Take a stroll through the housing markets along the East Coast and West Coast (and many places in-between), and you’ll hear talk of “affordable housing.”
During the housing boom, incomes were growing fast, but home prices and rents were growing faster. Because housing prices were growing faster than income, conversations turn to the lack of affordable housing.
Throughout the housing bust and the associated recession, rental rates continued to rise while home prices dropped. But, because incomes dropped and credit froze up, the affordable housing conversation continued.
Now, the economy is in recovery. Home prices are rising and so are incomes. But, home prices are rising faster than incomes, so even the recovery won’t make the affordable housing problem go away.
The Portland area is a curious case where land use policies have thrown gasoline on the affordable housing fire.
Oregon Public Broadcasting reports that Portland has a shortage of about 20,000 affordable housing units. About 30,450 very low income households in Portland should be spending in the ballpark of $500 a month or less on housing, only 10,420 units are available in the city within that price range.
But, it looks like things will get worse.
Oregon’s land use laws severely limit the expansion of residential development to outlying areas. The result is a region where development is limited to a virtual island surrounded by agricultural and natural resources uses. Because development cannot spread out, it must spread up. And, when consumers don’t want to buy in to high rise density, single family and low-density residential housing prices have only one way to go, and that way is up.
Gerry Mildner, the director of the Center for Real Estate at Portland State University notes (PDF, followup PDF) that the local government’s application of the state’s land use laws “pay only lip service to housing affordability.”
His analysis finds that under current policies, by 2035, Portland area rents will rise “roughly equal to levels in Los Angeles, San Diego, or San Francisco, eroding an important comparative advantage for the region.”
That’s why it’s been noted the declining housing affordability is often a self-inflicted wound caused by misguided policies.