellingham gets bigger, it faces new challenges in its growth. Some of them are geographical.

“The big problem is lack of land available for single-family homes,” said Linda Twitchell, the government affairs director at the Building Industry Association of Whatcom County.

Right now, the city is looking at this exact issue; it’s working on finalizing a comprehensive plan — the massive document that will govern the growth, zoning and planning of the city for the next 20 years.

During one of the many meetings on the comprehensive plan, the City Council decided not to expand the urban growth area, the city’s footprint where new buildings can go up.

Instead, new growth will have to be focused on undeveloped plots inside existing city borders.

Currently, the city has 42,055 units of housing, according to the comprehensive plan.

Of those 23,506, or 55.9 percent, are single-family units and 18,549, or 44.1
percent, are in multi-family buildings.

Since 1980, Bellingham’s population has doubled, to an estimated 83,580 people. There was a surge of new people in the 1990s and early 2000s. Starting around 2007, population growth has slowed down, but is still steadily increasing.

By 2036 city planners predict a population of increase of 27,565 people and the capacity for 16,525 additional units of housing.

The comprehensive plan calls for a split of 50.4 percent multi-family housing to 49.6 percent single-family housing.

That slight shift to more multi-family housing is to accommodate students, baby boomers as they look to retire and downsize and millennials who want to live in downtown areas.

The city is planning on most of the new multi-family housing to go in what it calls urban villages: seven compact, mixed use areas, like Fairhaven and Barkley Village.

Most of the single-family housing is expected to grow outside the urban
villages, but within the city limits, in unbuilt areas already designated for single-family homes.

The city’s models show plenty of space for all the housing Bellingham will need for the next 20 years.

Builders however, disagree with the city’s models.

“The land we have left is difficult or expensive to build on,” Twitchell said.

A lot of the land the city suggests is buildable is near streams, wetlands, on steep slopes or other issues that the city calls “critical areas.”

They need a buffer zone around protected areas, or have extra challenges that builders need to deal with before building.

That can make building there more expensive and sometimes means fewer homes can fit there.

The city has taken these critical areas into account with its figures, Behee said.

“All the real easy stuff has been purchased and is being developed,” Behee said. Building on the rest, the more problematic land, is just one of the realities of a growing city.

Jacobus agreed that it’s a common stage in a city’s growth.

“I think that is a typical problem,” Jacobus said.

It’s an issue that cities, like Bellingham, that set the goal to limit sprawl have to face.

“Sprawl allowed us to build really cheaply, really fast,” he said. “At some point, we have to figure out how to build infill.”

The city has provided some resources to help fill in the areas inside the city that are underdeveloped; it put together an infill toolkit, which is supposed to allow builders different options for the variety of housing they’re allowed to put on a piece of land.

Some have had success with the program — a development of new townhomes on Peabody Street were built using the toolkit. Other builders say the toolkit’s
restrictions — like it not applying to single-family zoned property, make it difficult or financially nonsensical to use.

Another challenge builders and the city also have to navigate, Jacobus said, is the concerns of neighbors, who are worried infill will ruin the character of the
neighborhood, impact parking, or have other complaints.

But now, with demand for housing outstripping supply, there are few other options.

“Ideally that drives prices up [to the point] that it’s worth dealing with the
politics in the city,” Jacobus said. “But that’s just a really slow process and we’re behind.”