Housing Needs Analysis

Executive Summary

The City of Boise is facing an unprecedented housing crisis. Rapidly rising rents and appreciating home values have led to renewed conversations among city leadership on the right actions to take to address these issues and build a comprehensive set of housing policies, programs, projects, and partnerships. To understand the challenges and opportunities, the City of Boise contracted with Agnew::Beck Consulting to quantify the supply and demand for housing within city limits. Results from this analysis will be used by the city to inform policy decisions that impact housing development and preservation as well as specialized populations most affected by the housing crisis.

Key Findings

1. Housing demand has increased: The City of Boise requires 2,770 units every year for the next 10 years to meet demand; 77% of this demand is for housing affordable to those earning 80% or less of the area median income.
2. Construction is not keeping up with demand: Over the last 3 years, housing construction in Boise produced 4,146 units less than the need.
3. Affordable housing is increasingly more difficult to build: The gap financing needed to build a unit at 60% AMI is up to $115,000 per unit at the time this analysis was conducted in the summer of 2020.
4. Land constraints necessitate more compact use of existing land: Neighborhoods, on average, need to increase housing density by 26% to meet housing demand.
5. Development is concentrating in a few planning areas: 41% of all new Boise construction in the last 5 years occurred in Southeast and West Bench.
6. Specialized populations have unique housing needs: Homelessness, increases in refugee resettlement, and student enrollment create specific needs for dedicated housing development.

Key Opportunities

The City of Boise has the following key opportunities to consider as it contemplates policy decisions and strategic next steps:

1. The scale of the housing crisis is too large for one city to tackle and requires regional partners: It would cost roughly $4.9B in development costs to address the entire affordable housing deficit over the next 10 years. This is a massive deficit to finance. The city will require regional and statewide partners to address the scale of this issue. It will be necessary to focus on specific income and population segments to maximize impact, instead of developing policy with too broad of a scope.
2. Clear city priorities will aid decision-making and highlight trade-offs: Given constraints, the city is facing stark trade-offs. There is finite available land in neighborhoods to consider. There are finite resources to finance the development and preservation of housing. This indicates a need for the city to create clear criteria for a housing project to receive financing from the city.
3. Construction costs and other data are constantly changing: To stay relevant, regular data updates are recommended for permitting data (monthly), construction costs (quarterly), and Census estimates (annually).
4. The city has five key levers to support the creation of housing: On both a strategic and a project by-project basis, the city has the following key levers as decision points. Each of these levers affects the feasibility of a project, the amount the city may choose to invest, and their direct impacts on the public good:

• Land: The cost of land represents between 7-10% of development costs.
• Unit mix and unit size: The affordability of the units, the size of the units, and who the units are intended to serve can drastically impact the cost of construction and the amount of gap financing needed.
• Gap financing: The city must determine, for any given project, its ability and capacity to provide the funding that enables a project to be financially feasible.
• Capital stack partnerships: Every project provides an opportunity to leverage non-city resources and have additional funders supplement gap financing. A strategic plan that considers these partnership opportunities is critical to not only identify and time funder engagement but also establish processes by which partners can be approached effectively.
• Timing and phasing: Strategy, timing, and phasing of all project components need to be considered as high impact triggers.

Housing Need by Income

The housing units needed to meet demand are not allocated evenly across household income categories. Households that earn less than the area median income – a standard comparative measure of earnings in a community – are more likely to need a housing intervention. As seen in the supply analysis below, the housing market is building units in Boise. However, available research suggests that these newly developed units are more likely to attract higher-income households.

^{*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: American Community Survey/Census and Homeless Management Information System}

Supply Analysis

The population growth of the Treasure Valley has coincided with peak season for housing development. The analysis, in addition to considering the need for housing over the next decade, matched the demand with the current supply of housing.

To fully comprehend the development patterns, a few housing types must be defined:

• 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 three years shows that development in Ada County has exceeded demand, while the City of Boise has not kept up with housing demand. As shown below, Ada County has seen significant development and has exceeded demand by 748 units over the last three years. Boise, however, has not kept up with the demand, producing 4,146 units less than the demand.

It should be noted that 2020 development occurred during an unprecedented global pandemic, brought on by the spread of COVID-19. This impacted development patterns significantly in the early and middle part of the year. However, 2021 preliminary data suggests that development has continued at even more aggressive levels than its 2019 pace, suggesting that the 2020 data could be an aberration and not a trend.

NUMBER OF UNITS NEEDED

NUMBER OF PERMITTED UNITS

^{Source: COMPASS Building Permitting open data
Development in Ada County produced 748 units above the need (2018-2020)}

To understand housing supply, it is necessary to understand how the new construction of units compares to units lost to demolition. Review of the permitting data demonstrates observable trends. Over the last 3 years, the number of permitted demoed units has represented roughly 5% of the newly constructed units. In other words, for every 100 units created in Boise, five will be lost to demolition. This may not necessarily be a negative trend, because one parcel of land could demolish one unit of housing and develop 10 new units, for a net gain of nine units. It is integral for policymakers, as demo permits are reviewed, to consider how incentives and zoning regulations can be used to ensure that demolition contributes to a net gain of housing units.

DEVELOPMENT TRENDS

^{Source: COMPASS Building Permitting open data.}

New construction occurs across different housing types, as listed above. These trends illustrate strong growth in the multi-family market. This is a positive sign for meeting housing demand, given that multifamily construction is a denser housing form that uses less land to produce more units. The same is true with an increase in accessory dwelling units, which infill housing units on parcels.

NEW CONSTRUCTION TRENDS

^{Source: COMPASS Building Permitting open data.}

The Cost to Build Housing

Housing supply is heavily impacted by the cost of development, this includes the cost of construction, financing, and land acquisition. Nationally, the cost of development, according to the Nationwide Construction Price Index, has increased by 30% in the past five years. Interviews with developers in Idaho suggest that these numbers are a lagging indicator, and that the state has seen even quicker appreciation in the last 18 months.

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 and rental costs are therefore directly related.

Based on an estimate of the cost to develop one housing unit determined through a pro forma review and interviews with developers, the analysis projects the cost to fill all housing needs in Boise as follows:

• Number of units needed annually (over the next decade) for those earning
  less than 80% area median income: 2,145
• Estimated cost to develop one unit: $230,000
• Annual development cost to fulfill affordable housing need: $493M
• Cost of development over 10 years to fulfill affordable housing need: $4.9B

NOTE: The cost of developing one unit depends on many factors. The above figure is based on current development assumptions. The cost will not be consistent over a 10-year period.

Land Analysis

The analysis reviewed the current vacant and underutilized land in each Boise neighborhood to understand the opportunities and challenges in developing enough land to meet the demand for housing over the next 10 years. It is significant to note that the analysis was not intended to recommend specific plots of land for development, only to consider trends in vacant and underutilized spaces. The analysis finds that increased utilization of existing land is necessary to meet projected housing needs over the next ten years. Work in housing and land use must remain consistent with the goals and actions in the City of Boise’s Climate Action Plan, so that all tactics on land development can be supportive of nurturing a healthy and livable planet.

Specialized Populations

Housing crises are not felt equally by all populations, and some populations bear the brunt of this crisis more than others. There are several populations that should be considered specialized populations and warrant focused goals and actions by the city:

• Minority populations
• Students
• Refugee communities
• Households experiencing homelessness

Neighborhoods with a >20% Minority Population

A key question emerged during the analysis: is there a noticeable variance in housing characteristics in neighborhoods that have a larger population of minority demographics? The data below points to key differences in neighborhoods with a larger minority population, including lower-median home values, lower rates of owner-occupied units, lower-median household income, and a slightly smaller household size.

The findings in this comparison are shown below:

• Average median home value: $214,644 compared to $277,980 citywide
• Owner occupied: 40% compared to 60% citywide
• Median household income: $42,031 compared to $64,094 citywide
• Average household size: 2.11 compared to 2.28 citywide

Student Housing Demand

Students living in Boise are a special population that have unique housing needs. Boise State University is increasing its planning for student (and faculty and staff) housing needs and integration with the campus’ surrounding neighborhoods.

Key findings for the Boise State population are below:

• In 2018, Boise State enrolled ~3,000 more students than in the preceding years. This created a housing shortage with an unserved waitlist of over 385 students in 2019.
• Recent studies show sufficient demand for a 500-bed housing project.
• The University is short approximately 500 traditional beds and 1,000 apartment beds.
• Phase 2 of the University’s housing analysis will provide more information.
• Housing needs of other institutions including College of Western Idaho, University of Idaho, and other trade schools should be considered.

Refugee Communities

Boise’s welcoming spirit is a core value of its community and has led to international recognition and appreciation as a resettlement location for refugees coming into the United States. This is visible in the accreditation by the Welcoming American in 2019 certifying the City of Boise as a “Welcoming Community.” The number of refugees resettled in Boise is determined in relation to the national cap – the United States resettlement cap was raised to 62,500 in 2021.

The cap increase is likely to drastically increase Boise’s resettlement in the coming years. For instance, the state of Idaho saw roughly 330 refugees resettled in FY20. It is projected, based on national estimates and local interviews, 1,400 refugees will be resettled in Idaho in FY21. For housing considerations, this translates to an increased housing demand of 1,000 units per year, in addition to the housing need identified in this analysis.

Neighbors United, the Treasure Valley partnership serving our refugee communities, convened a housing taskforce beginning in May 2021 to address this issue.

Homelessness

Our Path Home, the partnership striving to end homelessness in Ada County, has developed a Supportive Housing Plan which addresses the housing needs of households experiencing homelessness.

This plan recognizes the specific housing considerations for people experiencing homelessness:

• Supportive services: It is imperative to connect permanent housing with trauma-informed services to maintain stable housing.
• Affordable units: A very large majority of households experiencing homelessness are earning <30% AMI. Therefore, accessible, affordable housing is critical for these households to retain housing.
• Transit corridors: It is conducive to build housing along public transit routes to enhance accessibility to medical care, childcare, schools, employment, and more.

Each of these considerations will positively impact the lives of those experiencing homelessness and create opportunity for these individuals and families to climb out of poverty. In 2021, the City of Boise, as the lead agency of Our Path Home, commissioned a national expert, the Corporation for Supportive Housing, to conduct a supportive housing needs analysis and action plan.

Conclusion

The current climate of the housing market in Boise, developed from a significant increase in demand for housing compounded with recent construction of units unable to meet this demand, has triggered a need to develop strategy to ensure there is sufficient and affordable housing in the area. This is illuminated in the construction constraints for affordable housing due to building costs, as well as the lack of available land and the need for denser development. This strategy must include considerations for specialized populations to ensure that there are sufficient units being considered, as well as affordable options to prevent further hardship on these populations. To stay relevant to ongoing conditions, this report should be updated annually.

Documents

• Housing Needs Analysis Report (PDF)
• Appendix