Two seemingly outlandish land deals made headlines this month in the Treasure Valley.
Corey Barton, of CBH Homes, bought 282 acres of state farmland near Caldwell for $36.6 million, or about $130,000 per acre.
Matt Bauscher, a partner in a Boise-based real estate brokerage, bought 34.5 acres of parkland owned by the city of Eagle for $9.1 million at auction. That’s nearly $264,000 per acre.
You might look at these most recent land deals and think this is going to push up the cost of houses and make things worse for housing affordability. In reality, it will have the opposite effect.
While the recent sales are a sign of the Boise area’s red-hot housing market, the reality is building million-dollar homes actually will help our affordable housing crisis.
It’s all a matter of supply and demand.
Consider this: A few months ago, Idaho Statesman reporter John Sowell wrote a story about a house in Meridian selling for $1.05 million, nearly double its assessed value of $534,000.
The only reason a half-million-dollar house sold for a million dollars is because the supply of million-dollar houses is limited. Someone with a budget of $1 million was willing to pay $1 million for the best available house they could find.
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If Corey Barton and Matt Bauscher build a bunch of million-dollar houses on their newly acquired properties, that will meet a demand that’s clearly already out there.
And those million-dollar homebuyers will go there instead of snatching up a half-million-dollar house in Meridian.
With less demand, a $534,000 house in Meridian is more likely to go for — you guessed it — $534,000.
It’s somewhat of a simplification, and to be clear, we need more housing across the board, not just million-dollar houses. But the fact remains that home prices here are going up because demand is higher than the supply.
“Boise was popular before COVID, and then in the wake of COVID, Boise and the Treasure Valley have become more popular for people to live,” said Daniel Malarkey, senior fellow at the Sightline Institute, a think tank that analyzes energy, economic, and environmental policy in the Pacific Northwest, in a phone interview. “People are moving here, and we have to build housing for them.”
And demand is outstripping supply at all levels, from the lower-end starter homes all the way up to million-dollar homes.
New housing at top of market
It might seem counterintuitive, but building more expensive homes actually makes other homes more affordable.
“Most new housing comes in at the top of the market, so you add housing at the top of the market and then people move, and then you create affordability,” said Malarkey, who also volunteers on Boise Mayor Lauren McLean’s Economic Recovery Task Force and on the city’s zoning rewrite committee.
Malarkey points to a 2019 study by the Upjohn Institute that showed that 100 units of market-rate housing in central cities create 70 new vacancies at below-median rents and 39 vacancies at rents in the bottom fifth.
That’s because people move into that new market-rate housing, leaving behind their old place to be sold or rented at a lower price.
“And that is a more affordable unit, and also that unit is now 10, 20, 30 years old, so it’s further out and it’s an older unit,” Malarkey said. “And so it’s affordable for a young person who just graduated from high school and their friends. That’s where they can afford to live. Because the people that are living there can now afford to move into downtown Boise, because they’re 10 years into their career and they can afford that.”
Same thing with the chain of buying a house in the Treasure Valley.
For sure, we need more housing at all levels, but building million-dollar homes is satisfying a demand, too, and that makes housing more affordable down the chain.
So while those two recent land deals are eye-popping and may appear to hurt efforts toward affordable housing, they actually will help.
Scott McIntosh is the opinion editor of the Idaho Statesman. You can email him at firstname.lastname@example.org or call him at 208-377-6202. Follow him on Twitter @ScottMcIntosh12.