Stats and stories from a changing Portland region.
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Almost daily, the stories shout from greater Portland's newspapers and screens. Evictions, rent hikes, struggling first-time home buyers. Rallies, hearings and government responses. Housing has long been a hot topic in Portland, but it seems to burn more people with each passing day.
So why are we struggling so much with housing costs in this region, and what can be done? Are there signs of hope? Here are some things to know about affording a home in the Portland region today.
1. Quality of life, prosperity and affordability: Choose two?
It's a simple fact: Our population grew during the Great Recession, but housing production stalled. From 2006 to 2015, the region underbuilt by about 22,000 units relative to the population growth.
The region's growth has possibly made us a victim of what Oregon economist Josh Lehner calls the Housing Trilemma: The idea that there are tradeoffs between quality of life, economic strength and affordability. Success in two of these areas is matched by a decline in the third, Lehner asserts, based on analysis of cities around the country.
Here in greater Portland, we've planned for decades to achieve the walkable, livable communities that have given the region a reputation for having a very high quality of life. We’ve also experienced a strong economic rebound from the Great Recession, increasing the median income and adding twice as many jobs as we had lost.
But as we’ve been successful in these two areas, we’ve seen our region’s affordability slipping away. One of the ways we experience that change most acutely is in housing costs. Costs go up when there are more people looking for housing than there are places to live.
Permits lagged far behind population growth during the Recession. The good news is builders are finally adding new housing at about the same clip as population growth, but there's still a big backlog to fill.
Census estimates say the region built about 5,300 new units of multifamily housing and 8,600 single family homes in 2015. Most of these multifamily units are concentrated in inner Portland, while the majority of the single family housing has been built in the suburbs such as Washington County, Wilsonville and Vancouver. (That said, the city of Portland is also adding single-family homes, ranking third among area jurisdictions in single-family permits in the first half of 2016.)
Map: Portland-area housing permits, January-June 2016
The map below shows where housing was permitted in the first six months of 2016. Orange circles represent apartments, duplexes and condos. Blue circles represent detached houses and townhomes.
2. Rents and home prices are going up – but renters may be squeezed hardest.
Soaring rents, declining homeownership rates, rising home prices and falling vacancy rates: These themes that have created housing crisis headlines here are all in line with broader trends that are playing out nationally. Our region, however, has been experiencing them more intensely.
Home prices were at an all-time high in 2006, and then abruptly they were not. Both the national and regional housing markets began to recover from the subsequent housing crash and Great Recession around 2011. Unlike national home prices, which (when adjusted for inflation) have started to settle around 20 percent below peak levels, the Portland market maintained momentum and is fast approaching the prices at the bursting point of the bubble.
The contrast between the Recession trough just 5 years ago and today is sharp. According to Zillow, a person looking to buy a home in 2011 would be looking at a median list price of around $195,000. If they were looking today, that median list price would be $369,500 – almost a 90% increase.
Of course, there is considerable variation in home prices throughout the region – some areas, like inner Portland, have risen much faster than others. And, things get more complicated when you account for the fact that existing homeowners want their home values to increase.
Unlike home sale prices, the region’s rental prices stayed relatively stable through most of the Recession. When the recovery began in earnest in 2012, rents were already nearly 20 percent higher than they had been in 2006.
Like most of the nation, greater Portland had been under-building housing during the Recession, but that didn’t slow the influx of newcomers who continued to migrate here. As more people moved to the area, apartment vacancy rates dropped to among the lowest in the nation. Our for-sale inventory also remains lower than the national average.
And as demand increased, so did prices. Between 2006 and 2015, rents in the Portland metropolitan area increased 63 percent.
Renter incomes have not kept pace with those surging rents; in that same time period, renter incomes increased just 39 percent. The median renter income is also about half that of the median homeowner. A person would have to earn an hourly wage of $19.73 – approximately twice Oregon’s current minimum wage of $9.75 per hour – to afford fair market rent for a 2-bedroom apartment.
Homeowner incomes, on the other hand, rose more quickly than home prices, though one still needs to earn considerably more than the median income to afford to buy a home in much of greater Portland.
3. “Affordability” – It’s all relative.
While the recent increases in housing costs may seem exorbitant to many long-time residents, the Portland area still looks like a bargain deal compared to other metropolitan regions, particularly those on the West Coast. Places like Los Angeles and San Francisco that have contributed thousands of new migrants to the Portland region in the past few years are used to seeing home sale prices more than double ours.
Their higher home costs are generally accompanied by higher incomes, of course. For example, San Francisco’s median home sale price is more than $400,000 higher than Portland’s, but its median household income is also about $25,000 greater as well.
But those higher incomes aren’t necessarily proportional to home prices. One way of comparing housing affordability between cities is to look at the price-to-income ratio – the years of median income that it would take to purchase a median-priced home in a community.
In greater Portland, it would take 4.7 years of the median income to purchase a median-priced home. That’s quite high compared to the top 100 most populated metro regions in the county: In 2015, Portland ranked 11th nationally, up from 15th in 2014.
Portland’s ratio is still considerably lower than the places that have contributed the most new migrants to our region, including many California metro areas. That relative affordability is one of the biggest drivers of migration to our region.
But being more affordable than some other metro area is little consolation to people who have watched housing prices move beyond their reach in greater Portland.
4. Wealthier newcomers means more expensive new housing.
Much of the Portland area’s recent housing development has been driven by growth in high-wage jobs and people moving here from more expensive places. That’s affected what kind of housing gets built.
From 2010 to 2014, the 3-county Portland region – Clackamas, Multnomah and Washington counties – gained 37,850 new households. A full 70 percent of those additional households earn more than $100,000 a year – well above the regional median of $63,850.
New construction adds to the overall supply of housing and can relieve demand that drives up prices. But most private developers respond to what new, relatively well-off households can afford.
Nearly everyone sees a need for new housing affordable to all income levels – particularly for the lowest-income households, which have also grown recently. With a lack of incentives to do otherwise, however, private developers naturally focus on where they can earn the most – with houses and apartments intended for higher-income people.
That’s a key reason advocates say government must either incentivize, fund or require private and nonprofit developers to create more housing that’s affordable to all income brackets.
5. The public sector can help, but the gap is huge.
Local governments are taking action to preserve affordability in greater Portland. For example, several communities have been considering easing restrictions on multi-unit housing types such as duplexes and fourplexes that could put more lower-priced units into the market.
And in April, the Legislature reversed a ban to allow local governments to establish inclusionary zoning policies and construction excise taxes, two measures that tie development of new market-rate housing to the creation of new regulated affordable housing units. (To date, only the city of Portland has moved toward doing this in the Portland region.)
Local governments, often in partnership with nonprofits and advocacy groups, also provide regulated affordable housing that is reserved for people below certain income levels. According to the recently published update of Metro’s Affordable Housing Inventory, we have approximately 40,000 of these regulated housing units in Multnomah, Clackamas, Clark and Washington counties – an increase of nearly 2,500 units since 2011. The majority of the new units – nearly 1,900 – were added within the city of Portland.
But the region’s housing challenges often exceed our ability to address them with conventional solutions. Washington County had to return more than $221,742 in federal rent assistance in 2015 because of a lack of affordable supply.
Most voucher-holders pay around 30 percent of their income on rent, with the federal government picking up the rest of the tab – up to a limit that's typically set for an entire metro area. Seeking to make sure the vouchers still work as rents spike in Portland, Home Forward, which administers the program in Multnomah County, successfully sought more flexibility from federal housing authorities to allow higher subsidies in more expensive neighborhoods.
There are roughly 14,300 Section 8 vouchers in the three-county region, an increase of about 675 since 2011. The map below shows where Section 8 voucher-holders were living in June 2016, compared to the average rent in each neighborhood.
The combined total of regulated and low-cost market-rate housing falls far below the needs of the 185,000 households in the four-county region that earn less than 60 percent of the median income. The region is short more than 80,000 units of housing affordable to these households – and demand is building for government, private and nonprofit sectors to find solutions.
Metro is playing a role with its Equitable Housing Initiative – which, among other programs, will provide at least $500,000 in grants this year to help local governments reduce barriers to building more housing that's affordable to people of all incomes. And this month Metro received an $890,000 grant from the federal government to develop an equitable housing and jobs strategy as transit planning continues in the Southwest Corridor between Portland and Tualatin.
6. People experiencing homelessness are more visible, but not necessarily more numerous.
Insufficient income and not enough affordable housing are the most commonly cited causes of homelessness, according to the National Law Center on Homelessness and Poverty. So has an increase in homelessness accompanied the current housing affordability crisis? News reports and anecdotes from throughout the region suggest it has.
But data tell a different story. The most recent data from the Portland area's four urban counties suggests that while the size of homeless populations fluctuates from year to year, the long-term size of the population is surprisingly stable. For example, based on its biennial Point-in-Time counts, Multnomah County’s total number of homeless individuals in 2015 is roughly the same as it was in 2004. Clark County saw a slight decrease in its unsheltered population from 2014 to 2015.
The Point-in-Time counts aren’t a perfect data source. They are conducted in January, meaning that there are no numbers for the summer months when homeless travelers augment the region’s resident populations. Counting methods have differed over the years as well, causing minor variations in year-to-year totals. Still, county and city staff suggest that it isn’t so much the size of the population that has changed as its visibility. As more vacant and underdeveloped land has developed, homeless individuals have lost the urban sanctuaries where they could once take shelter, forcing them into living in much more public spaces.
7. People pinched by housing costs spend more income on housing, move – or both.
Although some families may move away entirely, most residents in the greater Portland area faced with rising housing costs will take on the increase and adjust other spending accordingly.
The US Housing and Urban Development Department describes families as being housing cost burdened if they spend more than 30 percent of their income on housing, beyond which they may have difficulty affording necessities such as food, clothing, transportation and medical care.
Renters spend more of their income on housing than homeowners do, in large part due to lower incomes. Most renters make less than 60 percent of the area median income, but only 31 percent of available rental units in the region are affordable to them by HUD’s standard. The rest have to rent more expensive units.
The impact differs for people of different races and ethnicities. Just as Blacks, Latinos and Native Americans have lower incomes than Whites and Asians, they have higher housing cost burdens.
Others, unable to afford living in the region’s urban centers, have moved outward toward areas of the region with cheaper housing. Cheap housing comes with hidden costs, though. When you factor in the additional transportation costs – the increased costs of gas and car expenses or the extra time to bike, walk or take transit – a significant portion of the affordability benefits are lost if it requires long commutes.
Displacement has been worst among communities of color, leading to a shift in the racial geography of the region over the last decade.
Displacement is a geographic consequence of a series of systemic inequities that would not be entirely solved by creating more abundant, affordable housing close to the region’s city centers. But not providing it exacerbates community divisions, by putting some people further from resources, jobs and opportunities readily available in more walkable, transit-served areas.
And the impacts can be long-term. Displacement and housing stress can have wide-ranging impacts on health and well-being – impacts that can span generations.
So, what now?
The crisis is real and daunting. So what can be done?
Countless people, organizations and agencies are working on solutions. In the next part of this Regional Snapshot, we hear from a few leaders advocating for more places to call home, at prices people can afford.
Update, Nov. 15: This story has been corrected to update the type of federal housing funds returned by Washington County in 2015, as described in Section 5.