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Are changes on the horizon? A potential solution to Seattle’s housing affordability crisis.
Home affordability and the current housing crisis across Seattle and the surrounding region have been a hot topic for politicians and investors alike over the last several years. As new residents continue to flock to the region, solving this issue represents a major potential opportunity for developers and real estate investors in the future.
One factor to consider when examining housing affordability in the Puget Sound is the extreme lack of new condos – generally a more affordable housing product. The lack of new condo development projects in the region is largely the result of Washington’s extreme condo liability laws.
As currently written, Washington law makes it easy for condo owners to sue builders because of a broad interpretation of the term “breach,” which allows for claims to be brought up to four years after the cause of action occurring. These laws can even result in personal liability for Home Owners Association board members for failure to sue a builder on behalf of the association.
As a result of the current law, many developers won’t even consider new condo projects, and those who will often have a difficult time securing the requisite financing. Furthermore, the expense of builder liability insurance is often passed on to buyers, further exacerbating the issue of affordability.
Because there are minimal new condos and rapidly increasing demand, condo prices across the Puget Sound region have soared – pricing out many prospective buyers. In January 2012, the median sale price for condos in King County was $208,000, while by January 2019 that figure has risen to $383,500.
Currently there is a bipartisan effort in Olympia to reform Washington condominium law. In February, a bill was passed unanimously in the Senate that aims to protect developers, while still allowing for consumer protection. The proposed bill would raise the bar as to what condo owners can sue builders for, requiring a claim to show that any defects violated WA state building code and caused a safety risk.
Even with changes to the state law, fears of a condo bubble may still limit new development, but a unique opportunity would be available for developers to take advantage of significant demand for affordable housing options.