In the first of an eight-part speaker series on the topic of housing hosted by the Sitka Chamber of Commerce, Sitka Planning Director Amy Ainslie discussed the reasons behind “stickiness” in the local market, and its relationship to long-term affordability.
Note: The next installment of the Sitka Chamber of Commerce’s eight-part speaker series on housing will take place at noon Wednesday, October 27, at the Sitka Westmark and on Zoom and social media. State Representative Rebecca Himschoot will discuss the problem of housing affordability at the state level.
In her remarks to the Sitka Chamber (on 10-4-23), Ainslie described an “unfettered demand” for housing in Sitka – not just for ownership, but also for rentals.
“We have a very strong demand for housing,” Ainslie said. “We live in a beautiful place. We know we’ve got a very strong rental market, both long-term and short-term. And generally our holding costs are not that high, once you have real estate it doesn’t cost that much to hold on to it. And so that’s created a huge imbalance in our market.”
Traditionally, the alternative to the high cost of home ownership is an affordable rental. But that’s not happening in Sitka. Ainslie cited data from the Southeast Conference showing that 52-percent of Sitka’s renters are “cost-burdened,” or paying more than 30-percent of their income on rent.
High rents are a big factor in stickiness.
“You know, in many markets where you don’t have a strong rental market, if you need to move, you would probably eventually sell your house for the price that people are willing to buy it for,” Ainslie said. “Because if you gotta go you gotta go. But here you have a lot of alternatives to just selling. And so you don’t have to bring down price even if you know the market would prefer a lower price. And again, coupled with the limited housing stock we have, we don’t have a lot of new stock coming in, it just keeps those prices high and they just won’t come down.”
Ainslie also talked about the “missing middle,” or the pathway to entering the housing market in Sitka and working your way up. High housing costs have basically squeezed the middle out of existence.
“The lack of starter homes is really challenging here in Sitka,” Ainslie said. “ A lot of people, their first house that they’re going to buy here, you know, at this point, is easily over $400,000. And for a lot of folks, that’s not necessarily a starter home. And there’s not really enough inventory in our market, to be able to start with something small, build equity there, and then use that to buy your next middle home, move from there, maybe move up to a larger home or downsize in retirement. There’s not a lot of opportunity for that movement. And so the type of stock that we have in our ‘missing middle’ is really problematic.”
Ainslie said that Sitka wasn’t initially planned with growth in mind. Housing developments were designed for immediate needs – rather than future needs. As a result, utilities are inadequate to support the further subdivision of existing low-density neighborhoods, and the exceptionally high costs of developing raw land in Sitka predictably results in more high-cost housing.
“Because we live in a really high cost environment, and because we have a market that’s pushing those higher prices, you’re going to see more high end housing development be produced,” said Ainslie. “If the profit margin is already kind of slim because you have such high costs, you really need to hedge your bet and kind of go for what is going to give you the least risk to put out on the market.”
Ainslie didn’t cover the short-term rental market in her presentation, but chamber members were interested to know if the city had plans to cap the number of Airbnb’s. Ainslie pointed out that in residential zones, the city had already imposed a requirement that owners must reside on the same property as their short-term rentals, as well as obtain a conditional use permit. In commercial zones, not only were there no restrictions on B&B’s, but another phenomenon of Sitka’s unusual market was also in play: “We have a ton of single-family homes in our commercial zones,” she said.
