Portland rent hikes have finally leveled off west of 82nd Avenue, PSU report says

Rapid new construction has driven up vacancy rates.

By Michael Andersen | Wednesday, March 8

In central Portland, well-to-do people seem to finally be finding places to live other than homes that used to belong to poorer people.

That’s the conclusion of a quarterly report released in February by Portland State University’s Center for Real Estate, which credited rapid construction for the fact that apartment vacancy rates have finally climbed above 7 percent in Portland’s “northwest” and “northeast” districts — which in real estate industry jargon refers to almost everything within city limits and west of 82nd Avenue.

Higher vacancy rates give landlords more reason to fear tenants will move out if they raise rents. Apparently as a result, the average apartment landlord west of 82nd Avenue has stopped raising prices.

To be sure, the news doesn’t mean central Portland’s huge rent increases of the last five years are reversing. It does mean that, at least for now, they’re no longer getting worse.

And apartment rents in Portland’s “northeast” and “northwest” areas actually did fall slightly in the fourth quarter of 2016, according to the report:

The report, which is written for an audience in the real estate industry, described new homes in Northwest Portland as an “onslaught of deliveries” that were preventing rent hikes.

A spokesman for Portland Mayor Ted Wheeler welcomed the news, but speculated that only the most expensive homes might actually be falling in price.

“More market-rate housing is a good thing,” Wheeler’s communications director Michael Cox said in an interview Wednesday. “It probably takes some pressure off.”

Cox said that to help Portlanders at all income levels, tenant protections and direct public subsidies for the lowest-income people are also needed.

“There is more than one force at work here,” he said. “It’s really those people struggling with fixed incomes that really face the worst effects of the cycle of high rent increases. … What’s happening in Salem around just-cause evictions and rent stabilization is really important.”

Rents keep climbing fast in Portland’s suburbs — and construction there remains slow

These 1,062 acres of South Hillsboro have development on both sides and were green-lighted for urbanization in 2014 but remain undeveloped. Image: Google Street View.

Portland joins a growing list of cities that have seen years of surging rents slowed or halted by a construction boom. As Seattle Times housing reporter Mike Rosenberg pithily documented in January, the same trend has been observed in Denver, New York City, Houston and DC.

The opposite happened in Sacramento and Oakland, where apartment construction nearly halted … and rents soared two to three years later for rich and poor alike.

Indeed, the new PSU report also showed that empty apartments continue to be scarce in much of the Portland metro area, and rapid rent hikes remain common.

Vacancy rates in “east Gresham” (which, in real estate industry jargon, includes Portland east of 82nd Avenue), Milwaukie and Vancouver are all below 5 percent, and average rents there were continuing to rise at 7 to 8 percent per year.

Construction in those areas has been relatively slow, suggesting that vacancies there will stay low.

This doesn’t seem to be for a shortage of developable land. Last year, regional government Metro reported that although urban growth boundary expansions have made room for 67,000 new homes on the suburban fringe in the last 16 years, only 5,400 had been built — fewer than the number of new homes in Portland in 2014 alone.

This slowdown in suburban sprawl, and the boom in demand for attached housing, may be good for overall affordability — but only if the metro area can build adequate infill housing instead, especially the low-rise infill that it’s possible to finance without sky-high rents.

“There ha[ve] been some increases in suburban construction, though the increases are minimal,” according to the fall 2016 installment of the respected local Barry Apartment Report. “Suburban construction has remained slow throughout this cycle, despite low vacancies and increasing rents.”

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