New Home Permits at an Historic Low

Last week the MOA published the Building Home Permit Activity Report for the first three quarters of this year. The report which tracks residential and commercial construction and alterations shows an historic low of 160 single family permits. With the frost and first snow last week, this downward trend is sure to continue through the end of the year. Single family permits are down 24.17%. Duplex permits are down 30.77% and multi-family units are down 61.22%. All total the dollar value of residential permits is down 7.95%. This number doesn’t come close to the decline in the number of permits which, simply put, means new housing has gotten more expensive at the permit counter and to the consumer.

On the flip side, more homeowners and commercial tenants are staying put and investing in remodeling. Residential alteration permits are up 25.65% and commercial alterations are up 12.94%. Part of the residential remodeling activity can be attributed to Anchorage’s aging housing stock and the need for maintenance and repairs. Some boomers are electing to remodel and age in place, knowing that their remodeling costs don’t add value but only convenience and comfort.

So why can’t we have more construction activity? There’s plenty of blame to go around. You can start with the new Title 21 implemented the first of the year forcing commercial and residential builders/developers to redefine not only their plans but also to take a long term look at the high cost of over-regulation. On the residential side, home builders and developers have always been under-funded. Anchorage has no publicly traded builders or sources of deep equities. Acquisition, development and construction loans are the highest risk in any lender’s portfolio and it’s less work and more profitable to lend to non-profits and for strip malls that you see popping up in southeast Anchorage.

Population and jobs haven’t taken the deep dive in 2016 that so many publicly predicted so Anchorage’s need for more housing continues to fall behind the economic curve.