Next affordable city is already too expensive
SPOKANE, Wash. — Maybe it was the date night when he and his wife spent two hours driving 19 miles to dinner, or the homeless encampment down the street, or the fact that homes were so expensive that his children could never afford to live near him.
Whatever the reason, Steve MacDonald decided he was done with Los Angeles. He wanted a city that was smaller and cheaper, big enough that he could find a decent restaurant but not so much that its problems felt unsolvable and every little task like an odyssey. After the pandemic hit and he and his wife went through a grand reprioritizing, they centered on Spokane, Washington, where their son went to college.
Their new house is twice as big as their Los Angeles home, cost less than half as much and is a five-minute commute from City Hall, where MacDonald works as Spokane’s director of community and economic development.
He arrives each day to tackle a familiar conundrum: how to prevent Spokane from developing the same kinds of problems that people like him are moving there to escape.
MacDonald knows the pattern, and so does everyone else who has been following the U.S. housing market. The story plays out locally but is national in scope. It is the story of people leaving high-cost cities because they’ve been priced out or become fed up with how impossible the housing problem seems.
No matter how many times it happens, no next city, as of yet, seems better prepared than the last one was.
Just a few years ago, a Spokane household that made the median income could afford about two-thirds of the homes
on the market, according to Zillow. Now home prices are up 60% over the past two years, pricing out broad swaths of the populace and fomenting an escalating housing crisis.
Growth is never perfect, and Spokane’s influx has been accompanied by a booming employment market that has increased wages, turned abandoned warehouses into offices and helped the city recover jobs lost during the pandemic. This is normally called progress. But for people who already lived in and around Spokane, the shift from living in a place that was broadly affordable to broadly not has come on with the suddenness of a car crash.
Even the mayor isn’t immune. In an interview, Nadine Woodward, a Republican who was elected in 2019, noted that her son and daughter-inlaw were living with her and her husband while they figured out where they could afford to settle. They
came back to Spokane from Seattle, where they were long ago priced out.
“I never thought I’d see the day where my adult children couldn’t afford a home in Spokane,” Woodward said.
A between place
As in most of urban America, much of the growth in the Spokane area is on the fringes, where heavy equipment and the skeletal outlines of new subdivisions unfold in every direction and into Idaho. Building permits have surged, and the cadre of mostly local builders who had the market more or less to themselves now grumble that the rapid growth has attracted big national builders.
All of this happened fairly recently. In the years after the Great Recession, when homebuilders were in bankruptcy or hibernation, migration to the Spokane area plunged. That pattern shifted in 2014 when, as if a switch
had been flipped, waves of migrants started arriving as already high-cost cities like Seattle and San Francisco saw their housing markets go into a tech-fueled frenzy.
By the end of 2014, migration to the Spokane area had jumped to more than 2,000 net new residents, compared with a net loss the year before, according to Equifax and Moody’s Analytics. Annual growth has only continued, rising further with the pandemic to more than 4,500 net new residents.
Nurses and teachers
Five years ago, a little over half the homes in the Spokane area sold for less than $200,000, and about 70% of its employed population could afford to buy a home, according to a recent report commissioned by the Spokane Association of Realtors. Now fewer than 5% of homes — a few dozen a month — sell for less than $200,000, and less than 15% of the area’s employed population can afford a home. A recent survey by Redfin, the real estate brokerage, showed that homebuyers moving to Spokane in 2021 had a budget 23% higher than what locals had.
Lindsey Simler, a 38-year-old nurse who grew up in Spokane, wants to buy a home in the $300,000 range but keeps losing out because she doesn’t have enough cash to compete. Prices have shot up so fast that many homes are appraising for less than their sale price, forcing buyers to put up higher down payments to cover the difference.
A dozen failed offers later, Simler has decided to sit out the market for a while because the constant losing is so demoralizing.
“I’m not at the point where I want to give up on living in Spokane, because I have family here and it feels like home,” she said. “But travel nursing is going to be my next step if I haven’t been able to land a house.”
‘Positive activity’
From her seventh-floor office atop the art deco
City Hall, Woodward, the mayor, looked out at the Spokane River, where in the warmer months a gondola glides past her window to the Riverfront Park built for the World’s Fair. During the recent interview Woodward pointed out the window at cranes and construction sites that she calls “positive activity.”
Spokane’s job market is among the strongest in the nation, and the virtuous economic cycle — of people coming for housing, causing businesses to come for people, causing more people to come for jobs — is in full swing.
And yet, as in Seattle and California before and increasingly across the nation, the scourge of rising prices, particularly for rent and housing, makes it feel less virtuous than advertised.
The recent Realtors report warned of “significant social implications” if the city doesn’t tackle housing. The issues included young families not being able to buy or taking on excessive debt, small businesses not being able to hire, and difficulty keeping young college graduates in town.
In the dominoes of the housing market, the disappointments of aspiring buyers like Simler get magnified as they move down to lower-income households. With homes so hard to buy, rents have shot up, and the vacancy rate for apartments is close to zero.
All of this has compounded at the lowest end of the market, where the nonprofit Volunteers of America’s Eastern Washington and Northern Idaho affiliate, which runs three shelters and maintains
240 apartments for people who were formerly homeless, said it will lose a quarter of its units in the next fiscal year as more of its funding goes to higher rents.