Inside the Real Cost of Anchorage’s Housing Regulations

April 25, 2020

 

The Matanuska Valley is booming with new builds. The Mat-Su added 640 new single-family housing units in 2018, according to the Alaska Department of Labor and Workforce Development. That’s more than triple the number of new single-family homes in Anchorage, which only added 193 in 2018. It’s also important to remember the Municipality of Anchorage has more than two times the number of residents than the Mat-Su Borough.

 

The Valley has become an increasingly attractive place for many families to call home. It has always attracted outdoor enthusiasts but new development is making it even more appealing. Skiers are excited about Skeetawk, an alpine ski area under development in Hatcher Pass. Shoppers are seeing more national retailers opening their doors. This development is driving local jobs but with telecommuting on the rise, more and more people don’t even need to drive to Anchorage to work.

 

The Valley isn’t for everyone. For those with careers in Anchorage, the commute is time-consuming and a major headache anytime there’s an accident on the Glenn. Some people just enjoy living near the perks of a big city like the dining, shopping and entertainment options available exclusively in Anchorage. But unfortunately, for families looking to build, Anchorage is the significantly more expensive option.

 

A lot of the cost is beyond the homebuilding industry’s control: there’s more land in the Valley, making it cheaper and available in bigger parcels. But Anchorage’s regulatory costs are also a big factor in the expensive price tag. Anchorage’s regulations contribute to both the cost of build-ready land and expense of building on that land.

 

“Anchorage needs to be more competitive on these costs,” said Eric Visser, president of AHBA. “This regulatory burden is pushing more Anchorage residents to the Valley. Around 20% of Anchorage’s workforcelives outside the city and that’s detrimental to not only our economy but our families and neighborhoods.”

 

Regulations are important but they shouldn’t cost more than the benefits they provide or worse, prevent responsible development from occurring all together. The question for Anchorage homeowners has become: Are you seeing additional value with the extra $100,000 you spend to build on a smaller lot in Anchorage than you would on a bigger parcel in the Valley?

 

There are many ways the MOA’s regulations increase home costs, but one of the biggest is time. The longer it takes to build a home, the more in property tax a builder will pay, along with interest to the bank on the construction loan.

 

The MOA’s building process takes so long for many reasons. The MOA requires more permits, plan reviews and inspections done by several different departments, which often conflict with each other. This means there’s increased overhead in simply getting approval to build. This increases timelines and makes them more expensive for builders, who in turn must pass these costs onto homeowners.

 

The MOA also pushes offsite infrastructure improvements onto individual homebuyers. This is particularly noticeable when homebuilders try to build in some of the city’s older neighborhoods. For example, when homebuilders put up new construction in Spenard, the builder is forced by Anchorage Water and Wastewater Utility to dig up the waterline in the MOA right-of-way and upgrade it to 1-inch to meet new regulations.

 

Regulations moved to 1-inch waterline because it requires less pressure to move the same amount of water. But hundreds of Anchorage homes have been served on 3⁄4-inch waterlines for decades without problems, including multiplex units. The MOA isn’t requiring the replacement of waterline unless the property is being redeveloped. Which means digging up a portion of the public road at a substantial expense and environmental cost. This results in patching over the torn up curb, road and sidewalk.

 

Many of the neighborhoods requiring waterline replacements are areas well suited for affordable housing, but regulatory costs in particular can be an insurmountable barrier to more affordable construction. Unlike materials and labor costs, which can be reduced by building a smaller or simpler house, costs mandated by regulation often can’t be reduced. If it costs $30,000 to remove and replace the existing water line, for instance, that necessitates a 10% increase in the cost of a $300,000 home, but only a 5% premium on a $600,000 build.

 

This problem also extends to road development. If the existing road does not meet MOA standards, even though the municipality maintains the road and taxes the property as if the road serves it, the MOA requires builders to rebuild the road in order to obtain a permit to build on a house on the lot. You can imagine how expensive this is for the prospective homebuyer, many of whom give up when faced with massive expenses that have little to do with the home they wanted to build and live in.

 

The municipality’s Title 21 also added several often costly regulations to builds such as landscaping, additional windows, complicated door placement, porch expansions, and additions of roofs over porches. Meeting these requirements all add up on the final bill.

 

Additionally, the MOA has amended the wind maps in the building code to increase the design for wind speeds in Anchorage. People traditionally think that Anchorage buildings are designed to resist seismic forces but wind governs 95% of house design. This increases the structural components required in homes, drastically increasing design, approval and build time, and material and labor cost.

 

The high cost of new construction isn’t isolated to Anchorage. According to a 2016 report by the White House titled “Housing Development Toolkit,” over the past 30 years, local barriers to housing development have intensified, especially in bigger cities. “The accumulation of such barriers – including zoning, other land use regulations, and lengthy development approval processes – has reduced the ability of many housing markets to respond to growing demand,” the report stated.

 

If you’re looking to build in Anchorage don’t let this scare you off, the market is seeing improvement. The municipality has been understaffed in its permitting department, which contributes to delays, causing downtime on projects and costing Anchorage residents money. But that’s changing. Thanks to a grant from the Rasmuson Foundation, Anchorage has a building official for the first time in several years. Bob Doehl, building official and the director of the development services department, has held the position for nearly a year and the city is seeing major improvements.

 

The Anchorage Home Builders Association will continue to pursue opportunities to decrease the cost of homeownership because it benefits everyone in the community. When new construction costs decrease, more houses are built and that creates more jobs. As run-down homes are replaced with new construction, the overall value of neighborhoods goes up and this can lead to a decrease in crime.

 

Nice neighborhoods help business recruit and retain employees who want to work and live in Anchorage. Currently 47% of Anchorage employers say the housing market plays a major role in attracting and retaining a qualified workforce. AHBA wants to be able to provide Anchorage with affordable new construction to help more families find their forever home.

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