Despite cranes, home construction still lags

Reports say housing is not keeping up with growth and the public and private sectors must work together and do more to close the gap.

If you drive around the region, it's easy to believe that enough new homes are being built for everyone who wants to live here.

New apartment buildings are being constructed in many parts of Portland, from the Pearl District to the Albina and Sellwood neighborhoods. Hundreds of single-family homes and townhouses have recently been completed in the Cooper Mountain area of Beaverton, near the new Mountainside High School.

Work is finally underway in South Hillsboro, where this year's Street of Dreams was held. And clusters of new homes can be tucked away in underdeveloped parts of all three counties.

But two recent reports by the Portland-based ECONorthwest consulting firm say this activity is not nearly enough to reverse many years of housing shortfalls in the region. Although residential construction surged over the past two years, it has been down since 2000, almost completely stopping during the Great Recession, and continuing to lag between 2010 and 2016.

The issue was a hot topic at the 2019 Housing Forecast sponsored by the Home Builders Association of Metropolitan Portland last Friday. Those gathered at the Oregon Convention Center were told Oregon underproduced 155,000 new homes needed to accommodate population increases since 2000.

The shortage has pushed up rents and sale prices — and the deficit cannot be erased without more public and private efforts to build far more housing, the reports say.

"We need a Marshall Plan for housing," says ECONorthwest partner Mike Wilkerson, who worked on the report titled "Housing Underproduction in Oregon." It was prepared for Up for Growth, a national advocacy organization, and presented during a conference it organized on Oct. 16.

The other report is "Homelessness in the Portland Region," which was prepared for the Oregon Community Foundation. It says the region has a severe shortage of housing affordable to households earning less than the median family income. The shortage is increasing homelessness in the region by driving up rents and forcing vulnerable households into the streets, the report says.

Both reports revolve around the same fundamental concept, that just to break even, enough new housing units must be built every year to accommodate all new households that are formed, including the homes that are demolished because of age or other reasons. Experts agree this ratio needs to be higher than 1-to-1.

"When less than one unit is built for every new household formed, demand outpaces supply and puts upward pressure on prices," says the Up for Growth report.

But that is not happening in Oregon and the Portland region, both reports say. In fact, from 2000 to 2016, Oregon produced only 89 new units for every 100 households formed. The ratio was even worse in Multnomah County, where only 76 new units were produced. Clackamas County was higher at 95 and Washington County was close at 92.

But, the reports say, production was even less than that in the years after the end of the Great Recession. From 2010 to 2016, Oregon only produced 63 units for every 100 new households. During those six years, only 59 units were built for every 100 new households in Multnomah County. The number was 78 in Clackamas County and 71 in Washington County.

Even worse, the report says new home construction is now slowing down, suggesting the current building boom is nearing the end of its periodic cycle.

"These ratios are likely to get worse in the short run and will require substantive policy interventions to bring the ratio of units-to-households back into equilibrium," says the Up for Growth report.

Both reports call for the public and private sectors to work together to create as much new housing as soon as possible.

The Up for Growth report recommends that much of the housing be concentrated along major transit corridors and within walking distance of TriMet bus and MAX stops. It says such construction will require less land and fewer public subsidies than suburban growth.

The Oregon Community Foundation stresses the importance of building more government-subsidized housing affordable to households earning less than the median family income.

"A supply strategy would start with a top-line production goal. In the Portland region's case, that will require returning to annual production levels that keep pace with household formation while simultaneously adding production to address the legacy of a decade of underbuilding. Accelerating production requires a re-examination of the regulatory environment — both what's in code, as well as the processes by which the regulations are implemented," reads the Oregon Community Foundation report.

Eliminating the housing production shortfall will not be easy. Oregon business leaders have called for building 30,000 new homes in the state every year for 10 years. But less than 20,000 were built last year.

Although several proposals are in the works to increase housing in the Portland area, none has yet been finalized. The Metro Council is scheduled to consider increasing the urban growth boundary it administers in December by 2,200 acres to support 9,200 new homes in Beaverton, Hillboro, King City and Wilsonville.

The Portland City Council is expected to consider rezoning most single-family neighborhoods to allow relatively small multifamily infill projects and accessory dwelling units early next year. And the council also has approved an Equitable Housing Strategy in the Southwest Corridor between Portland and Tualatin that calls for increased densities along the planned MAX line, especially around the new stations.

You can read the Up for Growth report at tinyurl.com/y9lkyfst.

You can read the Oregon Community Foundation report at tinyurl.com/yd7fhvqe.