How car parking makes new housing much more expensive
Posted by Jonathan Maus (Publisher/Editor) on October 2nd, 2019 at 11:44 am
Townhomes at NE Couch and 53rd Avenue, currently selling for $729,000 each. But if parking isn’t needed, the most profitable project would be mixed-income condo buildings with average prices near $280,000.
(Photo: Michael Andersen/Sightline)
We’ve been on the car-housing beat for many years now, so when housing expert and Sightline reporter Michael Andersen says he’s never seen a more clear-cut example of how Portland can choose housing for people or housing for cars, I think it’s worth your attention.
Andersen just published a story about a policy in front of Portland City Council today that would reform “mid-density zones”. Among the details of the Bureau of Planning & Sustainability’s Better Homes By Design proposal is one that Andersen finds “almost shocking its clarity.”
I’ll let Andersen explain (emphasis mine):
“It turns out that there is one simple factor that determines whether these lots are likely to eventually redevelop as: high-cost townhomes, or as mixed-income condo buildings for the middle and working class.
The difference between these options is whether they need to provide storage for cars — i.e. parking.
According to calculations (PDF) from the city’s own contracted analysts, if off-street parking spaces are required in the city’s new “RM2” zone, then the most profitable thing for a landowner to build on one of these properties in inner Portland is 10 townhomes, each valued at $733,000, with an on-site garage.
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But if off-street parking isn’t required, then the most profitable thing to build is a 32-unit mixed-income building, including 28 market-rate condos selling for an average of $280,000 and four below-market condos—potentially created in partnership with a community land trust like Portland’s Proud Ground—sold to households making no more than 60 percent of the area’s median income.
This is worth repeating: As long as parking isn’t necessary, the most profitable homes a developer can build on a lot like this in inner Portland would already be within the reach of most Portland households on day one.”
Get the full lowdown at Sightline.org.
— Jonathan Maus: (503) 706-8804, @jonathan_maus on Twitter and jonathan@bikeportland.org
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I’m glad Michael is on our team. Such a smart fellow!
Let’s turn the eastside of Portland in Queens, NY without the transportation infrastructure to support it.
Spot on, m, we need to rapidly build cycle tracks, add diverters to Greenways, and have bus only lanes to support the kind of density we want, and need, in order to reduce our carbon emissions.
Portland needs a district form of council government like, yesterday.
It’s kind of the way of the US that you’re not going to get public transit until there’s a tangible demand for it.
Not true, Zac. Most early development in Portland happened along the streetcar lines, which were built first. In fact, the development of the American West happened *after* railroads opened up the territory. Nowadays it makes more sense to plan for high-density transit in tandem with building-development planning, but you are correct in implying both are needed.
Does this mean developers would actually charge the much lower price? How does a city or state guarantee they would? (Serious questions, not trying to stir the pot.)
Developers will charge what they can for a building; if they can build cheaper, they won’t pass the savings on; they’ll enjoy the bonus.
If you want to make housing without parking cheaper, restrict car ownership for tenants. That will drive prices down, and won’t require developers to externalize their costs onto everyone else.
That’s true, they won’t pass the savings on unless they’re forced to … but they will be forced to because if they don’t, somebody else will do the exact same project somewhere else and dramatically undersell them.
It’s not quite that simple of course — requires other land to be similarly zoned, and requires enough developers in the market that there’s always competition — but like you say, developers (and landlords) don’t actually have control of the price either way.
I’m not sure the housing market works like that anywhere, with developers in a mad dash to undercut other developers by building cheaper and cheaper housing, and especially not in a constrained geography like Portland and its UGB.
And even if it did, I’m not convinced it would lead to a better city.
I actually agree with Kitty here. The theory that housing is a fungible good, like a can of soda or a gallon of milk, and therefore price-sensitive, just doesn’t hold up. There are way too many intervening factors that make housing price-insensitive. People will go into serious debt to get the housing they want, in ways that defy rational economic behavior.
What you’re missing here is that it’s been a long time since the Portland housing market was whatever is considered normal. When demand and supply are reasonably similar, all this stuff in theory sorts itself out nicely. We’re short on supply, and Better Housing By Design is one way the city is trying to correct that. No, it’s not enough, and no, the new housing won’t be available within weeks or months, but it’s a long overdue step in the right direction.
I’m gonna say “stop dissing Californians.” Sacramento and some of its suburbs are now providing free transit for kids, students and student-aged. Start them young. I don’t know why they’d feel any great desire to escape to Portland, where they would suffer far more diesel pollution.
I mean, developers are also competing with all older housing, and vice versa, in the same way that Burgerville is competing with McDonalds. I’m sure the local McDonalds franchisees (that’s the owners of existing buildings in this metaphor) would be happy if Burgerville stopped selling burgers, or if we started requiring every new burger to come with a garage. Lots more room to raise the prices on somewhat their less flavorful burgers in that case.
Developers are not really competing with older housing; they are very different things. And I think you are overthinking the motivations of homeowners. I have literally never once heard anyone in Portland lamenting new construction because it would somehow reduce the price of their house by diluting the market. That’s just not how people think.
Right, I agree it’s not conscious or direct in that way on homeowners’ part. I have heard of landlords expressing this feeling about new buildings nearby that are priced close to theirs, though.
But I’m throwing one more comment into our years-long debate because I don’t understand why you don’t think developers of new homes are in any sort of competition with landlords of existing ones. Huh?
>>> I don’t understand why you don’t think developers of new homes are in any sort of competition with landlords of existing ones. Huh? <<<
It sounds like you are asking about rental property; does a developer of a new building present "competition" to the existing building down the street?
Assuming both are charging market rent, I think there would be both a competitive angle and a synergistic one. It might be that the market is now flooded with units, and so landlords in the two buildings need to offer incentives to get people to move in (though as we've seen in the recent softening of the rental market, they are often loathe to lower base rent.) It might be that the new building signals that the area is "hot", and so both buildings are able to raise rents. It could be that the new building is offering something different enough (dog washing stations! chain link bike storage corral! bike hooks in every unit!) that there is really no economic interaction between them (e.g. a building with a community of retired people near one with tiny apartments for millennials) .
In other words, these sorts of hypothetical questions that attempt to simplify real estate using the widget-based rules of Econ 101 are not particularly helpful in understanding how things work in the real world.
In the meantime, I'm on the hunt for one of those $280K condos that savvy developers are building in areas where parking is not required. If you can point me to one, I'd really appreciate it.
“In the meantime, I’m on the hunt for one of those $280K condos that savvy developers are building in areas where parking is not required. If you can point me to one, I’d really appreciate it.”
1-bedroom condo, currently under construction. No parking, walking distance to the MAX.
https://www.redfin.com/OR/Portland/2050-N-Killingsworth-St-97217/unit-7/home/169108732
Hello, Kitty, do you have a response to Maccoinich pointing out an actual example of an actual $280,000 inner-Portland condo that you earlier seemed to be believe would be priced much higher? Does this change your opinion about the existence of price competition between suppliers (sellers) in the housing market? If not, can you explain why others shouldn’t think you are ignoring evidence that contradicts your beliefs?
I think it’s great (and yes, I was surprised, pleasantly). I agree with you and others who say options and diversity are good.
There is clearly demand for lower-cost (compared to a single family house in Portland, not to real estate elsewhere) ownership opportunities, and also for smaller units that require less care and feeding. I don’t see the existence of $280K condos as evidence of price competition (with what?), more of serving a particular market segment. I do see it as evidence that that model described in the article can work for developers.
One thing that will be interesting to watch over time is whether there is any price appreciation of these units. I suspect not, but the ability to get some/most of your money out when you move is a big advantage not available to renters.
I’m glad you saw that and are taking it into your thinking!
Personally, I see it as pretty clear evidence of price competition. You stated that “Developers will charge what they can for a building; if they can build cheaper, they won’t pass the savings on; they’ll enjoy the bonus.” In this case, they built cheaper, and passed at least some of the savings on.
You might argue that developers can’t charge more than $280,000 for a one-bedroom no-parking condo in inner eastside Portland. Certainly, they’re not pricing this quote-unquote “low” out of the goodness of their hearts. However, why can’t they charge more? Because, at higher price points, there are options out there that most people prefer. And some of those preferred options… are also new construction built by developers. That sounds like price competition to me.
>>> You might argue that developers can’t charge more than $280,000 for a one-bedroom no-parking condo in inner eastside Portland…. However, why can’t they charge more? …That sounds like price competition to me. <<<
I understand your argument, and, perhaps, in a very broad sense you are right, but not in meaningful way. There is price competition in the same way that a Hyundai is in price competition with a Tesla. There may be some theoretical interaction of prices, but fundamentally they are different things; they appeal to different buyers looking seeking different attributes with different price sensitivities, and the existence of the Hyundai does not meaningfully exert downward price pressure on the Tesla.
And regardless, even if there is meaningful competition, the mere existence of the $280K condo does not prove it.
And, in another way, if more people move here because of the $280K condo (which might make moving to Portland seem more feasible for the upwardly mobile demographics to whom a $280K condo seems like a good choice), later, when they outgrow it, they will help exert upward pressure on single family house prices.
But the banks won’t loan to a builder if they are going to undercut the market or provide amenities the bak doesn’t like.
Banks essentially are the ones who determine how many units, what square footages and how many bedrooms go into these projects. We fought long and hard on several projects to build larger than tiny studio apartments, but they wouldn’t budge despite the fact they would still be profitable… they want to maximize return on investment.
If you want to build anything but the buildings we are currently getting you need to self-fund.
In this example, the 32-unit building is cheaper because the units are smaller, and they don’t have driveways and garages. People pay more for more space, and car storage. It’s pretty simple.
As someone who supports the free market, I fully support eliminating parking minimums.
If you live in a unit with no parking, you should have no car, and if you have no car, your unit shouldn’t be required to have parking.
Wait, no car is illegal.
The big complaint I hear from parking-requirement advocates is that people who don’t have a car will buy a place that doesn’t have parking, but then a year or so down the line buy a car, and then wreak havoc on street parking. Not saying it’s valid or not, just saying that’s a concern that people have.
I think you may be correct on that. Many of my friends including myself were car free in our twenties, we’re all car owners now that we’re in our 30s and have kids.
Every one of those driveway curb-cuts pictured above takes away street parking permanently and to the exclusive benefit of one household. Not sure that is better than parking on the street.
And many times — due to lack of enforcement — people will park in tandem, whereas to hang over the sidewalk. Not only do they remove one “public” parking spot but they often inhibit people walking on a public right of way.
An unfortunate aside for someone like me is that I have so many bicycles that I need a garage, basement, or area to store and work on them.
Worse yet, most of the condo buildings that offer secure bike parking are often targeted rather successfully. Nothing more than a relatively cheap commuter would go into one of these spaces. Beyond bicycles I would say the same goes for any sporting goods. I would imagine that solutions to this would become more common eventually, but it is a massive hurdle for me.
Additionally, the a huge detriment to me in a condo are the often very significant HOA fees. Some are nearly the cost of my rent of a bedroom with roommates on the east side.
great point! I wish the city could compel developers to build a wider range of housing types that support the way many people want to live; this would mean including storage, workshop space, gardening space, play areas, pet areas. The same goes for transit: I wish it supported taking gear/pets/kids around so it could be more of a viable alternative.
Word. My home’s garage makes coming and going on bike waaaay easier than when I lived in a condo and had to use a bike room (but the nice bikes stayed in my unit). Another problem with bike rooms is that some buildings highlight their existence as a marketing ploy and provide clear directions to it from the street, which just invites too much attention.
I totally agree, garages are perfect for storing bikes and I find it annoying to not have access to one myself any more. But the reason I don’t have one is that my landlords/friends knocked the garage down to build the backyard cottage my family lives in now. I would be way more annoyed to not have a home!
No one is forcing you to live in a condo. But for those who want to live low-car or car-free lifestyles, there aren’t many options that don’t involve subsidizing the car parking for others. If we keep parking requirements as-is, housing costs will increase at a higher rate.
You are suggesting that without the cost of parking, your unit would be cheaper. If you bought a parking spot with your unit, you may be right, but you may be able to partially offset that by leasing the spot to a neighbor. If you are concerned that the developer passed on higher overall building costs to you, you are probably wrong — if you were willing to pay what you paid for the unit you got, the seller would have charged that even if construction costs were lower.
That’s been my problem too over the years. With multiple bikes, tandem, trailer, and all my camping gear, I’ve always found it difficult to live in small places. In the last five years I’ve lived in a shared house with friends where we had a shared garage and basement with free off street parking and then I moved into my girlfriends place — a 2 bedroom with a small storage unit — and found that our second room quickly became an annex of our storage. Then we went small scale and moved into a 606 sqft condo with some storage. For a while I had our tandem stashed between the couch and wall; we eventually had to rent additional storage down the street. From there we purchased a home on the east side with a driveway, garage, backyard and a storage shed and I have to say that it has significantly changed our lives. No more parking two blocks away and walking with bags of groceries. No more having to put my bikes in the house. I don’t have to worry about people breaking into my storage because there’s no public access. I have a place to store my tools and work on my bikes. I have room for my dogs to run free. Small scale condo life wasn’t for us. We’re Oregonians. We love to camp and bike and take our kid and dogs. I know we sound privileged but we have worked very very hard for what we have.
That is great. But other people are different. Heck, you might be different at age 65 or have been different age 22. I know I’m looking forward to getting rid of my single-family house and moving to a condo when the kids are out of the house and I’m older. Shouldn’t developers be allowed to build different kinds of housing for different kinds of people and different stages of life?
Of course they should be allowed, I wasn’t say they shouldn’t. I was just saying condo life wasn’t for my family.
I get that. You could have been a little clearer in how you stated it though. I read you saying “We’re Oregonians. We love to camp and bike and take our kid and dogs.” as implying that it’s an inherent quality of Oregonians to be outdoorsy in those ways. And, less directly, but still implying that it’s Oregonian to value space to store large outdoor gear and have a backyard over valung a more urban environment, convenience, and not having to deal with a backyard. Sounds like you didn’t mean it that way, yay! 🙂
As a side note, I know Oregonians who live in a condo and use small outdoors equipment with their kid VERY frequently. I’m pretty sure they went camping and backpacking more frequently than I did when I lived in Oregon, perhaps because they had shorter commutes (less exhausted at the end of the week) and didn’t have to do yardwork. (They do have a car, though 🙂 )
I suppose I was saying that one cultural identity of an Oregonian is to love the outdoors and open space. This may be debatable, but some would consider Portland an urban environment only the last 15-20 years. And then when you get outside the UGB, ideas of open space definitely change. I do love living in Portland, but if I could make the same type of money living in the country without long commutes, I’d move outside of the city in a minute. My wife and I started the timer as soon as we signed up for our mortgage. .
Why not build a shed. It’s like 10% of the cost per sqft you pay for a house and tandem bikes like sheds fine.
This issue isn’t whether a builder can put parking or a garage, it’s whether they should be required too. Many apartment complexes in the burbs build garages because they believe there is a market for it. Granted, the municipality makes them build car storage (dumb) but that’s an issue too. To the guy said “I have so many bikes I need a garage” well, think about that. Do you need a room that could be used for housing for your inanimate objects?
My preferred solution to this housing price problem is let the oncoming real estate correction turn the $729,000 town homes in to $280,000 town homes then I can have a garage to put all my bikes in.
Whether or not there is an imminent market correction, at some point in the not too distant future, boomers will start selling their houses, and prices will start to fall. We may be in a cyclical low with boomers still holding onto their houses, and millennials trying to buy into the market causing a shortage and thus increasing prices. In 10-20 years, things may look very different than they do today.
I don’t know what the policy implications of that are, but I do know that now is probably not the time to be making a long-term bet on housing prices.
I live in an expensive inner eastside neighborhood in a home I have owned for 25 years.
I am the oldest owner on my block. All my boomer neighbors have already sold and left.
My new neighbors are all in their 30’s…..
You need to get out more. The ship has sailed.
What I gleaned from this and also from some of the reading I’ve been doing is, baby boomers own larger more expensive housing that millennials are willing to pay for, these boomers are having to hold on to their housing longer than they are wanting to. Furthermore, boomers entered the housing market, largely at an earlier age than millennials currently are. I’m in my 30s and my wife is her 20s and we own our home. Many of the neighbors surrounding us are in their 60s and have lived in neighborhood for many years. There’s a few
houses down where a fella appears to be in his 30s.
There could be a titanic shift in policy and the economy where millennials are able to enter the housing market in droves, but I doubt it anytime soon.
I think you missed my point. The people who are buying the million dollar homes in my neighborhood are Millennials…
My neighborhood (Alameda-irvington) has already almost turned over.
Apparently there are plenty of millennials who have a lot of money….
You’re talking about a region from Fremont and 21st all the way out to 52nd down close to Sandy. I doubt there’s been even close to a complete turn over with millennials buying…
“Apparently there are plenty of millennials who have a lot of money….”
I think just about every survey of generational net worth disagrees with your anecdotal.
With an avg net worth of approx 8k, straddled with record student debt…demos for housing mkt look poor
Both can be true, and probably are.
Part of the reason demand for rentals is higher (and thus rents are higher, relative to home purchases) than before the 2008 crunch is that many Baby Boomers are already bailing out of their big houses and downsizing. Of course this will accelerate, but it’s already happening.
That just might be a while.
Kalifornians all have cars. And demand places to park them.
One could say the same about Oregonians.
Of course some in both states don’t have cars, and one of these days those shares will have grown.
#jeering
Any day now…
#ostrich
I see Texas plates all over town. Solution to all of this b.s. is less people moving here and even less people in general. If you folks want to bask in density please start pedaling to NYC before the snow arrives.
Seems to me the Townhouse probably has 3 bedrooms, and more certainly bathrooms, the Condo probably only one. If you’re going to make the comparison, at least make it equivalent, talk about price per square foot, etc.
One bedroom condo the whole family can share, for $280,000, what a deal…
100 year old 2-bedroom houses in this same neigborhood go for $400-$500k.
Friend of mine just sold her house off of Emerson and 25th, right there by Alberta st. It was a 1 bed 1 bath, with a small mother and law on a 5000 sqft lot, built 100 years ago. Sold for $425,000 no inspection. They were from CA.
Cheap when compared to the going rates for mothers and (sic) law.
It was an old shed divided. One room and nothing else, you couldn’t live in for more than a couple days.
Oh… You were talking about a building!
You’re right about relative size, GB. The point of these hypothetical condos (like the point of cities in general) is that they let people prioritize location rather than space, if that’s their preference.
Not sure if you’re reasoning hold up. Most one bedroom condos that distance (NE 50) would still sell for that much or even more. Close in? There’s a 3 year old Townhouse with 3 beds and garage on the market right now for $419,000 in my neighborhood, Eliot, just off Williams. If you want a cheaper condo you’d have to go much further out, past 82nd.
You don’t need to go east of 82nd to find lower priced condos. Indeed, most of the housing that sells below $400k in the inner neighborhoods are condos.
Not sure how your comment relates to the point of the article. The point is that when parking is required, the most profitable type of development are large, expensive units. When parking isn’t required, the most profitable type is building smaller, cheaper units.
I also think it would be interesting to compare prices of units that are identical, except that one includes parking and one doesn’t, but that’s a whole different subject.
It is surprising how many inquiries a neighborhood association receives from home owners next to proposed multifamily developments. The inquiries sound benign enough, “As an adjacent home owner next to these proposed apartments, who is looking to sell within the next few years, how will this affect my property values??”
The simple reality is that an area with development potential and activity will translate into higher property values. The fear is that development which fails to personify the “dream” of a detached, single-family household falls short of this ideal and nearby property values could be reduced due to apartments, skinny houses, condos, and other multifamily housing being perceived as “less desirable” and therefore of lower value. This is not the case at all.
Increased housing choices are good for a community’s resilience, its economic diversity, and simply providing a means for which our supply is failing to meet. Nonetheless, concerns of multifamily housing somehow lowering the value of nearby single family households is not an uncommon thing to hear. It may not be directly articulated as a “dilution” of property values but it is not a stretch to read that message behind such concerns.
To summarize, people do fear that new development will lower the price of their home and yet they may not express it in simple, direct terms.
When you’re talking about raw land value, absolutely. When there is a $500,000 lot and a $600,000 house sitting on that lot, an apartment building nextdoor can easily lower the selling price to $900,000 instead of $1,100,000. The development value has to exceed the value of the home
>>> concerns of multifamily housing somehow lowering the value of nearby single family households is not an uncommon thing to hear. It may not be directly articulated as a “dilution” of property values <<<
Because it isn't a concern about value dilution. I think people do express their concerns in simple, direct terms: they are most typically about noise, light, privacy, and other direct impacts of a large building on its immediate neighbors.
Think about it: who says "How will I be able to get full value for my house when the buyer could just rent an apartment next door?" They may say "This sucks; how can I sell my house when there is a loud garbage pickup next door that wakes me up at 4AM?"
I think many people are resistant to apartments being built because there’s a broad generalization that they bring people who are not connected or invested in the neighborhood; moreover there’s a worry of cars of gobbling up parking and the potential for crime to spike.
Which us hilariously misplaced in light of the fact that according to the census numbers I recall finding in inner SE the number of cars per household was higher for homeowners, and not declining; for renting households it was lower and declining. And secondly, at least in the early 2000s (according to Rex Burkholder) renter household tenure in those inner SE census tracts was on average longer(!) than it was for homeowners.
Gotta love those stereotypes.
best places to live car free:
https://www.citylab.com/life/2019/09/where-live-no-car-america-public-transit-transportation/598606/
From that article:
What are the characteristics that distinguish car-free metros? The popularity of living without a car is only weakly related to population and density (with correlations of around .2). Going car-free is much more closely related to America’s economic and political divides.
Living in a car-free metro is positively associated with both the share of adults who are college graduates (.54) and the creative-class share of the workforce (.48), and negatively associated with the blue-collar working-class share of the workforce (.45). Car-free living has an even stronger positive association with living in a liberal metro, and is negatively correlated with living in a conservative metro, based on votes for Hillary Clinton (.56) and Donald Trump (-.62) in the 2016 presidential election
And…
Ironically, despite the expense of owning a car, going carless in America often requires having money. It helps if you can afford living close to where you work or near good transit, or in a walkable neighborhood with most of life’s necessities close by.
…and then there’s the fact that PBOT doesn’t require certain developments to install ADA curb ramps even though they require driveways for auto access…
NE 13th and Saratoga… NE Rodney and Prescott… to name just two
The no-parking condo solution should require the developer to install a few parking spots with electronic charging stations which are owned by the HOA and provide a few vehicles that unit owners would have access and reserve with an online system. Then people would have the option to have a vehicle if traveling where biking/weather/public transportation makes it difficult. I think this would ease a lot of “carless anxiety”, especially given carshares are starting to pull out of metro areas such as SEA (lime) and PDX (care2go).
This actually raises an interesting question: if we move toward developing most buildings without parking, what does that do for adoption of electric vehicles?
A renter and a buyer are in different markets – Someone selling a house won’t think that someone may rent the apartment next door rather than buy the house. It’s more likely that homeowners obviously want to protect the investment of their house – and generally, a house next door to a house will be worth more than an equal house next door to an apartment complex.
I think we are saying the same thing.
A renter and buyer aren’t necessarily in different markets, it just depends on the economics. We would have likely stayed renters back in 2011, if inner neighborhood rents hadn’t been so high. Instead it made more sent to become a buyer a bit further out.
Now I think you have the opposite problem in Portland, as it can more often be cheaper to rent than buy.
Rent is cheaper when you live more compact. Wife and I paid $1500 for two bedroom apartment in a three plex. We pay $2150 now for our own space which we can do whatever we want to. We never had a garage or backyard with our apartment. I suppose one could invest that additional $700 a month at 8% and after 30 years walk away with some cash, but then you’re stuck living in a place that’s never truly yours and subject to increased rent. Our mortgage rate is 4.5% and we’re looking to pay off 30 year loan in 20. We know housing as investment only yields 1-2% as a return on investment, but it’s not subject to the ups and downs as the stock market.
Anderson is not a “reporter” but an employee of a “think tank” that receives financial support from real estate industry figures. I was somewhat skeptical of the $280,000 price point for a new condo in inner Portland and decided to check the source.
I found this discussion in the introduction:
https://www.portlandoregon.gov/bps/article/738561
So it turns out that these modeled sales prices are not meant to reflect inner Portland prices after all.
I will also note that Mr Anderson only lists mortgage costs, and not true monthly costs which should also include hoa fees, insurance, and taxes. Zillow and Redfin estimate these to be in the ~$1520-1650 range for a $280,000 condo.
According to city code a 32 unit building with 6 affordable units is exempt from parking by default. It’s not really a choice. Moreover all buildings with less than 31 units are exempt even if a developer choose the very rare “in lieu” option for inclusionary housing. Basically, the idea that “parking” is an important issue when it comes to multifamily housing is exaggerated.
https://www.portlandoregon.gov/phb/article/652708
Great article, Michael! As others have already pointed out, Portland’s housing market has been fundamentally supply-constrained for decades, relative to demand. That’s why prices have risen so much: this is a great place to live, the economy is strong, and there’s much more demand than supply — especially in close-in neighborhoods.
Now that all of the area’s “greedy developers” are no longer limited to single-family zoning, they can build whatever is most profitable. And since (as Michael’s article makes clear) more density = more profitability, developers can now maximize their profits by building stacked flats and thereby help alleviate the housing shortage, rather than by replacing a small, relatively affordable bungalow with a massive McMansion.
It seems pretty clear that with more supply, prices will either: 1) continue to increase, but more slowly than they would with less new supply; 2) stabilize; or 3) start to drop. That’s how markets work. Yes, even housing markets. I’m hopeful that that’ll now start to happen.
However, I’m nearly certain that these $280k stacked flats will, if sold as condos, initially and until the supply:demand balance is restored, sell for WAY more than $280k — maybe even twice that much. And if they’re rented as apartments they won’t be “affordable” either. And that’s ok. Because every developer who makes a ton of money will build as fast as they can — as will other “greedy developers,” and more housing will be added to the overall supply. Again: almost none of this NEW supply will be “affordable,” but the overall regional housing supply will still increase. And as the lower end of the market becomes less supply-constrained, prices at all price-points should stabilize.
…at least until we’re inundated with climate refugees from Arizona.
Portland has plenty of water and is still pretty temperate, IMHO our corner of the nation is unlikely to become a less desirable a place to live anytime soon. Given that fact, even with the recent zoning changes and rapid increases in new housing supply, I suspect that it’s going to be hard for all of the area’s “greedy developers” to build enough housing fast enough to avoid ongoing housing cost increases.
Which is why it would really be more accurate to frame this not as a shortage of housing but a longage of people.
There is no shortage of housing for middle income folk in Portland. There is, however, a chronic shortage of housing for lower income folk. Moreover, the idea that the kind of upper class housing that Mr Anderson and other “YIMBYs” advocate for will trickle down to poor people in a dense urban area has little support in the literature. The right wing idea that housing is a “free market” is propaganda designed to promote the “nice” housing that economically-comfortable households find desirable.
Affordability my arse.
>>> That’s how markets work. <<<
It's the same reason why building more roads will alleviate traffic congestion. Unless, of course, the new housing/road capacity attracts more people to the system bringing things back to the current equilibrium.
There's climate refugees from Arizona, but also an influx of people from other west coast housing markets that still see Portland as a bargain.