You've no doubt heard the news, maybe even seen it on your street. The Portland region is growing – and so are the numbers of houses, apartments and condos all over the place.
Yet two things also seem clear as the region adds tens of thousands of residents annually: housing supply isn't keeping pace with growth, and housing prices are increasingly out of reach for many middle- and low-income residents. Many people are having trouble finding places to live that fit their budget and their needs.
Why?
There are, of course, many things that affect what gets built and where. But if you care about housing availability and affordability, here are a few things to consider. None has an easy solution, but each raises tough questions for policy makers, community advocates and the private sector alike.
Building the basic ingredients of a community – streets, schools, pipes and parks – can add up to millions of dollars, especially in new urban areas.
The basic ingredients
What it is: No house is an island. Communities need water, sewer and storm water pipes, streets, transit, sidewalks, parks and schools to function.
Why it's a challenge: Many communities around the region need these things built, maintained or replaced before additional housing can be built. It all costs money, and there's often not clear agreement about who should pay – developers, taxpayers or people who buy new homes.
The 2014 urban growth report, which will help guide the Metro Council's decision this year about the urban growth boundary, concludes cities and counties in the region have zoned more than enough land within the existing urban growth boundary for all the residential growth expected for 20 years. But getting that land ready for development is another matter.
This is a common problem in areas at the region's edges. 31,400 acres have been added to the region's original 1979 urban growth boundary – an area larger than the cities of Hillsboro and Gresham combined, most of it for housing. But many of those acres have been slow to develop. In fact, from 1998 to 2012, 16 times as many new housing units were built in the original urban growth boundary as in expansion areas.
Infrastructure costs are one of the main reasons for sluggish growth in new urban areas. For example, a recent estimate in the South Hillsboro expansion area estimated that $297 million would be needed just for roads in the proposed 8,000-home development, along with another $99 million for parks and $110 million for water and sewers. That could mean as much as $41,000 in infrastructure costs per house – costs likely to be passed on to homebuyers. Similar infrastructure cost challenges are concerns in Beaverton's South Cooper Mountain and Tigard's River Terrace, two other recent expansion areas.
Local governments often tack a variety of fees onto development permits to pay for these projects, which can find their way into new housing prices. In some cases, they may prevent projects from moving ahead at all, further constraining supply.
Even for projects in existing communities like Portland, infrastructure costs can be significant, as developers must pay for the impacts planners expect their development will have on streets, parks and wastewater facilities. However, on a per-unit basis, these are often lower. In fact, some developers prefer to work in existing communities for this very reason, said Eric Cress, a principal with Urban Development Partners, which focuses on mixed-use projects in the urban core.
Key question: How can we fund infrastructure needed to support new homes and communities, while keeping new housing accessible to people of various incomes and household sizes?
New development – particularly in existing communities – can heighten anxiety along with roof lines. Though existing neighbors might like some of what it brings, how can concerns be balanced with the ability to make a project work?
Neighborhood concerns
What it is: Every day, new people move here and babies are born in local hospitals. They all have to live somewhere. Two decades ago, people in the region decided most new homes should be built within existing downtowns, main streets and near transit instead of paving over farm and forest land. Current trends indicate that's also where people increasingly prefer to live, but those same trends can raise concerns among existing residents about what it will mean for livability.
Why it's a challenge: It’s not always easy to see neighborhoods change. We might like being able to walk to a new store or restaurant, and the new neighbors might even be nice. But sometimes those changes mean more traffic on the street, tighter neighborhood parking, even losing favorite trees or open space. They can also raise very real concerns of displacement of existing residents, though displacement also happens without new development.
Sometimes, reactions to change can curtail the construction of new housing, or drive up the cost of new units by requiring expensive add-ons like additional structured parking. Some advocates blame soaring housing costs in the San Francisco Bay Area on these dynamics, for example.
This has been an issue in many inner neighborhoods across the region, but especially in Portland. Regional growth forecasts suggest most new housing through 2035 will be built within Portland city limits. These kinds of numbers can raise concerns for nearby neighbors. Similar concerns have been raised about proposed development in Lake Oswego, West Linn and Gresham, among other communities.
Developers report that neighborhood opposition rarely kills a major project outright, but can affect where they will decide to build next. And some worry that neighborhood opposition could lead to some areas receiving lower-density zoning than they've had historically. "That's a disturbing trend to me," said one developer who asked not to be named. "Certainly we need to balance neighborhood scale with character, but when it comes to affordability, one of the ways to deal with that is to build more units on a given site."
On the other hand, neighborhood opposition can be overstated; a vocal minority can grab a lot of attention even if most of their neighbors are fine with or even welcome new development. And on a broader level, considerable majorities of the region's residents still say they prefer to protect farmland and focus growth inward.
Plus, constructive input from nearby neighborhoods can sometimes make projects better, said developer Noel Johnson of Killian Pacific, who is leading a large mixed-use project in Portland's Buckman neighborhood. Thanks to neighborhood input, he said, "the project got better, though it did take a little longer to go through."
Key question: What are the best ways to allow new housing to be built in appropriate places while also protecting and enhancing what we love about our communities?
Whether you're a buyer or a builder, chances are you'll need help from a bank to make your housing dreams happen. But finding financing -- particularly for certain types of housing -- can be a challenge that holds new construction back.
Finding funds
What it is: Whether you’re a developer contemplating building new housing or a prospective home buyer, you’ll probably be looking for a loan. But if private financing is hard to find, it's harder to build and buy housing – particularly certain kinds of housing.
For affordable housing developers, public financing like tax credits or grants tends to be crucial to making projects possible. But affordable housing advocates say public sources of affordable housing revenue are not keeping pace with demand.
Why it's a problem: Most of us aren't sitting on piles of cash, so we need credit to help pursue our plans. When credit is hard to access, options are more limited. That's as true of builders as it is of buyers, and the lending world is still recovering from the crippling recession. And without sufficient public financing for affordable housing, the supply of subsidized or below-market units is severely constrained – leading to years-long waiting lists for many of these homes.
Private developers report this was more of a problem during the Great Recession. Financing has eased up quite a bit since then. But many lenders tend to want to play it safe, meaning that it's harder to build housing less common to our region – like townhomes, duplexes or other middle-density homes.
Despite a rosier picture for for-profit developers, affordable housing providers say they're struggling to get enough public financing to make their projects possible anywhere in the region. "You can borrow (from banks), that's not a problem," said Maxine Fitzpatrick, executive director of nonprofit Portland Community Reinvestment Initiative, which has a campaign called Pathway 1000 to build 1,000 homes in North/Northeast Portland to bring back displaced residents to their former neighborhoods . "But we could do a lot more if there was more (public money) available to do it with."
Key question: How can we build more public and private avenues to financing home building and buying – particularly for more affordable housing types and people with low to moderate incomes?
Every community has good reason to add conditions to building permits. But processing those permits takes time, which can delay housing from being built where it's needed most.
Getting approved
What it is: Every community in the region has good reasons to regulate what gets built in its neighborhoods, whether new or old. Builders need a variety of local permits and approvals to build, which can be different in every community and for every project. But in times of high demand, local governments can be stretched to keep up with demand, creating a bottleneck that holds up new housing.
Some of the conditions on local permits (or more specifically, on the zoning codes that influence them) can also constrain what gets built – like regulations that can prevent middle-density options like duplexes from being built in neighborhoods, as developer Eli Spevak pointed out on a June tour in Portland.
Why it's a problem: Every week of delay on a project can drive up costs and unpredictability can even cause developers and financers to drop projects altogether. That could add up to fewer new homes right when people need them most.
Builders report delays in many cities experiencing major growth in the region, particularly due to some lag in hiring municipal employees to staff permitting departments that shrank during the recession.
"Added time equals additional costs," said developer Ben Gates. "It could change the feasibility equation."
Gates and other developers are also quick to note there are good reasons for the process, but say it would be nice to see it be more predictable and streamlined when possible.
Key question: What are smart ways to improve permitting processes while protecting the fundamental purpose of community review and regulation?
Despite high regional demand for housing, market demand can be uneven between communities. That's a challenge for increasing overall supply, but potentially an opportunity to plan ahead to preserve affordability.
Demand gaps
What it is: There are numerous examples of vacant land and dilapidated buildings around the region. Many of us pass these places daily and wonder: why is new housing not being built there? One reason can simply be low demand: builders can't make projects profitable, usually because the market won't support rents or housing prices needed to pay for developing a project that fits a community's local vision.
Why it's a challenge, and a potential opportunity: Vacant land and dilapidated buildings can be eyesores, bring down the value of nearby housing and depress the market in a particular neighborhood even more. The market can be fickle and it can sometimes be slow.
Sometimes it’s a matter of waiting for more population to create the demand for new housing. Other times, there are things that the public sector could do to make areas more appealing for investment – like cleaning up polluted sites, storefront improvements or investing in schools, parks, roads and transit. But as with other costs, who should pay for these is always challenging.
Low-market areas can also present an opportunity, though. Since land is cheaper, affordable housing agencies, nonprofits or governments could find it easier to "bank" land for affordable housing development, purchasing it before the market picks up. Fitzpatrick pointed to neighborhoods like Cully in Northeast Portland, where neighbors and advocates are developing strategies to fight displacement before the big wave of redevelopment arrives, as opposed to inner Northeast Portland neighborhoods like the ones Fitzpatrick works in, which have seen displacement for longer. "What we're dealing with is mitigating the displacement already happening," she said. "Those neighborhoods are working on preventing it."
Key question: What's the proper role of the public sector in nudging the market toward developing sites that may be viewed as lower-demand or less profitable? How can affordable housing advocates take advantage of these areas at the right time to build affordable housing before the market picks up?
Neighborhoods that are walkable and near transit are in hot demand around the region. That can lead to confusion about whether new development is causing higher rents or responding to them.
Hot 'hoods
What it is: In some of the region's most popular neighborhoods, market demand seems to be driving rapid change and development, to the point of demolishing houses that seem perfectly fine and replacing them with a more expensive house, several smaller houses or an apartment complex. But housing in the region's most popular neighborhoods is often still not being built as quickly as needed to keep up with people who want to live there.
Why it's a problem: Walkable, close-to-transit neighborhoods are in high demand throughout the region and nationally. There are only so many established neighborhoods in the region that currently provide these kinds of amenities; thus demand in those areas is particularly high.
On a recent episode of OPB's Think Out Loud, chief Portland planner Joe Zehnder suggested that new development was often being blamed for rising housing costs when it fact it is more a symptom of it. If housing in high-demand areas can't be built quickly enough, then rents and for-sale prices will rise dramatically.
Housing gets less affordable as buyers and renters compete for a place to live, and it also contributes to displacement of long-time residents who suddenly find rental prices rising faster than they can keep up.
“It’s like musical chairs,” economist Joe Cortright told Willamette Week in June. “If you don’t add more chairs to the game, people get squeezed out of the game.”
Unfortunately, this phenomenon can also exacerbate growing concerns about inequity in the region, as people of color and lower-income residents are particularly susceptible, because there is less room in their budget for increased rents.
Some advocate for requiring developers to include some affordable units in new market-rate developments – a policy known as "inclusionary zoning." Others say such a policy will have less effect on housing affordability than simply building more housing through both private and public funding, or a voluntary approach that might offer tax credits for developers who choose to include more affordable housing in their projects.
Either way, inclusionary zoning is a tool that can't even be tried here. Oregon is one of two states where inclusionary zoning is illegal – and efforts to change the law in the Oregon Legislature have repeatedly stalled.
Key question: What needs to be done to create more housing in those locations and ensure that more is affordable?, while also protecting the qualities people value about these neighborhoods and helping keep existing residents in their homes?
If you can afford a mortgage or the rent but have to drive a long way to get to work or other destinations -- is your home really affordable? The cost of transportation is often overlooked in housing affordability, but plays a major role.
Beyond rent: paying at the pump and by the clock
What it is: If you can afford a house but have to drive an hour to work and spend hundreds of dollars on gas monthly, is that house really affordable? Transportation costs are usually a household’s second biggest expense after rent or the mortgage. But housing costs are sometimes discussed in isolation, obscuring the crucial role of transportation in affordability.
Why it's a challenge: Displacement and limited affordable housing options are driving some of the region's middle- and low-income residents to further-out neighborhoods with transportation systems largely designed for automobiles. This adds up to a lot more cost in dollars and time, as well as bigger safety risks, for people who must get to work, school or other places – whether they drive, take transit, walk or bike.
It's important not to overlook the cost in time, Fitzpatrick and others note. More time in a long commute is less time helping kids with homework, cooking healthy meals, exercising or socializing with friends. Less time for all those things can compound the effects of poverty. A comprehensive understanding of housing affordability and equity thus has to take these costs into account.
The region's strongest belts of housing affordability stretch from northern Clackamas County northeast through East Portland and Gresham, and from northern Tigard through Aloha-Reedville to Cornelius. It also happens that these areas have some of the most disconnected street networks with the least-safe places to walk and bike, and often subpar transit service. For residents, that can mean a longer, more costly and less safe commute.
Key question: How can we ensure a better balance between better housing affordability and better, more reliable transportation choices? How can we help people live closer to where they need to go so their trips can be shorter, be open to more options and save time?