12/15/2022
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The Spokesman-Review
Inslee proposes $70 billion state budget
The Wall St Journal
The Center Square
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The Spokesman-Review
Inslee proposes $70 billion state budget
By Laurel Demkovich
OLYMPIA – Gov. Jay Inslee on Wednesday proposed a state budget topping $70 billion for the next biennium that would invest money for homelessness and behavioral health services across Washington, including a proposal for a voter-approved referendum to increase funding for housing.
The proposal is intended to guide lawmakers this session as they write budgets for the next two-year cycle that will fund education, housing, new construction, state employees’ salaries, public safety and other programs across the state.
As federal pandemic relief funds run out, Inslee’s budget uses mostly state revenues, as well as a small amount of leftover federal COVID-19 relief money and funds from the new cap-and-trade program – set to go into effect in January – to transition the state to more normal times.
His proposal leaves the state with about $2.6 billion in reserves at the end of the two-year cycle.
Washington survived the COVID-19 pandemic with a “relatively good economy,” Inslee said, while acknowledging many people are still suffering.
“We still have some challenges left unmet,” Inslee said.
There are no new taxes or tax increases proposed, but Inslee plans to ask voters for permission to borrow money to build new housing.
Inslee’s plan would ask voters to approve a referendum to allow the state to issue bonds outside of Washington’s debt limit to raise $4 billion over the next six years. The amount of obligation debt the state can take on is restricted, but voters can approve bonds outside the limit. It would require a simple majority to pass. There would be no tax or fee increases for voters, according to Inslee’s office.
The last referendum of this kind failed in 2010, when lawmakers asked voters to approve bonds for energy- related projects in public schools, colleges and universities.
Inslee said Wednesday he is optimistic that Washington voters want to see the housing problem solved.
If approved, the $4 billion will go toward the capital budget, which funds construction projects across the state, and likely would be used to address homelessness, housing and behavioral health, Schumacher said.
The capital budget currently allows for the construction of 2,200 new housing units, but the $4 billion would allow for the construction of about 5,300 additional housing units during the next two years and 19,000 in the following two years, according to the governor’s office.
Washington needs more than 1 million additional housing units by 2044 to accommodate the state’s growing population, Inslee said Wednesday.
“We’re not going to solve the problem unless we build and unless we build quickly and unless we provide support for many of the people in these programs who need more than a roof over their heads,” Inslee said.
Much of the new housing would be built for homeless people, those with developmental disabilities or chronic mental illness and those making less than 80% of average median income. It also would provide down payment and closing cost assistance for low-income, first-time homebuyers.
The referendum also would help fund construction for a new behavioral health diversion and treatment facility for offenders with behavioral health needs.
Inslee’s budget also includes nearly $900 million to construct a new 350bed forensic hospital on the Western State Hospital campus. Other behavioral health priorities include expanding early treatment, diversion and intervention services; expanding the 988 crisis team; providing additional navigator resources for families with children; and improving compensation rates and training opportunities for behavioral health workers.
Inslee’s budget proposal will use the remaining $202 million in federal relief funds for emergency housing, food programs, public health and special education.
Over the last two years, Washington lawmakers have spent more than $14 billion in federal relief funding for people and programs affected by the COVID-19 pandemic on business assistance, rental assistance, housing, transportation, public health, child care and local governments.
Legislators will use Inslee’s budget proposal to guide their budget decisions in the upcoming 105-day session, which starts Jan. 9.
Senate Democrats’ top budget writer, Christine Rolfes, D-Bainbridge Island, said Inslee’s budget was a “solid roadmap” to address the state’s needs. She said she was encouraged with his focus on behavioral health investments and his commitment to growing the workforce and building new facilities.
“Legislators are deeply concerned about the lack of affordable housing in communities across Washington, and I appreciate the governor’s commitment to address this urgent need,” she said in a statement.
Republican budget leaders, however, were critical of Inslee’s plan. Sen. Lynda Wilson, R-Vancouver, said Inslee’s plan spends “just about every tax dollar available” while still failing to invest in answers to Washington residents’ biggest concerns, such as public safety, cost of living and learning loss.
Wilson supported Inslee’s behavioral health proposals but said his ideas will do nothing in the shortterm to help with drug overdoses, crime and hiring more law enforcement officers.
She also criticized Inslee for failing to provide tax relief for families.
“Unfortunately, the governor is showing once again that in his world, government’s desires come ahead of families’ needs,” Wilson said in astatement. “The Inslee budget represents a rate of spending growth that is more than double the growth in median wages in our state over the past decade. The working people of our state can’t continue to afford that.”
State employee raises, climate, education, more
Inslee’s budget also proposes to fund the Working Families Tax Credit, which passed in 2021 and will provide low-income working families with a $1,200 tax credit beginning next year.
His proposal also funds the state employees’ collective bargaining agreement decided earlier this year, which includes a 4% raise in 2023 and 3% increase in 2024, and a $1,000 incentive payment for employees who received COVID-19 boosters.
It also uses funding from the capand- trade program to fund a number of climate policies, including citing and permitting clean energy and transmission infrastructure; creating a service program to build clean-energy projects; and using emerging energy technologies and systems in homes.
Inslee announced earlier this week he was requesting $10 million in funding for a new clean energy institute at the Washington State University Tri-Cities campus.
For education, Inslee’s budget adds 2,000 slots each year for childcare programs and increases provider rates by 40%. He also proposes to continue funding social-emotional learning supports for students, such as nurses, social workers, counselors and others.
Some Eastern Washington highlights of Inslee’s budget include funding a bachelor’s degree in nursing at Eastern Washington University; a public health degree program at Washington State University campuses in Pullman, Spokane and Vancouver; renovating the Spokane Hatchery and creating a mobile licensing unit in Eastern Washington to help service people who have difficulty accessing a Department of Licensing office.
Laurel Demkovich can be reached at (509) 416-6260 or at laureld@spokesman.com.
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The Wall St Journal
Recent volatility in home prices and rents has been a long time coming. Fixing it will require abandoning outdated policy frameworks.
By Paul WilliamsDec. 12, 2022 8:00 am ET
For years, housing affordability was largely an issue that plagued the working class in urban areas. But in recent years, the problem has spread well beyond the working class and is now firmly entrenched in the middle class.
Plenty of statistics confirm that housing has become less affordable. Rental costs in the inflation index have risen more than 7% this year, nearly double the prepandemic trend. Home prices jumped 20% year-over-year on an annualized basis during the pandemic buying surge. And many tens of thousands or even hundreds of thousands of homes would have to be built to match recent job growth in certain regions in the U.S.
Those figures alone, however, don’t tell the story of what happened, how it happened or who it happened to—they only tell us the result. But if we scratch a little below the surface, it reveals that the recent volatility in the housing market has been a long time in the making, and that achieving stability will require leaving behind outdated policy frameworks.
Homes in San Francisco. During the 2010s, California’s economy added more than 2½ jobs for each home that was built in the state, creating conditions for a housing crisis.Photo: David Paul Morris/Bloomberg News
Years of underbuilding
To start, let’s step back about 20 years to the mid-2000s, when a housing boom led to generational highs across the sector in terms of building permits, investment and employment. We were building a lot of homes. But when markets became aware of just how much risk was really packaged up in mortgage-backed securities, the housing industry crashed. The selloff began and everything plummeted—investment, home buying and home building, to name a few.
There were foreclosures and forced sales, and from 2006 through 2010 construction workers were laid off in droves. In fact, from peak to trough, the number of people working in residential construction was nearly halved, and it took all of the 2010s for the housing industry to recover to precrash levels of investment and employment. As a result, not enough homes were built during that decade, even as tons of jobs were created in coastal economic hubs such as New York, San Francisco and Seattle. Considering that California added more than 2½ jobs for each home it built over the decade, the state’s well-known housing crisis should come as no surprise.
In the spring of 2020, as the pandemic took hold and many businesses made the switch to working from home, swaths of people left coastal economic hubs and moved to smaller and more inland cities and towns—particularly in the Sunbelt, but also in places like Boise, Idaho. Analysis of these trends found that remote work was an important driver of the population changes, and that generally people moved from more-expensive places to less-expensive places, an indication that many workers in coastal job hubs had had enough.
In the regions that experienced the largest surges in demand, we saw record low inventories of homes and record long lines of would-be home buyers hoping to take advantage of record low mortgage rates. These factors, coupled with historical underbuilding, drove home prices higher, expanding the affordability crisis to the point where it ensnared more of the middle class.
Apartments for lease in Austin. Renters faced steep increases in many cities, but there’s a bright spot: Many new homes and especially apartment buildings that were started during the pandemic-era building surge haven’t been completed yet. When they hit the market next year, they should help with affordability.Photo: Mary Inhea Kang for The Wall Street Journal
Renters, too, faced exorbitant rent increases in many major cities, especially those that attracted many new residents during the pandemic. Industry data showed spot prices on the rental market surging 10% to 20% annually in 2021 and 2022. Such increases are unsustainable for many middle-income and low-income households, and can drive longtime renters from their homes.
Of course, one of the reasons people were attracted to regions such as the Sunbelt is because housing is easier to build there. Indeed, many of the metropolitan areas with the highest population growth such as Atlanta and Dallas saw corresponding increases in the number of housing permits issued—a healthy response to the influx of new neighbors.
Midway into 2022, however, the Federal Reserve put the kibosh on the boom. With its aggressive rate increases and the selling of assets on its balance sheet—including mortgage-backed securities—the average 30-year fixed mortgage rate has roughly doubled, from just over 3% at the beginning of the year to about 6.5% today. As monthly mortgage payments have climbed out of reach of more potential home buyers, demand for homes has fallen, and home prices are beginning to fall, too, in many markets. More critically, new building has fallen, which is the opposite of what is needed to achieve housing-price stability in the long run.
One glimmer of hope is that many of the new homes and apartment buildings that were started during the pandemic-era surge in building haven’t been completed yet. Homes are taking longer to build these days because of supply-chain disruptions. And for multifamily apartments, it is taking longer still. When these homes and apartment buildings come online in 2023, the boost in supply should help with affordability, especially in the most constrained markets.
Construction in Cactus, Texas. Home building rose along with population growth in much of the Sunbelt in recent years, but the Federal Reserve’s interest-rate increases this year have crimped potential buyers, and new building has fallen. Photo: Nick Oxford for The Wall Street Journal
New prescription
Pulling back the curtain on these housing trends reveals questions that policy makers are going to be pressed to consider.
First is the wisdom of using interest-rate increases to tame inflation when housing is one of the sectors most sensitive to credit availability. We certainly can’t afford a repeat of the underbuilding phenomenon of the 2010s if we want to improve housing affordability.
Second, whether our current policy—“deal with it”—is the best response to Americans subjected to unpredictable housing-market shocks and resulting rent hikes. The rent increases that many households faced during the surge are likely here to stay, as rents are notoriously “sticky”—quick to rise and slow to fall. As a result, policy makers are being asked whether it’s time to reconsider basic regulations on rent growth, which are customary in many European and Asian countries.
Third, the land-use and zoning regimes that have governed housing production in our cities and suburbs for decades ought to be rewritten for the 21st century. As any economist will tell you, the only certainty in the economy is fundamental uncertainty: We can only guess where the next booms in job growth might be, and we can’t predict shocks like the pandemic. So if we want longer-term stability of housing prices, our cities and suburbs must be more elastic and allowed to grow in response to demand.
House hunters at an open house in Rye, N.Y. The land-use and zoning regimes that have governed housing production in our cities and suburbs for decades have contributed to the market’s volatility.Photo: Amir Hamja for The Wall Street Journal
Finally, we know the housing sector is highly cyclical—it has famously been saidthat “housing is the business cycle.” There are certainly some benefits to this, such as the booms in investment, jobs and wages on the upward part of the curve. But we might also take a cue from some of our peers in Europe and Asia, and consider public-sector programs that build housing for a range of incomes, from the working to the middle class, across the business cycle.
Moving into 2023, we have a few things to look forward to. Some moderating of rental inflation is likely, as new housing, especially apartments in cities, is completed and comes online. The pandemic-induced volatility in the housing market is coming to a close. But the question of how—or whether—we plan to build more stability into the housing market remains.
Mr. Williams is the founder and director of the Center for Public Enterprise, a think tank. He can be reached at reports@wsj.com.
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The Center Square
Spokane Mayor Nadine Woodward, at work.
Courtesy of Spokane City Government.
(The Center Square) – One year ago, Spokane Mayor Nadine Woodward said, the city council majority was upset about not having enough shelter space to get homeless people out of frigid winter weather. She wondered why, with great strides have been made to provide more than 1,000 shelter beds, the same councilors now seem to be fighting to keep residents of Camp Hope outdoors for an indefinite period of time.
“There’s no reason why anyone should be living out in this weather, it is not humane or safe,” she said.
Woodward was referencing the 5-2 vote on the council earlier this week to remove liability protection from Spokane Police Department officers who assist Spokane County Sheriff Ozzie Knezovich with plans to close Camp Hope unless authorized by a court.
The resolution was intended to protect employees from unintended consequences, said the council majority.
Woodward has championed getting people out of the state’s largest encampment on public land as quickly as possible. The camp is located in East Central on Washington Department of Transportation land and has been in place since December 2021.
Woodward updated The Center Square this week on work done by her administration to open up space for the campers before winter.
In August, the city opened the doors to the Trent Resource and Assistance Center, which can shelter 350 people, and more during emergencies.
In addition, Woodward said a shelter was opened with 44 beds for young adults, ages 18 to 24.
Services at the Cannon Street Shelter were expanded from seasonal use to year-round with 80 beds.
The Hope House for women can also provide 80 beds and Catholic Charities has just opened the old Quality Inn to provide units for 82-100 people.
The Way Out Center has added 60 spaces for individuals ready to undertake steady work as they prepare to enter permanent housing.
The city has also added funding to Truth Ministries to secure 40 more spaces for men.
“We have added hundreds of beds,” said Woodward, noting that there are other facilities that also provide transitional housing.
To make finding shelter space easier, the city is now offering a dashboard of information at ShelterMeSpokane.org.
The portal shows bed availability, shelter locations and contact information, check-in times and a weather forecast.
The cities of Spokane and Spokane Valley, as well as Spokane County and the Spokane Regional Health District, partnered on the dashboard project.
Earlier this year, Councilor Jonathan Bingle called out the council majority for setting the mayor up with “impossible tasks” that could not be fulfilled. He said now that Woodward’s administration has managed to overcome hurdles set up by the council to get more shelter space, it is time for the council to show its support.
Toward that end, he is hoping to be joined by his peers in assembling 350 metal beds for the Trent center. That work will be done Dec. 19-21 at the fairgrounds.
“I think people would like to see us working together so I’ve told everyone about the opportunity,” he said.
The metal beds will replace existing wooden ones that are less sturdy. In addition, there is a low metal partition between the new beds to provide shelter guests with some privacy. They will also have access to storage containers for clothing and other personal items.
There will be enough tables and chairs for 200 people to use at a time, according to a presentation at Monday’s council meeting by Johnnie Perkins.
He said the Trent center will also soon have a quarantine area and space for changing rooms. Handwashing stations are being moved indoors to keep water from freezing and other work is being done to accommodate hygiene needs.
City building official Dermott Murphy signed off on new Trent occupancy permits that would allow a capacity of 375 people, including 25 support staff.
At the Dec. 12 meeting, Murphy said the 33,000 square foot warehouse leased and renovated by the city has a maximum occupancy of 688 people, but the shelter is staffed right now for only 350. Officials are analyzing the costs involved in expanding operations.
Major Ken Perine of the Salvation Army said, in the first 42 days after the Trent center opened, there were 10,598 overnight stays, many involving the same guests, and 31,794 meals served.
At Cannon, which the Salvation Army also oversees, there had been 3,360 bed nights in the same time period, and 10,080 meals served.
Perine said wraparound services are also being made available to help shelter guests overcome addictions and mental health issues, as well as find a job and get into permanent housing.