Editor’s note: This is the third and final part of our series about the rental housing crisis.
In 2008, real estate developer Larry Wood had just started a townhouse development in West Longview when the recession hit and the housing market tanked. He was forced to declare bankruptcy and abandon the project.
As the market recovered, Wood got back on his feet and bought back the project two years ago. Six of 17 planned townhouses are completed, and six more are under construction.
But Wood and other developers now face high construction prices, rising property taxes and other increasing costs as they try to replenish the area’s stock of affordable housing.
“Banks are willing to work with people (again). It’s easy to be successful because it’s an easy market,” Wood said. “But it makes me sad. I can do well just targeting the higher end, and I see a need for the higher end. But I also really see a need for these affordable townhomes and (other projects).”
The county has an acute need for affordable rental housing: The apartment vacancy rate is 1.4 percent, well below a healthy level, and more than half of residents are classified as “income distressed.” This has made it difficult for many to cope with rents that are being pushed up by a host of factors, including plain old supply and demand.
“Longview needs some more housing. We are getting more people all the time and they can’t find a place. They have to drive out of town,” Longview developer Chuck Bond said. “On the low end, some end up living on the street. In order for Longview to prosper and develop, it’s got to have enough housing for its residents.”
The recession halted new apartment construction in the local area. Nearly a decade after the market crash, Bond’s new 20-unit apartment complex in the 4700 block of Ocean Beach Highway, called Copperwood Apartments, is the only apartment complex built in Longview since 2006, according to the city.
It has been almost as long in Kelso, where the most recent multifamily development was the 83-unit SummerWind Apartment complex, built in 2009, according to the city.
And no large multifamily housing projects have been built in rural Cowlitz County in at least eight years, and one county building official couldn’t recall any being built since at least 2002.
Bond’s Copperwood project opened in October. To recoup his investment, Bond said, he would have to charge $1,295 a month for the new, 960 square-foot apartments. However, after a slow start to leasing out the units, Bond said he had to drop rents by $200 a month. The complex filled up in a month. Yet Bond said rents will probably have to creep back up to $1,295 for him to profit off the $2 million investment.
Bond says he could charge less if he had been allowed to build a higher density complex. He wanted to build a 36-unit complex, but city code restrictions forced him to build a smaller project, increasing the per-unit-cost of each apartment by about 20 percent, he said.
“I didn’t realize how much building costs had gone up,” Bond said. “It cost me way more to build Copperwood Apartments than what I had anticipated.”
Another factor in driving up rents are rising property taxes. The county’s total property value dropped four straight years during and following the recession, bottoming out at $8.6 billion in 2013. It has roared back, hitting $10 billion in 2017. Higher values generally mean higher property taxes that developers must recover in higher rents.
Zoning code changes
In an attempt to encourage developers to build more rental housing, the Longview City Council recently reduced zoning requirements for minimum lot sizes, density, building height, maximum impervious area, design standards and the off-street parking.
“There is a perception ... that regulations are a barrier to development in our community compared to other communities,” said John Brickey, the city’s community development director. “I don’t know if our regulations are that onerous. However, our council believes that reduced regulations would encourage development.”
While Kelso has not made the same specific zoning changes, City Manager Steve Taylor said the city overhauled the municipal development code last year to make design standards and regulations more accessible for developers.
“Kelso’s emphasis was to try to streamline the language to make it easier for developers to come to Kelso, look at our standards and have a good idea of what our requirements are going to be,” Taylor said. “Our goal is to create certainty in the process and apply the rules consistently.”
Brickey said the planning commission is confident the changes won’t negatively impact the city goals of safe and livable land use.
“Anytime you reduce the cost of construction, that’s certainly going to encourage some developers to develop a little sooner than they would have or develop more than they had planned on previously,” Brickey said. “If nothing else, it sends a message to developers that we’re not trying to discourage development.”
Wood, who now is planning a new 361-unit apartment complex with townhouses called Village Pointe in West Longview, said support from the City Council and city staff has made it easier to start new projects.
“The market is responding to the demand in Longview. And the Longview Council is very aggressive and supportive of doing what they can,” Wood said. “(They) are not standing in the way.”
Still, there could be some new impediments to building low-income housing.
Agencies like Housing Opportunities of Southwest Washington (formerly called the Longview Housing Authority) construct brand new apartments with low-income tax credits. But there have not been many of those projects in recent years.
“The low income tax credit in the 1980s spurred the majority of the affordable housing that has been built in this country over the last 30 years,” but federal budgets for housing have been declining, said Melissa Taylor, with Lower Columbia CAP.
The Housing Authority is currently developing a 4.3 acre plot of land in West Longview and has plans to build an 85-unit affordable housing complex there. However, due to the length of the funding and permitting process, it typically takes at least two years to complete a project, said Executive Director Chris Pegg. The authority is primarily funded with the housing trust fund and low-income housing tax credits.
The recent tax reform bill could undercut the tax credit, Pegg said.
“We all expect that it will result in less available funding because there’s less incentive, but we don’t know yet,” she said.
Lower Columbia CAP has turned to other creative solutions, such as a sweat equity program for tenants who spend a certain number of hours building their own homes. So far, the program has built 400 new homes. Another program helps tenants rehabilitate abandoned homes.
“In both of those programs, (the tenants) know how to maintain their homes because they’ve built every part of it,” Taylor said.
Brickey and Wood both predict that the area’s economy is on the cusp of growth and development, and that will include an expansion of housing.
“I think that good times are ahead for Longview. But I don’t think that rent is going to get cheaper,” Wood said. “I still think we will be very affordable compared to the rest of the county. I think the economy will get better and people will be able to afford (the rent).”