Land in Anchorage – The Key to A Strong Economy

August 26, 2018

 

Anchorage is Alaska’s economic center. Nearly one- third of the state’s population and about half of all the jobs are located in the 100 square mile area. The high concentration of people causes problems in Alaska’s housing market.

 

The average cost of housing, according the Alaska MLS in July 2018, is $364,144. In comparison, the average cost of a new construction home in the Anchorage area is $547,498. So, why is new construction so much more expensive? There are many reasons but the biggest is the lack and cost of affordable, available and developable land in the Anchorage Bowl.

 

As the biggest state in the nation, lack of land seems like a strange problem to have. When you’re on the hillside surveying the Anchorage Bowl, there seems to be endless amounts of land available for recreation, development and housing, but looks are deceiving.

 

In the next 20 years, population estimates predict about 50,000 people will move to the Anchorage Bowl. Those people will make up about 20,000 or more households. Housing is already tough to find, so where will these people live?

 

Currently it’s expensive to build, even before you start. According to Alaska MLS listings, there are 330 residential land listings available in Anchorage, Eagle River, Chugiak and Girdwood and the average cost is $140,000.

 

There are not many large parcels of land available to build affordable housing. The land costs in the larger neighborhoods developed in the past 10 years had a land cost of between $120,000 and $140,000 for a single-family residential lot. This cost was a finished cost with water, sewer, curb, gutter, paved streets, lighting and other amenities expected by the consumer. Turning these land parcels into detached single-family homes costs at least $400,000.

 

Say someone has 25 raw lots and is asking $90,000 per lot (undeveloped). This land must be excavated of overburden and roads, water, sewer, drains and lighting installed. These costs are added to the final cost of the lots. The cost of these lots would exceed the current cost of developed land and would further drive up the cost of a new construction home in Anchorage.

 

 

What’s the answer? Some say it is high density housing, and for a few that may be the answer. But most people who move to Alaska want the feeling of Alaska’s vast openness and hope to live with some space. Others argue Anchorage has the land resources, but the government holds them and to a degree, that’s true.

 

Currently the Heritage Land Bank, Mental Health Trust and other institutional land holdings have thousands of acres of land in the Anchorage Bowl. The 2012 Heritage Land Bank Annual Work Program and 5-Year Management Plan reported the organization received 25,000 acres of land of the 44,983 acres that were granted to the Municipality of Anchorage in the 1978 Municipal Entitlement Act. Heritage Land Bank, formed in 1983 to acquire and manage these tracts, received a total just over 11,000 acres according to the report; of which they have identified 882 acres as acreage with unencumbered development potential.

 

The Heritage Land Banks objectives are to, “manage land to maximize the benefit to the Municipality and to the public.” However, upon reading the plan, further disposing of land through trade, sale or lease does not seem to be a high priority.

 

An increasing number of people are moving from the Anchorage area to the Mat-Su Valley because land is more readily available, making the cost to build much cheaper. The Valley saw double the number of new construction projects than Anchorage last year, and the trend continues. However, not everyone can afford the monetary and time commitment of commuting.

 

As a real estate professional in the new construction trade, I serve on the Alaska Home Builders Association, the Anchorage Home Builders Association and have presided over the Anchorage Board of REALTORS® and the Alaska Association of REALTORS®. We have been and will continue to speak with the State of Alaska, The Municipality of Anchorage and all other trust land organizations to find a way to get more publicly held lands that have been identified as developable lands into private hands.

 

This in no way compromises our quality of life or our valuable park lands. We have been blessed in Anchorage with ski trails, dog parks, open spaces and recreation opportunities galore. However, we also need to the ability to provide housing for our community members.

 

If our population is going to grow as is suggested in the 2040 Land Use Plan, there must be land allocated for housing. Land is needed for high density homes, town centers (with a mix of residential and retail), single family detached homes, condominiums, affordable and luxury housing alike.

 

We live in a beautiful community with lots of promise and growth potential. When considering how to house the population we must work together to allocate the land resources around us to sustain and grow this community. It’s an interesting discussion that certainly will not end here, but should be considered by all who live, work and play in and around Anchorage.

 

Sources:

1. Alaska MLS

2. Heritage Land Bank 2012 Annual Work Program / 2013-2017 Five Year Management Plan

3. Anchorage 2040 Land Use Plan

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