Tag: affordable housing

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Residents Say Portland is Not the City that Works

By Eric Fruits, Ph.D.

What if the self-proclaimed “City that Works” isn’t working? That’s what Portland residents are saying.

Last week the City of Portland published its most recent survey of city residents. Nearly 90 percent of those surveyed are dissatisfied with the city’s response to homelessness and almost two-thirds are dissatisfied with traffic congestion on their daily commutes.

This outrage comes after voters approved hundreds of millions of dollars for affordable housing projects and steep hikes in gas taxes to improve roads. Clearly, more money is not the answer: The more the city spends, the worse things get.

Council’s renter relocation payments, inclusionary zoning, and renter screening rules are shrinking the supply of affordable housing. While the city’s population is growing, it’s reducing its road infrastructure through road diets and replacing automobile lanes with dedicated bus and bike lanes.

Instead of punishing property owners for renting apartments, let’s loosen regulations on building and renting truly affordable housing. Instead of bringing traffic to a standstill, let’s add traffic lanes to foster a safe and speedy flow of auto and truck traffic. These aren’t radical ideas. In fact, these were Portland’s policies when it really was “The City that Worked.”

Eric Fruits, Ph.D. is Vice President of Research at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Portland’s City Council Wants Rent to Go Up

By Micah Perry

The Portland City Council recently passed a new ordinance that will require landlords to register all of their rental units with the city and pay a $60 yearly registration fee per unit.

While regulated affordable housing will be exempt, other types of rentals, like mobile homes, will still be subject to the fee. It is almost certain that landlords will pass on the increased costs to their tenants.

During one council meeting, current landlords noted that the registration fees will siphon money away that could be used for maintenance. They also said that increased housing regulations will discourage potential developers and landlords from wanting to build new rental units in the city. Many landlords are incentivized to sell their units, rather than rent them, because of the increased regulation.

The money raised by the fee will fund the Rental Services Office, a new, needless expansion of Portland’s bureaucracy that will only serve to grow the number of rules placed on housing in the city.

This ordinance adds to the long list of policies that disincentivize the operation and construction of rental units in Portland. If the Portland City Council keeps pursuing policies like these, rents will continue to go up and rental housing will continue to disappear.

Micah Perry is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Public Debt for Public Housing

By Vlad Yurlov

In the 2018 general election, voters approved a bond measure that enabled Metro to borrow about $652 million for low-income public housing in the tri-county area. This money will be given out to localities within Metro. With the minimum of 3,900 housing units to be built, the price-tag would be more than $165,000 per unit.

When pressed for completion times for this project, a high-level Metro staffer stated new units can be expected to be used in eight to ten years. This schedule should not surprise anyone who has dealt with government bureaucracies, but a decade is a long time to wait for a crisis we’re having today.

For comparison, more than 6,700 housing units were constructed per year between 2010 and 2018 in the tri-county area, based on the U.S. Census Annual Housing Estimates. This means that even a target of 3,900 units would be roughly 60% of just one year’s worth of private construction. In addition, if Metro does build homes, private companies have less incentive to build, thereby compounding the current crisis.

A good government delivers public services on time and on budget. Right now, Metro is taking the bucks, without making much of a bang.

Vlad Yurlov is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Portland’s Affordable Housing Bond: Nothing for Money

By Eric Fruits, Ph.D.

Remember that song about getting money for nothing? In Portland, it’s the opposite. We’re getting nothing for money.

This week, Portland’s City Council will get the first annual report on how the city is spending its affordable housing bond money. The four-page report—yes, it’s really only four pages—is colorful and has lots of pictures but nothing about actual results. So, I did some research.

Turns out, by the end of 2018, the city spent almost $38 million and built exactly zero new units of affordable housing. Sure, Portland bought two buildings. But, the buildings were already built or almost completely built, which means the money did nothing to actually add any new units.

Once the city spends millions more on the four other buildings in their pipeline, Portland might have only 250 additional units of affordable housing.

Last year, French President Emmanuel Macron announced plans to reform the country’s social welfare programs. He said, “We put a crazy amount of dough into our social benefits and poor people are still poor.”

The same can be said for Portland: We’re spending a crazy amount of money on affordable housing, but we’re not actually building much new affordable housing.

Eric Fruits, Ph.D. is Vice President of Research at Cascade Policy Institute, Oregon’s free market public policy research organization.

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What’s Causing Oregon’s “Housing Affordability Crisis”?

By Miranda Bonifield

Here’s a question for you: Why is housing so expensive in Oregon?

Government at all levels has attempted to address the issue of housing affordability for years with tax credits, occasional expansion of the urban growth boundary, multimillion dollar bond measures, and now statewide rent control in Oregon. But rather than making life easier for Americans, state and local policies play major roles in the affordability crisis.

Economist Dr. Randall Pozdena recently authored a report published by Cascade Policy Institute that analyzes the decline of housing affordability, with a particular focus on Oregon. His research confirms what any developer can already tell you: Housing is less affordable because land is less available.

Easy access to land up until the 1970s meant housing price increases roughly tracked increases in household income. But in the ’60s and ’70s, planners and environmentalists dreaming of European-style density began lobbying against automobile-driven suburban sprawl. These measures gained enough traction that by 2000, the Brookings Institution found, state ballots around the country contained 553 “anti-sprawl” measures. Supporters expected higher density to decrease the need for public spending, improve traffic conditions by facilitating the use of transit, and lower development costs.

Instead, housing is escalating further out of reach every year. Oregon, California, Hawaii, and Washington, D.C. have the worst affordability scores in the country. An expensive market might make sense in D.C. and Hawaii, as both have extremely limited land available for development. California’s problem is the bureaucratic state whose regulations keep developers from meeting demand. But it’s Oregon that has the worst score for affordability out of the fifty states: Our housing prices rose 32% faster than our incomes between 1992 and 2007. This puts housing affordability in Oregon behind every one of the other 49 states.

With some exceptions, Oregon’s income growth has generally kept pace with the rest of the nation. We have plenty of developable land and a capable, productive community. Our housing is unaffordable because we’ve embraced some of the most aggressive “anti-sprawl” policies in the country. Dr. Pozdena finds:

“The higher the rank of anti-sprawl policy in a state, the poorer is the affordability rank of the state and the lower has been the availability of additional development sites relative to population growth. The confidence that these associations are not random is 99.99 percent. This is strongly indicative of a causal relationship between implementation of anti-sprawl policy, land conservation, and the affordability problem.”

There is no market and no economic philosophy in which reducing supply while demand increases leads to lower prices. In reality, Oregon’s policies have increased public spending, damaged public service quality, made no sizable impact on the number of automobile commuters, and worsened congestion.

It’s encouraging to hear policymakers acknowledge that we need to expand urban growth boundaries and encourage more development; but until a fundamental shift occurs in the philosophy behind growth policy, these statements are all flash and no substance. Oregon’s land use regulations don’t align with the way Oregonians actually live. They worsen traffic, crowd cities, and decrease quality of life.

Oregon must address the true causes of housing affordability problems, not just the symptoms—or the crisis will never end.

Miranda Bonifield is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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The Housing Affordability Crisis: The Role of Anti-Sprawl Policy

By Randall Pozdena, Ph.D.

Executive Summary

So-called smart growth policies are advocated as a means of avoiding sprawl.  These policies have at their heart a policy of reducing the availability of land for housing in urban areas. In Oregon and some other states, anti-sprawl policy is implemented by regulations that impose urban growth boundaries (UGBs).  Other regulations impose minimum density policies and others reduce spending on highways and increase spending on transit service—especially light rail—as an alternative.  Advocates of anti-sprawl policies argue that such regulations would allow urban growth to proceed at a lower overall cost.

Many states adopted smart growth policies in the last five decades—enough time for the policies to have demonstrated their purported advantages.  The evidence, at least on the housing front, is that the cost-containment claims have not materialized.  Instead, many urban areas are finding themselves with home prices that make ownership and rental of housing increasingly unaffordable.  Cities and states are thus using or considering additional regulations and subsidy policies to provide their residents with more affordable housing.  There is virtually no discussion of whether anti-sprawl regulatory interventions precipitated the housing crisis, let alone consideration of abandoning the policy.

The purpose of this study is to examine the links between anti-sprawl regulations and the spectacular increases in housing costs and the virtual disappearance of affordable housing in many markets.  Specifically, we measure the extent of site supply restrictions and its impact on housing prices using an economic model of housing markets, data on the economic conditions in housing markets, and trends in development revealed in satellite inventories of US land uses.

We apply the analysis to data from all 50 states and identify those states whose development policies reflect constrained site supply and those that do not.  Because Oregon has among the longest-standing and most aggressive implementations of smart growth land use policy, we pay particular attention to the state, and drill down with analyses at the Metropolitan Statistical Area (MSA) level in Oregon to demonstrate that the state-level findings are corroborated for all of its MSAs.

The primary metrics examined in this study are the rate of housing price appreciation, the degree of rigidity (“inelasticity”) of the supply of new homesites, and the degree to which the housing stock has failed to increase enough to affordably provide additional housing services.  Since we note that the adverse trends in house price inflation and slowing of site supply took greatest effect the last 30 years or so, we scrutinize market behavior subsequent to this period.  Because of the onset of the Great Recession in 2007, however, we estimate our models on this period.  This is because we do not wish to conflate the effects of anti-sprawl policy with the collapse of mortgage markets and home construction that persisted for the next half decade.

After establishing the linkage between constrained site supply and housing prices and affordability, we turn to the evaluation of the various policies that are in place or proposed to redress these problems.  This analysis is performed for the state of Oregon only.  The State’s wide-ranging and aggressive policies and proposals make it broadly representative of the nature, cost, and effectiveness of these policies—both those in place and those recently proposed.  With theory as a guide, and our acquired knowledge of the reactivity of the housing market to various stimuli, we can then opine on the likely effectiveness of these policies.  We also offer our own suggestions.

At the national level, using state and MSA data, we find the following:

  1. Twenty-three of the 50 states studied fail to provide housing units at a volume adequate to keep housing prices and incomes growing at a rate consistent with affordability. On average, these states under-provided housing units by 6.4 percent of their current stock of housing units.
  2. We demonstrate that those states that fail the affordability and supply adequacy test are overwhelmingly those with documented adoption of one or more aggressive anti-sprawl growth regulatory initiatives.
  3. Annual housing price inflation exceeded annual income growth by 14 percent each year during the study period in those states that failed to provide housing in sufficient quantity to keep it affordable. Extrapolating the findings to the nation, the housing stock is smaller by as much as 4.5 million housing units (in 2015 likely) than it should have been to preserve affordability.

Because Oregon has aggressively pursued anti-sprawl policy, it was given special attention in the study.  We found the following:

  1. All eight of Oregon’s MSA housing markets failed the test of affordability and adequacy of supply over the various study periods for which data was available. The estimated total shortfall in supply equals approximately 18 percent of the existing stock—virtually identical to that found for Oregon using state-level data.
  2. We analyzed the current and proposed housing policies of the state of Oregon. At present, proposals include approximately $2.3 billion by the State and the Department of Housing and Urban Development (HUD) to assist housing access and over $600 million in new affordability-related programs. This study finds that there is little hope that these policies can redress the scale and extent of Oregon’s affordable housing problems and, in some cases, may worsen them by burdening developers of housing with new regulations.

In summary, this study finds anti-sprawl policy to have been implemented in a manner that has pernicious effects on housing affordability.  Specifically, regulatory constraints on site supply have caused an on-going crisis of housing supply and affordability.  In many markets, the development of land for housing is regulated too aggressively.  Additionally, existing and new programs for addressing housing affordability rely on other regulation and spending programs that will not have the designed effect of providing affordable housing.  This study strongly recommends, instead, relaxation of regulations that limit the land area available for housing development.  Any residual concerns about sprawl should be addressed by reforming current highway and transit pricing and finance practices, which are known to be economically inefficient.

READ THE FULL REPORT

 

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Private Developers Leading the Way for Affordable Housing

By Rachel Dawson

The Metro Council voted June 7 to place a housing bond measure of $652.8 million for only 3,900 units on the ballot this fall. The regional government estimates the cost of new projects will be around $253,000 per home. But as there is no cap on cost per dwelling, project costs could be much greater. This bond will spend too much money on too few homes. However, private developers in the Portland region have shown it’s possible to build more residences at a lower cost compared with Metro’s proposal.

There is no better example of this than local private developer Rob Justus. With Home First Development, Justus has helped build a total of 431 public units for an average cost of $90,230 since 2011. Home First likes to call this “affordable-affordable” housing. Before a project begins, the company keeps itself accountable by working backwards: They contain the costs of the project so apartments can be rented to tenants at a price that works for them. This philosophy has allowed Home First to increase the number of homes they are able to build.

In concert with the Portland Habilitation Center, Justus built 78 affordable residences in 2015 in Portland at $65,000 per unit. In 2017 he offered to build 1,000 homes in Portland at $85,000 per unit if the city could gather $20 million, but Portland officials rejected this proposal. These homes would have cost 66% less than Metro’s housing bond estimates.

Justus has made low costs possible by building in less expensive neighborhoods and using non-union labor. These homes may not be the largest dwellings in the best part of town, but they are affordable to those in the lower 30% of area median income who are in need of a home.

Along with wages and location, the materials used can greatly affect the price of a project. A Catholic charity attempted to build the complex known as St. Francis Park in 2015 using an inexpensive siding called HardiPlank. When the project went through Portland’s required design review, city regulators decided to choose a more expensive siding, which drastically increased the cost of the project. This additional cost caused the city to increase taxpayer subsidy to the building. Ironically, in 2006 a housing complex in Vancouver using the same inexpensive siding that was rejected by the city of Portland received a national development award.

The fatal flaw in this bond measure is that there is no cap on cost per home, which the city of Vancouver has demonstrated is possible to have. Vancouver passed their own Affordable Housing Fund in 2016 which caps the amount spent per housing unit at $50,000. Money from the fund would add to a project’s “capital stack,” rather than fully funding the complex. This forces project applicants (one of whom was Home First Development) to search for multiple sources of funding instead of relying on the Vancouver City Council to foot the bill.

The Metro Council could build cheaper apartments by using less expensive materials and contracting with private developers to decrease labor costs. Without a cap on cost per unit to keep themselves accountable, Metro is able to write a blank check with taxpayer dollars for every project.

Housing can be made affordable to both taxpayers and renters. Metro can do this by withdrawing the bond measure and redrafting it to include a cap on costs. Doing so would allow them to follow the lead of private developers like Rob Justus to make “affordable-affordable” housing a reality.

Rachel Dawson is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article appeared in The Portland Tribune on July 26, 2018.

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Is Metro’s Affordable Housing Plan Really That Affordable?

By Rachel Dawson

The Metro City Council voted June 7 to place a housing bond measure of more than $600 million dollars on the ballot this fall. The regional government estimates the cost of new projects will be around $253,000 per unit. There is no cap on cost per unit, so project costs could be much greater, and have proven to be with past bonds.

However, it is possible to decrease the costs of these projects. Rob Justus, with Home First Development, has built a total of 431 public units for an average cost of $90,000 since 2011. He offered to build the city 1,000 homes at $85,000 per unit in 2015, but Portland officials rejected his proposal.

The city could build cheaper apartments by using less expensive materials and contracting with private developers to decrease labor costs. Placing a cap on how much is spent per unit would ensure that the city held itself accountable on project costs. Doing so would decrease the size of the bond and the burden it places on taxpayers.

There is a way to make housing affordable to both taxpayers and renters, and following the lead of private developers like Rob Justus is a way Portland can do just that.

Rachel Dawson is a Research Associate at Cascade Policy Institute, Oregon’s free market public policy research organization.

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Poll Shows Voters Are Smarter Than Politicians Think

By John A. Charles, Jr.

In November the regional government, Metro, released the results of a new public opinion poll of 800 registered voters living in the tri-county region.

One of the questions was, “In a few words of your own, what is the most important change that could be made to improve the quality of life in the Portland region?”

The top three responses were: dealing with the homeless/poverty (25%); affordable housing (17%); and traffic congestion (14%).

Environmental issues tied for last place (2%), and global warming did not even make the list.

This is roughly the opposite of what we frequently hear from many of the political talking heads. Listening to them, one would think that environmental Armageddon is upon us, especially because Donald Trump is President.

For instance, the top legislative priority for Senator Michael Dembrow (D-Portland), who chairs the Senate Environment Committee, is a bill he hopes to pass in early 2018 that would create a $700 million/year tax on carbon dioxide by establishing a convoluted industrial regulatory program. The ambient environment would not be improved one bit by this tax, but all of our basic necessities—food, clothing, shelter, and energy—would become more expensive.

Sen. Dembrow’s biggest supporter on this issue is Governor Kate Brown, who recently flew to Bonn, Germany to hobnob with celebrities at a United Nations conference on global warming. The two of them are convinced that if they can make energy more expensive, we’ll all use less of it and the world will be saved from “global warming.”

Most voters intuitively know that this is a scam. The term “global warming” doesn’t even have a useful definition. Voters know that the pain-versus-gain equation of global warming taxes is heavily one-sided: the “benefits” of reducing fossil fuel use are highly speculative (and may not exist at all); long-term (potentially thousands of years away); and global in nature. Yet the costs will be known, immediate, and local.

As the Metro poll shows, there is very little grassroots support for this kind of punishment.

It’s not surprising that homelessness, housing, and traffic congestion rank as the top three issues in the Metro poll because these are problems most of us confront daily. They are also things we can take action on.

Unfortunately, government itself has caused much of the mess, so voters will need to think carefully before signing on to more tax-and-spend programs. Almost every time regulators intervene in real estate markets, the result is some combination of less housing production and higher housing prices.

Take the most obvious intervention: urban growth boundaries. Since 1980, the population of the Portland metro region has increased by about 78%, but the available land supply for housing has only gone up by 10%. Making buildable land artificially scarce and thus more expensive is not a winning strategy if you’re trying to provide more housing.

But lack of land is just the start. After you add in ubiquitous farm and forestland zoning, extortionist system development charges, tree protection ordinances, inclusionary zoning requirements, prevailing wage rules on public housing projects, and numerous other interventions, the result is that we have a serious shortage of housing.

Even the government is trapped in government regulation. Last spring the Portland City Council approved spending $3.7 million to purchase a strip club on SE Powell Boulevard near Cleveland High School. The City plans to tear down the building and build 200 to 300 units of low-income public housing on the 50,000-square-foot property. City officials have admitted that it will take two years just to obtain the necessary permits for the redevelopment.

If it takes this long to get the permits for one of Mayor Ted Wheeler’s top priorities, imagine the delays facing a private sector developer.

The housing woes in such cities as Portland, San Francisco, New York, and Seattle are mostly self-inflicted. Housing supply is lagging demand because we’ve created so many barriers to housing construction. Removing those barriers should be a top priority for the state legislature when it convenes in February.

Global warming legislation does not even deserve a hearing.

John A. Charles, Jr. is President and CEO of the Portland-based Cascade Policy Institute, Oregon’s free market public policy research organization. A version of this article was published by the Pamplin Media Group and appeared in The Portland Tribune.

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Using Disparate Impact to Restore Housing Affordability and Property Rights

By Randall O’Toole

Executive Summary

Portland, Bend, Medford, and to a lesser degree other Oregon cities are in the midst of a housing crisis. Median home prices have rapidly grown and are now four or more times greater than median family incomes. As recently as 1990, median prices were only twice median incomes; housing starts to become unaffordable when median prices are more than three times median incomes.

The Oregon legislature and various cities have applied band-aid solutions to this problem; but none of them will work and some, such as inclusionary zoning, will actually make housing less affordable. That is because none of these solutions address the real problem, which is that the urban growth boundaries and other land-use restrictions imposed by the Land Conservation and Development Commission, Metro, and city and county governments have made it impossible for builders to keep up with the demand for new housing.

Growth boundaries and similar restrictions have three negative effects on low-income minorities. First, they make housing more expensive. Second, they make housing prices more volatile, which makes buying a home riskier than in places that do not have such restrictions. Third, they are a major—if not the major—contributor to growing wealth inequality as barriers to homeownership have dramatically increased the share of families who cannot afford or must go deeply into debt to buy their own homes.

Fortunately, a June 2015 Supreme Court decision offers a legal remedy to this problem. This decision authorized the use of disparate-impact considerations in judging whether government agencies are following the Fair Housing Act. That act specifically forbids the disparate treatment of minorities—that is, intentional discrimination in housing sales and rentals. The disparate-impact doctrine asserts that policies such as zoning and land-use regulation that make it more difficult for minorities to obtain housing—even if the policies are not intended to do so—are equally in violation of the law unless the policies can be “justified by a legitimate rationale.”

According to disparate-impact regulations published by the Department of Housing and Urban Development in February 2013, prohibited conduct includes “enacting or implementing land-use rules, ordinances, policies, or procedures that restrict or deny housing opportunities or otherwise make unavailable or deny dwellings to persons because of race, color, religion, sex, handicap, familial status, or national origin.” Numerous land-use rules, ordinances, and policies increase housing costs. Since some protected minorities, such as blacks, are more likely to have lower-than-average incomes, any such rules or policies reduce their housing opportunities and therefore potentially violate the Fair Housing Act.

HUD’s implementation, known as Affirmatively Furthering Fair Housing, focuses on ending income segregation of communities as a means of ending racial segregation. However, this will be a costly policy that will do little to make housing more affordable to most low-income minority families.

As an alternative, fair-housing advocates should question policies that increase housing costs by intruding on private property rights. These include growth-management tools such as urban growth boundaries, the use of eminent domain for economic development, rent control, inclusionary zoning, and excessive impact fees, all of which benefit a few at everyone else’s expense. In approving the disparate-impact doctrine, the Supreme Court has offered a tool to both affordable-housing advocates and property-rights advocates for undoing these rules and policies that make housing less affordable.

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