apartments division street for rent

New apartments on Southeast Division Street in Portland.

(Mark Graves/The Oregonian)

It might seem like the Portland area is in the middle of a building bonanza. Compared to the dry spell that followed the collapse of the housing bubble, it certainly is.

But there's growing consensus among regional economists that, despite the rebound in construction, the Portland area hasn't recently added enough housing to keep up with population growth.

That means the persistently competitive market for both apartments and home sales might not ease significantly anytime soon.

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finds that, unlike other major metro areas across the country, builders in the Portland area didn't produce a huge glut of homes during the bubble years.

Over the past 20 years, the Portland area has had one new housing unit for every 2.3 new residents. It didn't stray far from that rate during the bubble, which was also a time of rapid population growth for the region.

"Even though the bubble was a price phenomenon in Portland, it wasn't a building phenomenon," said Joshua Lehner, the state economist who authored the report.

Construction of new housing units still came to a halt when the bubble burst. There was little demand for new houses and, at first, little construction financing available for new apartments.

Construction has ramped up since — especially for apartments, which now make up a much larger share of overall housing unit construction. The city of Portland, notably, is building at a breakneck pace not seen since 2007.

But taking into account those years when builders were sitting on the sidelines, there's still a lot of ground to make up, even with thousands of new homes and apartments brought to the market over the last couple of years and thousands more in the pipeline.

"We need all of those and more," Lehner said.

By his measure, the metro area is going to need to add about 12,000 housing units each year just to keep up with expected population growth. Last year saw about 11,700.

In the meantime, the limited housing supply has created a heated market both for single-family houses and for apartments.

The inventory of homes on the market has created a strong seller's market, where houses often attract multiple offers. Price have risen rapidly because of the competition.

Meanwhile, renters have come to expect a line of applicants for apartments that become vacant, and landlords have had plenty of freedom to push rents higher.

"The low inventory and the price increases we're seeing is very much suggestive of a relative shortage of supply right now," said Tim Duy, an economist at the University of Oregon. "We're not able to bring that supply to market quick enough to stem the rise in prices."

It's still an open question what kind of housing needs to be built to meet the needs of the growing population, and where.

Jerry Johnson, a real estate economist, believes the Portland area may be approaching a saturation point for apartments, especially taking into account the thousands of that are proposed but not yet under construction.

But the construction of new houses in the suburbs hasn't significantly ramped up yet. That's largely because financing for development — referring here to the process of getting land ready to build a house — dried up, and it's only beginning to recovery.

"The model broke down," Johnson said. "The system isn't functioning as well as it normally would to produce more housing supply."

Demand for new homes also hasn't shown up in force, so builders haven't seen any reason to dramatically increase their production rate.

Johnson said that will change as the economy improves and people who are currently renting gain confidence in the economy.

On the other hand, Portland economist Joe Cortright says predict housing needs isn't as simple as looking at historic norms.

It's only Portland's close-in urban neighborhoods that are experiencing what seems like a housing shortage, Cortright says, and then mostly because more people want to live in an urban setting. (His urbanist think tank, City Observatory,

.)

And it's not clear, he says, whether the ratio of new housing units per new resident should remain the same going forward. Household formation has slowed, and more young people are living with roommates rather than on their own.

"This isn't a return to the status quo," he said. "I think that's the challenge with a lot of the analysis with the housing market."

-- Elliot Njus