Housing Needs Analysis

Project Summary

Like many cities and communities across the United States, the City of Boise continues to face a housing crisis. Rents and home values have continued to rise and home loan interest rates are facing 20-year highs. In 2021, the City undertook a comprehensive housing needs analysis to help plan for and address ongoing housing challenges throughout the community. This report serves as an update to the 2021 Housing Needs Analysis and provides updated data related to existing housing inventory, construction, and demolition trends as well as a revised 10-year housing needs projection. This report will serve as a guiding document for the City to inform policy decisions that will impact housing development and investment throughout Boise.

Since the 2021 Housing Needs Analysis, the City has been actively working to address housing challenges and create housing opportunities that support all Boiseans. Recent actions and initiatives from the City to help address housing affordability include:

• Adopting a modern zoning code. The modern zoning code was designed to better reflect the City’s broader values and has created the framework through which a wider variety of housing options and increased housing densities can be achieved. The revised zoning code was approved by the Planning and Zoning Commission and City Council and took effect on December 1, 2023.
• Partnering with developers. Leasing City-owned land for development of multi-family housing and leveraging City-owned and acquired land in transit-oriented corridors or near activity centers for the purpose of building affordable housing.
• Investing in affordable housing projects. Invested over $50 million in local and federal funds as gap financing to make affordable housing projects financially feasible.
• Creating incentives for affordable housing development. Codifying new zoning incentives for income-restricted housing and creating fee exemptions and deferrals for affordable housing development.
• Working with local nonprofits. Collaborating with local non-profits to pilot programs that incentivize Accessory Dwelling Units (ADUs) and permit moveable tiny homes on wheels.
• Streamlining entitlement and permitting processes. Creating a new staff position solely focused on streamlining and expediting the entitlement and permitting process for affordable housing.

While there is still much work to be done to ensure Boise achieves its long-term housing and livability goals, the City’s recent actions and investments mark a commitment to continued improvements in the coming years.

Methodology

The City of Boise re-engaged Agnew::Beck Consulting to provide updated data and findings to show housing demand and need for housing development over the next 10 years. The purpose of this summary report is to share the findings related to trends in population, housing development and changes to special population needs.

This analysis uses existing publicly available data to develop housing forecasts based on population growth, pent-up community demand, housing conditions, overcrowding and the needs of populations who are not served by traditional housing markets. The methodology of this analysis deviates slightly from the 2021 analysis and reflects the City’s ongoing progress towards making housing in Boise more accessible and affordable for all populations. This analysis should be viewed as a high-level forecast of community need and provides long-range benchmarks to gauge the effectiveness of housing development over the next 10 years.

This analysis utilizes the following categories of data to determine key findings:

The goals of this analysis are as follows:

• Provide an update to the 2021 Housing Needs Analysis as the first step to tracking long-term efficacy of housing programs, policy and investments throughout the City.
• Understand current housing needs and preferences in Boise.
• Provide critical data to apply for funding, convene partnerships and work with developers to increase the supply of housing that better meets the demands of Boise’s current and future residents.

Key Findings

• Housing demand continues to remain high in Boise. The City will require 2,019 new or significantly renovated units each year over the next ten years; 47 percent of this demand is for housing affordable to individuals and households earning less than 80 percent of the area median income.
• Regional construction is generally keeping up with demand, but new construction in the City is falling short of projected annual need. Permitting for new housing units throughout Ada County is matching projected housing demand numbers, but construction within Boise City limits during the last three years has fallen short by 300-800 units annually.
• The greatest need for housing development and support is for households earning less than 80 percent of the area median income (AMI). Six out of every ten households earning less than 80 percent of the AMI are housing cost-burdened, meaning that they pay over 30 percent of their monthly income on housing costs. These households are also the least likely to be able to find new housing opportunities within their budget if the need arises.
• Multi-family and missing middle housing development has been on a sharp rise. Over the last three years, 52 percent of permitted units throughout Ada County were categorized as multi-family and missing middle development, compared to only 31 percent between 2018 to 2020.
• The cost of construction remains a barrier to attainable housing development. According to the Mortenson Construction Cost Index, the overall cost of construction has increased 40 percent nationally since 2018.
• Development is concentrating in a few planning areas. Downtown Boise and the West Bench represent the planning areas experiencing the greatest number of new housing development with 36 percent of all new units being built in these areas since 2019.
• Regional partners are coming together to address housing availability, access and affordability. In 2023, the Community Planning Association of Southwest Idaho (COMPASS) convened a regional housing coordination plan for Ada and Canyon County. The plan was completed in December 2023 and sets the stage for short and long-term investments and prioritization.

Housing Need by Income

The housing units needed to meet demand over the next ten years are not allocated evenly across household income brackets. Households with income lower than the area median income are more likely to need housing interventions and housing units that are less likely to be developed by the housing market at large.

The need for housing units across income brackets is not distributed evenly between rental units and homeownership units. A vast majority of housing units entering the market to support households earning less than 80 percent of the AMI (an annual household income of around $78,640)3 need to be rental units. Even with incentives like first-time homebuyer programs, lower closing cost and down payment assistance, homeownership opportunities for this group are limited in today’s housing market. Affordable rental housing options for lower income households are often a more effective pathway to housing stability compared to homeownership. In light of these factors, this analysis indicates that all new housing units to support individuals below 50 percent AMI should be developed as rental units. While there is room for a handful of homeownership units at this price point, development targets should aim to create primarily rental units for these income brackets.

^{*numbers are representative of a 3-person household and pulled from www.hud.gov, effective June 1, 2020.}

The following chart details how the needed housing units over the next decade break down by income category:

^{SOURCE: Based on The Department of Housing and Urban Development (HUD) FY 2023 Income Limits for Boise City Metro FMR Area. (PDF)}

The forecasted unit need by income bracket was calculated through an analysis of household incomes of existing occupied households and adjusted to indicate a greater need for new housing units to support families under the 120 percent AMI threshold. This adjustment was made under the assumption that the market has been overproducing market rate and higher income housing, which is supported by development trends across Idaho and the United States. In most cases, it is easier for a developer to make higher profit margins on higher quality and larger single-family homes, a trend that is further exacerbated by restrictions in zoning codes.4 This adjustment was also made to address the needs households that are currently cost burdened, using more than 30 percent of their total household income to pay for housing. Just over 60 percent of existing households in Boise that earn 80 percent of the AMI or lower meet this definition of cost burdened. With the City’s modernized zoning code, it may be easier for developers to stay profitable while building denser and more affordable housing options.

Fifty-one percent of Boise households earn 80 percent of the AMI or less, while only 36 percent earn greater than 100 percent of the AMI. This distribution alongside existing housing inventory shows a greater need for new units to support lower income earners throughout Boise. It is worth noting that in recent years, AMI published by the Department of Housing and Urban Development (HUD) has seen a precipitous increase. Between 2020 and 2023, the median family income published by HUD for Boise City Metro Area has increased by over 30 percent from $74,800 to $98,300. HUD income limits are used to determine eligibility for assisted housing programs, including public housing, Section 8 Vouchers, Section 202 housing for elderly and Section 811 housing for persons with disabilities programs. This steep increase may be the result of adjustments made in response to updated household income data collected by the 2020 Decennial Census and/or a reflection of wage increases in recent years.

Supply Analysis

The COVID-19 Pandemic had a rippling effect across housing and construction markets, which resulted in lulls in housing development, followed by massive booms in development in many communities across the United States. This analysis incorporates an assessment of construction and development trends to assess the benchmarks and feasibility of the reported 10-year housing need estimate.

This analysis breaks down housing development into four categories:

• Single-Family Home: A housing unit that serves one household on one parcel of land
• Multi-Family Home: A building that houses more than one household in separate and distinct living units (examples: duplex, townhome, or apartment complex)
• Accessory Dwelling Unit (ADU): A housing unit on a piece of land that also serves a single-family home but remains an independent living space from the single-family home (example: an apartment over a garage).
• Manufactured Home:A home that is built in a factory and then transported to a piece of land (example: a mobile home).

A review of permits from the last six years shows that development in Ada County has exceeded regional demand, but newly constructed units in Boise are not meeting the projected annual demand.

Number of Constructed Units, Demolitions - Boise

Analysis of completed construction and demolition projects in Boise shows that between 2018 and 2023, a total of 7,879 new housing units were constructed, and 411 units were demolished resulting in 7,468 units being added to Boise’s housing inventory. This represents a significant amount of new housing development; however, this number still falls short of the currently projected annual need of 2,019 units per year.

DEVELOPMENT TRENDS

^{Source: City of Boise permit data}

The City of Boise has seen a recent increase in the diversity of housing types and unit sizes being built since 2018. In 2023, 76 percent of new housing units added to Boise’s housing inventory were missing middle or multi-family units, compared to only 42 percent in 2018. These new multi-family units represent a shift towards potentially more affordable units and denser development. The modern zoning code will further enable this type of development.

NEW CONSTRUCTION TRENDS BY TYPE

^{Source: COMPASS Idaho (2024) Regional Building Permits.}

The Cost to Build Housing

The housing supply is heavily impacted by the cost of development, this includes the cost of construction, available financing, land availability, and acquisition. According to the Mortenson Construction Cost Index, the overall cost of construction has increased 40 percent nationally since 2018. Construction costs, however, have started to level out since the end of 2022, with some estimates showing a stabilization rate of 2-4 percent annual increases, which is in line with past historical trends pre-pandemic. This stabilization of construction costs does not help solve the financing gap that already exists as construction costs are not predicted to decrease, so near term development will need to continue to take place with post-pandemic prices.

Construction costs interact with the price of rent, as the amount of rent charged at a property informs the amount of financing that a developer can secure to construct the project. Increased construction costs and rental costs are therefore directly related. This relationship between construction costs and rental prices also has an impact on the financial feasibility of development – if developers cannot charge higher rents to cover higher development costs their project may not be viable.

Based on an estimate of the costs to develop one housing unit, determined through 2023 development averages in the City of Boise, this analysis projects the costs to fill all housing needs in Boise as follows:

• Number of units needed annually for those earning less than 80 percent area median income: 892
• Estimated cost to develop one unit: $325,0006
• Annual development cost to fulfill affordable housing need: $290M
• Cost of development over 10 years to fulfill affordable housing need: $2.9B

Since the 2021 Housing Needs Analysis, the estimated cost to construct a single housing unit went up from $230,000 to $325,000, representing a 41 percent increase, which closely mirrors national construction cost increases. While the total number of estimated new units needed has declined slightly from 2021, the total gap in financing for affordable housing units in Boise is still nearly $3 billion over a ten-year period.

NOTE: The cost of developing one unit depends on many factors. The above figure is based on current development assumptions. The cost will not remain consistent over a ten-year period.

Documents

• Housing Needs Analysis Report (PDF)
• Appendix