The Construction Industry

September 22, 2008

The housing industry was hurting last spring before the most recent economic difficulties.  Housing starts were already at a fifty year low.  Commercial construct enjoyed a better fate but it appears that the home loan crisis has served to dry up money for commercial projects.

Bloomberg reports:

The recent collapse of Lehman Brothers and Merrill Lynch will make it even more difficult for borrowers to refinance commercial real estate loans.

According to UBS AG, the world’s largest manager of private wealth assets, eight of the top 10 investment banks accounted for about half of the loans packed into commercial mortgage-backed securities in 2006 and 2007. As of today, the eight are now either merging with other companies, no longer in business, or significantly reducing their real estate holdings.

By the end of 2012, UBS analysts anticipate a competitive market and estimate that almost $151 billion in commercial mortgage loans that were underwritten by investment banks and securitized will be due.

Housing Market at 50 Year Low

June 24, 2008

If you are interested in the current housing market and wish to read more, an excellent place to look is Harvard’s Joint Center for Housing Studies, which just this week came out with the best study that I have seen. The study says that the housing market has not been this bad in fifty years. Again, the report addresses the national problem.

It is a little stunning to see the map showing areas where permitting is down by more than 50%.  Nonetheless the report notes the historic ability of this market to spring back and lead economic recovery.  It says the forecast over the long term remains very good.

Affordable Housing in Seattle.

June 13, 2008

In 2006 King County issued a report on housing, called the <a href=””>King County Housing Benchmarks report.</a>  The report says exactly what you would expect but the details are interesting.  For example median income families accounted for only 10 per cent of home purchases in 2005 with a shift to condominium sales that is driving that market.

There are about 100,000 families for whom there is no affordable housing.  Between 2000 and 2004 homelessness increased at the rate of about 500 people per year.  With all the foreclosures I presume that this number has recently increased significantly.  (Nationally the homeownership percentages dramatically increased between 1998 and 2005, and have steadily declined in subsequent years as the foreclosure crisis blossomed.)

These numbers would be worse if the city and county did not have programs to ameliorate the problem.  In recent years the county in conjunction with partnership programs with cities have been adding about 700 affordable housing units per year.

Seattle has attacked this problem rather aggressively with results exceeding  expectations.  The cornerstone of Seattle’s approach is the Multi-Family Tax Exemption (MFTE), as revised in 2004.  The Seattle Office of Housing reports that over 1200 units have been created for people at or below 60% of the median income.  This is over three times the number of units required to be built by developers.  The reason for the high number of low income units is that non-profit institutions undertaken this type of construction.  Nonprofits determined that costs could be dramatically reduced when the MFTE indirect tax subsidy was combined with other direct subsidies such as city Housing Levy funds that require them to build only low and moderate income housing. Thus, the nonprofit organization has proven to be a highly efficient means of providing low income housing.

Mayor Nichels, long the developers’ friend, has proposed some revisions to the well-functioning program for low income families.  These revisions will increase the amount of rent to be charged for low income housing, expand the target areas to include areas developers have targeted for multi-family housing, and enhance subsidies to for profit developers, thereby reducing the role of non-profit organizations in providing affordable housing for lower income families.  All this at increased cost to the taxpayer on a per-unit basis.

Contact the council members and show Nick Licata your support as he takes on the mayor and the big developers.

Citizens are directed to the following website to complete a form to
send an email to the Mayor’s Office.