The Portland Conundrum 


Below is an eye-opening summary of the housing market in Portland, Oregon from the perspective of a new resident to the region, who also happens to be an urban planner and a friend of mine. The parallels to what we encountered in our move to Traverse City, Michigan (probably the hottest real estate market in Michigan), are quite striking, though the numbers here are not as extreme.

Affordable housing, a.k.a. “The Portland Conundrum,” has become a critical planning and socioeconomic issue in many hot real estate markets in the United States. Here in Traverse City, one can observe long, slender lines of traffic streaming into the city from less-costly communities further afield like Kalkaska, Kingsley, Maple City, or Cadillac each and every morning rush hour and the opposite on weekday evenings.

The story told below is certainly not exclusive to Portland, but poignantly personifies the problem(s) that many Americans face in the 21st century housing market. It is hoped that his story will better illuminate the problem while also leading to innovative and sustainable solutions that can be applied to communities across the nation.   Peace!

Rick B.

p.s. Here is a link to Bryan’s blog on Medium.

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“Previously I wrote about the trouble I’ve been having trying to buy a house in Portland. Although still somewhat sanely priced compared to other west coast cities, that is quickly changing as home prices skyrocket due in large part to the discovery of Portland by those in Silicon Valley who are opting to sell their homes in the Bay Area for a cool million or two and throwing down cash on anything that goes on the market here. This bonanza is forcing home buyers and renters of modest means out of the central city and into the farther reaches of the northern and eastern ends town, with some spillover occurring into more affluent Washington and Clackamas counties. Portland’s African-American population, which is already the smallest of any large city in the U.S. at just under 38,000 people, is being pushed out of the city entirely and into the burbs. Between 2000 and 2010 alone, nearly 10,000 people of color were forced to move out of Portland.

Just a couple years ago, prices were still affordable in the St. Johns neighborhood. This is the part of Portland that juts out to the north and west of downtown toward the confluence of the Willamette and Columbia Rivers, but that area has gentrified too, and those who have been priced out of St. Johns and other areas are now moving out to east Multnomah County, past I-205 toward Gresham. Some areas of the southeastern end of Portland are still somewhat affordable, such as in the Foster-Powell neighborhood and beyond, but that is changing fast.

As an example of the madness that is the Portland housing market, about a month ago I put an offer on a not-so-well-appointed 1920s bungalow that boasted a whopping 850 sq. ft. of living area in the heart of the St. Johns neighborhood. It also needed considerable rehab, but it had good bones and wasn’t entirely falling apart.

I was looking in St. Johns because it was once its own city before Portland subsumed it, so it has the feel of being a small town with a downtown-like area of its own complete with shops and restaurants and other urban amenities. And even though the transit out that way is not very good by any stretch of the imagination it would’ve been a manageable drive to work out in Hillsboro since the St. Johns bridge is the only crossing of the Willamette River that far north and there are a few roads that lead over the West Hills and through Forest Park. 

But I should’ve known better. New Seasons Market—Portlanders’ uber-expensive ‘buy local’ equivalent of Whole Foods—is putting in their newest store in St. Johns right now. By the time a New Seasons goes into a Portland neighborhood, it’s already too late for a growing number of would-be home buyers. I’m not sure where New Seasons’ market data for gentrifying neighborhoods comes from, but I’m certain their target market analysis includes categories for food carts, strollers, and hot yoga studios per capita. 

I showed up at the little bungalow with my realtor at about 6:00 pm the day it went on the market and not only did I have to wait for a young couple and their realtor to leave their showing, there were two other couples waiting behind me when I finished looking it over. I offered roughly ten percent more than the asking price when it went on the market on a Thursday, and by the following Monday the owner had 15 offers, two of which were around $120,000 over asking price, with a handful of cash offers. The winner took home the prize of a small and tired out old bungalow for the bargain price of just $355,000 cash.

On the east side, the housing stock in Portland transitions quickly on the approach to, and beyond, Interstate 205. Moving eastward the pre-WWII bungalows give way to post-war tract housing that lacks much character. Many neighborhoods out that way are full of smaller ranch-style houses and Cape Cods that were built to accommodate the G.I.s returning from war who were freshly equipped with the new-found purchasing power provided to them by government-backed home loans. Builders were quick to oblige, and the houses they built are no-frills utilitarian boxes of reasonable quality by today’s standards, but without the ornamental details of homes built just a couple of decades earlier. You see these houses in a lot of older inner-ring suburbs in the Midwest and Northeast. These houses are slightly wider along the road frontage than they are deep, an important design change that transformed the American landscape dramatically in concert with the Euclidean zoning that separated out “incompatible” land uses. Although this change was modest in the immediate post-war era, this was just the beginning of the suburban experiment that crescendoed with bucolic outer-ring suburbs with their houses on quarter-acre or even half-acre lots.

One important result of homes built on wider instead of deeper lots is that it takes much more infrastructure to accommodate fewer people, which is extremely costly to build and even more costly to maintain. Think of it this way: if there are 10 houses on a block front instead of 20, the road and sewer system and sidewalks cost twice as much per household to build and maintain. This form of development has been likened to a Ponzi scheme because the property taxes generated by this type of development don’t fully cover the costs of that infrastructure and it requires more and more development, and the subsequent tax dollars that new development provides, in order for cities to maintain the earlier infrastructure in those sprawled out hoods. 

The Oregon legislature, in an attempt to stem the tide of suburban sprawl that could be built in the agriculturally rich Willamette Valley, created an Urban Growth Boundary (UGB) in the late 1970s that put limits on the amount of land that could be developed. Anyone who has been to Phoenix, Arizona knows that there are major benefits to having a UGB. And the limitations the UGB put on land development wasn’t such a big deal until recent years as Portland has become a more desirable place to live.

For a city of its size, the Portland metro also has pretty good public transit with many bus routes and light rail lines for a metro of its size, and the city is actively encouraging higher density development along transit corridors. But supply is not coming close to keeping up with demand. This has had a considerable influence on the affordable housing crisis we are currently experiencing, and is only expected to get much worse as Portland tries to make room for 750,000 more people by 2035. This is the darker side to the UGB.

Metro, the regional government responsible for administering the UGB, is supposed to plan for a 20-year supply of developable land, and they maintain that housing developers just aren’t using the available land that exists. Trouble is, many of those undeveloped areas don’t have the infrastructure needed to support new development and system development charges (SDCs)—infrastructure costs passed on to developers by city and county governments—are astronomically expensive because the pricing is more in line with their actual costs. These charges are just smart business practice on the part of local governments, but it has resulted in major equity issues where low-to-moderate income households are finding it harder and harder to find places to live because of the lack of adequate supply and the added cost to those few homes that are actually built. Making matters worse, my nonprofit housing development partners are struggling to develop housing units because there either isn’t enough land in accessible locations, or there isn’t enough gap financing to make a deal pencil. Some of them are getting creative, such as REACH CDC, with their Orchards at Orenco development on the MAX line, making partnerships with for-profit construction companies in order to get land. Making matters worse, the City of Hillsboro is still requiring excessive amounts of parking in transit-oriented locations, which further takes up space that could be used for housing:

Orchards at Orenco Station, Phase II
Single-family homes in Portland are also being purchased by developers, who tear them down to build luxury condos and apartments. The City of Portland, in an attempt to increase the supply of housing, is in the process of relaxing standards on accessory dwelling units (ADUs) to incentivize homeowners to convert garages into apartments, or to allow owners to build units in their backyards. There is also a growing interest in supporting tiny homes and building micro apartments. However, work in these areas is slow going and is really more of a band-aid on the supply problem. 

Portland’s rental situation isn’t any better. Between February and March of 2016, Portland saw the greatest percentage increase in rent prices in the country, with average price of a one-bedroom apartment rising from $1,143 to $1,303, and the trend continues. Landlords all over are issuing no-cause evictions in order to rehab units to pull in much more rent, or to convert the units into condos. As a response, late last year the Oregon legislature passed a bill that restricted no-cause eviction notices to greater than 90 days, providing some relief. They also passed a bill that banned rent increases in the first year of month-to-month tenancy for Portland renters. This actually helped me this year as my 9-month lease was set to expire at the end of February and I was issued a notice that my rent would be going up 16%. The Oregon bill kicked in before my rent could be increased, thankfully. But that just means that if I were to stay here that my rent would likely go up by 30% or more at the end of another year. Thus, the reason I’ve been looking for a house to purchase. Not counting maintenance and repairs, in another year it will likely be more costly for me to rent my 500 sq. ft. apartment than it will be to pay a mortgage. 

Currently I live downtown Portland, where I’ve been for a little over a year, and I work in downtown Hillsboro. It’s about 15 miles as the crow flies, but about 22 miles by the fastest route. I had every intention of using the MAX light rail when I arrived in Portland, but it takes every bit of 55 minutes from Goose Hallow to Hillsboro, not counting walking to and from stations. All told, it’s about an hour and ten minutes to take the MAX one way. However, most days it only takes me 30 minutes to drive in the morning, and about 40 minutes back. So, I take the path of least resistance. What can I say, I like that extra 30 minutes of sleep and It’s the reverse commute to everyone else coming into Portland in the morning. 

Due to my work out in Washington County, it was nonsensical for me to try and buy a house out in east Multnomah County because it would take me an hour and a half to drive to Hillsboro. Even though where I work is far more suburban and doesn’t have the “cool factor” of a Portland address, or the historic neighborhoods, it just makes the most sense for my situation. Still, I didn’t take the decision lightly. I struggled to find a home within my price range that fit my dream criteria of having the character of a pre-war craftsman in an urban area that was close to the MAX light rail. I dreamt of a place within walking distance of a brew pub or a library and a few places to grab a bite to eat. My good urban planning indoctrination placed an image in my head of time spent on a front porch sipping an IPA on a summer night as I watched people stroll down the street. Apparently I wasn’t the only one with that dream. To my fellow planners, I’m here to say that our new urbanist policies have officially run their course here in Portland, Oregon. This city is now the play thing of those with much more disposable income than either you or me. 

This is all to say that after being outbid too many times, I’m buying a short sale in Aloha, an unincorporated area between Beaverton and Hillsboro. The owners accepted my offer and after about a month I found out this week from both of their lien holders that they approved my offer. But all is not lost in suburbia. The house is about a 5 minute walk from the MAX Blue Line at Elmonica Station, and about a 20-25 minute ride in either direction to downtown Hillsboro and Portland. It’s situated in a neighborhood that was built in the late 1980s, but is directly adjacent to a transit-oriented neighborhood with modern row houses and apartments.

No, it’s not of the same character of a traditional neighborhood and there isn’t very much that I can walk to. But it’s a quick train ride to places that do have those amenities and I don’t have to spend an hour+ in the car every morning and evening if I had moved to the far eastside. Fitting of the time period, the majority of the house is fronted by its garage and there is no real front porch. However, the house’s main systems are in good shape despite some cosmetic work that needs to be done. Mostly I just feel lucky to be getting in before things get as expensive as Seattle, and to be in a place that is not so car-dependent. And I’m already scheming on how to retrofit suburbia and convert that garage into a front porch.”

Bryan R.

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One Response to The Portland Conundrum 

  1. I’m way late in checking this out, and admit I’m too rushed even now to read through every word. But I’ve read stuff about the housing prices elsewhere in hot markets. One topic I don’t see brought up in the rising home prices is the question of whether this is demand-pull or cost-push inflation. I can see if a seller has an in-person auction for a property in which the highest bidder wins. That’s pure demand-pull. But otherwise, prices don’t have to rise unless there is a cost factor such as utilities or property taxes going up which the seller or landlord must take into account. Even where a number of people make offers to buy a home, the seller isn’t obliged to sell to the highest offer.

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