The construction industry in Anchorage lost 600 jobs in 2020. It was down from 7,800 in 2019 to 7,200. Most of that loss was in the commercial sector. In its January 2021 Jobs Forecast, Alaska Economic Trends reported that two of the three new hotels that had planned to break ground in 2020 stalled with the loss of tourism. In addition, the rise of e-commerce curtailed retail-related and other commercial construction projects. But the negative commercial downturn contrasts sharply with the uptick in residential construction. In 2020 there were 202 single family permits compared to 185 in the previous year. Although the unit number is somewhat encouraging what is much more significant is that December’s 2020 average permit value was $583,066 which does not include the cost of the lot. Plus, December 2020 had 14 permits compared to 7 in 2019. This was despite the added cost for heating and tenting foundations that most buyers and builders usually try to avoid. The rush for December digs can be attributed to our current historic low interest rates and the desire to get in the ground with a six month interest rate lock before mortgage rates go up which they inevitably will do this year.
Residential construction has a significant impact on a local economy but that impact varies on the type of residential dwelling. According to national statistics from the National Association of Home Builders, the average single family home contributes to 2.90 jobs and over $129,647 in taxes. Not so for apartments which is 1.25 jobs and $55,909 in taxes. A $100,000 spent on remodeling contributes even less with 0.75 jobs and an additional $29,797 taxes. So it stands to reason, if Anchorage wants to increase its economy, we need to do more than build apartments which has less than half the economic value of a single family home. Whether it was intuitive or purposeful, the Mat-Su Borough figured out the impact of single family home building over five years ago. New construction starts for single family homes is double Anchorage’s production and has been for the past several years.
Providing more residential units begins always with residential land development and, for disclosure purposes, I am one of those ‘developers’. The MOA made a good jump start to encourage single family development by pro-rating the value of the tract for taxes rather than on the fully improved lots. The assembly also eliminated from the international fire code the need for interior sprinkles in new homes, a cost saving of upwards of $15,000. But there is more that can be done. The creation of mixed residential zoning in a single family subdivision, and by that I mean, adding somewhere between four and six attached units in a single family community would slowly add housing units and create more diversity within the community. Licensed professionally designated engineers design our residential roads, water and sewer and are required to carry errors and omissions insurance. Yet, their plans have a time consuming submittal and review process by MOA staff that may or may not have the same professional training or experience. An independent third party review home builders are allowed to use to speed up the permit should also be allowed for land developers and their engineers. This could potentially be a cost savings of $25,000 or more due to delays.
As always thank you for your many buyer and seller referrals. Helping people with their real estate needs is one of the most rewarding professions anyone is lucky enough to have. After all, home ownership is and always will be part of the American dream. Please feel free to connect with me at 907-229-2703 via cell/text. Thank you.