Home prices in Washington State continue to escalate faster than the national average, the result of restrictive land use regulations according to a recent report released by the Building Industry Association of Washington (BIAW).

Continuing a decade long trend of Washington State home prices steadily outpacing national home prices, the median home price in Washington State in the first quarter of 2005 was $238,900 — over $40,000 higher than the national median.

But the median price of homes takes into consideration home sales throughout Washington, allowing the lower prices in some rural counties to offset those in populous metropolitan counties. As noted by the Washington Center for Real Estate Research, “the largest concentration of less costly housing is outside a reasonable commuting distance from major population centers.”

For instance, the average selling price for a 2,200 square foot single family detached home in 2004 was a seemingly reasonable $207,321 in Spokane and $225,125 in the Tri-Cities. But in more heavily populated areas, which comprise the bulk of the state’s work force, the prices increased dramatically. In Tacoma the average selling price was $255,250, and Seattle’s average selling price was $341,333. Bellevue was a whopping $491,666.

And while home prices steadily increase, family incomes have changed little. “This means increased home prices in Washington State are eroding the ability of average wage families to afford a home,” said BIAW President Lyle Fox. “Washington State is in the midst of an affordable housing crisis. Home prices in this state are increasing faster than most other states, and are outpacing increases in income.”

This means working wage families in other states are more able to purchase a home than those in Washington State. Washington’s homeownership rate in 2004 was 66 percent, lagging behind the national average of 69 percent.

What’s behind the ever increasing home prices of Washington State? “The simplest answer is land availability,” said Fox. “In the decade plus since the adoption of the state’s Growth Management Act (GMA), the availability of land has diminished,” he said. “While supply has decreased, demand has not.”

Before the recession, Washington’s white-hot economy drew transplants from other states hoping to cash in on the boom. This surge in population (which demanded more housing), combined with the implementation of the GMA (which restricted the land available for development) strained housing affordability and created today’s affordability crisis.

A 2001 study conducted by WCRER in Clark County substantiates this a significant upward surge in lot prices accompanied the implementation of the Growth Management Act in that county.

“Along with the artificial restriction of land supply from GMA came numerous land use rules and environmental regulations,” added Fox. “Complying with government rules and regulations is costly. Beyond these costs, the GMA allows counties to charge new homebuyers impact fees, which can add thousands of dollars to the cost of a home — in Vancouver impact fees range from $4,000 to $8,000 while Olympia charges up to $20,000.”

BIAW supported legislation during the 2005 legislative session that would have allowed jurisdictions to charge an additional Real Estate Excise Tax on home sales in exchange for eliminating impact fees. Eliminating impact fees would have provided homebuyers some relief from the housing affordability crisis. Despite broad bi-partisan support, the legislation died.