Jon Bell wrote an interesting post in this past week’s Portland Business Journal that highlight the underlying or root cause of the run-up in both home prices and rents.
The average Portland home price is roughly 44% higher than the national average, and the average apartment rent is a whopping 150% higher than the national average. That’s right sports-fans, by this metric, rents are 3 times more inflated than home prices. No wonder there has been so much recent discussion about rent-control, and new legislation designed to help tenants.
The recent landlord ordinance is in effect as long as Portland remains in it’s current “Housing Emergency (declared in 2015 and extended, currently through Fall 2017). Jan Bell’s April 7 article in the Portland Business Journal makes a renewed argument that Metro should expand the Urban Growth Boundary.
The roots of the current housing situation can be traced to the housing and financial crisis of 2008. Portland’s recovery is yet incomplete: The Oregon Office of Economic Analysis created the following chart which demonstrates that we we are “under-built” by approximately 27,000 homes over the past 10 years.
At the same time we’ve lagged historical building rates by these 27,000 homes, we’ve added almost 200,000 people to Portland. The types of homes that have been built, and are currently in the planning pipeline are a mis-match with the biggest need for a city with a housing emergency: affordable housing.
“Building dense, multi-family apartments in inner southeast Portland is expensive – and so in turn, are the rents – and building such developments farther out can be even more economically challenging since the costs are the same and the rents are lower.” (Gerard Milner – PSU).
Milner argues that there is simply no way for Portland to overcome the the affordability issues we face without making an expansion to the Urban Growth Boundary (UGB) part of the solution.
We know from the latest round of expansion to the UGB in South Hillsboro that this “aint so simple.” The South Hillsboro project was delayed by over a year while the city worked out other infrastructure needs, like roads and schools.
Given the supply challenges in our market, it’s hard for us to see a scenario where Portland real estate does not continue to out-pace most of the other markets in the Case Schiller index, and the national market. We’d love to hear your comments about the current shortfall, the implications on land-lords, and any thought you might have for longer term real estate to purchase now in anticipation of future development.
*Thanks to Great Guys Moving for use of their infographic in this article. If you need help moving, check them out at http://greatguysmoving.com/portland-long-distance-moving-services/.