Is the Portland area’s regional housing crisis being made better or worse by state and local land use regulations? Gerald Mildner, Ph.D, an associate professor of real estate and finance at Portland State University, and the academic director of the University’s Center for Real Estate, would say, “worse.” According to Dr. Mildner in his paper “Portland Housing Market and 2018 UGB,” the region’s urban growth boundary (UGB) in conjunction with other regional and local initiatives is likely exacerbating the housing crisis, and measures meant to alleviate that crisis are either making it worse or having less efficient positive effects than alternative measures. For example, Metro did not expand the UGB in 2015 because it determined that there was enough capacity within the existing UGB to accommodate the region’s housing and employment needs for the next 20 years. The problem, however, is that most of the future housing capacity relied upon lies in areas that are in eastside Portland neighborhoods that are not close to Portland’s urban core, like the Gateway and 122nd Street areas, and the assumption was that the capacity need will be met by high-rise residential projects. The reality is that high-rise projects are expensive to build and require rents that those outlying areas cannot hope to support anytime soon. So the capacity is there, but the market is not. Further, according to Dr. Mildner, there could be serious economic consequences to the region if rents in Portland actually increase to the point that high-rise residential projects can be supported in those areas.
Dr. Mildner also argues that Portland’s supply-oriented 2017 inclusionary zoning requirement, where all residential buildings of 20 or more units must set aside 20 percent of those units as “affordable,” is an inefficient way to provide affordable housing when compared to demand-oriented assistance programs, which entail giving a voucher to households that meet eligibility requirements and can then shop for apartments in their market. According to Dr. Mildner, economists estimate that there is a consumption inefficiency between supply-oriented and demand-oriented projects of approximately 20-35 percent. Dr. Mildner also noted some of the immediate consequences of the zoning requirement, which included a rush to submit development applications for residential projects of 20 units or more before the requirement went into effect. Further, he speculates quite reasonably that there will likely be a lot of buildings proposed in the future between 15 and 19 units to avoid the regulation. This would reduce the overall housing production from a given amount of land, as it likely that in at least some cases the developer would have provided additional units, but wanted to avoid the affordable unit requirement.
Affordable housing is a thorny and complicated issue to be sure, and Dr. Mildner offers some important issues to consider in resolving the issue. We can hope that all sides of the debate are being heard so that the problem can be resolved as efficiently and equitably as possible.