INSIDE REAL ESTATE: Redevelopment may not solve affordability problem
Mark Twain said, “Buy land because they don’t make any more.” I always believed that but recent changes in housing may make that statement no longer as true as it once was.
Robert J. Shiller, Professor of Economics at Yale, wrote an interesting article in July 2006 about the devaluing of land over several decades. Because land is the largest single cost component of any housing structure, does that mean the cost of housing will ultimately decrease in Anchorage and create more “affordable” housing, the topic of conversation that seems to be on every citizen’s mind, along with our balmy weather and the Permanent Fund Dividend?
Shiller categorized land into three residential groups: country, suburban and urban. The first was country such as Midwestern farmland adjacent to suburban areas that has been transformed into large lots for single family homes like what is currently occurring in the Mat-Su Valley.
These lots are usually larger than one acre and have minimum utilities to them (gas and electric) and function with well and septic systems. The second category was suburban land with public water/sewer and publicly dedicated and maintained roads, which is like the type of residential communities in southeast and southwest Anchorage. These lots are usually 6,000 to 10,000 square feet and are close to schools, shopping and entertainment.
Urban land is his final definition and is where new land, i.e. the opportunity for more housing, is being created. This urban redevelopment with increased density is what is occurring in South Addition, one of the oldest subdivisions in Anchorage.
Most South Addition lots were platted in a grid configuration with alleys and front streets and most were built out with single-family homes despite the underlying zoning of R2 (low density multi-family). Now, these single-family structures, built mostly in the l950s, are being replaced with duplex and four-plexes to be sold as individual townhouse style condos. Thus, creating more usable “land.”
This urban new land is right in keeping with both the millennial and aging baby boomer home buyers who have a strong desire to be near community activities, cultural events, trails, parks and eclectic eateries. It does not, however, solve the “affordability” issue Anchorage faces in its housing as redevelopment is expensive and land prices are high on a per unit basis, costing as much as $125,000 per unit.
Even the micro 200-square foot units being built in other urban cities are most likely not going to solve Anchorage’s shortage of affordable housing as the majority of baby boomers and “millies” still have a love affair with their F-150 long bed pick-up truck and snow machine. That’s why Alaska is different than Portland, Seattle or Minneapolis.