Zoning Oregonians out of House and Home

The Oregonian writes about the failure of government policy to provide “affordable housing” in the Portland metro region. Extensive public subsidies for low-income housing have failed to ameliorate the problem, and legislative efforts to force homebuilders to provide lower-priced housing (at a loss) have been unsuccessful.

What the story largely ignores, however, is that Oregon’s land-use regulatory system makes it illegal to build any kind of housing on most private land in Oregon. In addition, the small amount of land available for housing is subject to extensive planning and zoning requirements. This was explained 10 years ago by consulting economist Randall Pozdena in an econometric study entitled, “The New Segregation.” His analysis found that Portland-style “smart-growth” policies across the country were making it increasingly difficult for low-income and minority households to become homeowners.

Other housing experts, such as Harvard’s Edward L. Glaeser, reached similar conclusions.

Housing was not always so expensive. In the decades immediately following World War II, when there was enormous demand for more homes, the private sector was able to respond because large tracts of surplus farmland were converted to residential housing. Such conversions are illegal in Oregon today.

The Oregonian is correct in saying that government housing policy has failed, but forcing private builders to sell homes at a loss will only make things worse. The real solution is to get government zoning out of the way so housing markets can begin to work again.

Find out more at cascadepolicy.org.

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Posted by at 05:00 | Posted in Land Use Laws | Tagged , , , , , | 18 Comments |Email This Post Email This Post |Print This Post Print This Post
  • wilinsalem

    I agree with this, it would be a huge boon for the economy as well as for provision of lower income housing to reduce the mass of confusing regulation.  So how do we introduce this in the state legislature?  And does the legislature even have a say in this?  I thought most land use laws were county or city generated

  • HBguy

    I totally agree here. The cost of land was through the roof, and will be again when the economy picks up. But, you will be battling not only pro planning liberals, but also farmers and developers who now own or have options on large expensive tracts of land within the UGB (West Hills Development), and current home owners who don’t want to see a large inventory of cheaper homes on large lots come onto the market because of the effects on their own home values. And of course the powers that be that want to maintain Portland as the center of the universe.

    Any plan will have to be phased in. Maybe there can be exceptions to bringing land into the UGB as long as they have certain amounts of affordable housing. That would spread affordable housing around the suburban areas, and as the inventory of homes increased, homes closer to the core would drop in value making them more affordable as well.

    This is a problem long in the making. 

  • Johnb

    I agree.
    As it exist today if my home were to burn down I could not replace it with a like structure. I would have to put the rack and stack style of home. 3 to be exact.
    This is a direct compliance of UN Agenda 21 being applied in Portland which has embraced this garbage agenda wholeheartedly.
    Whatever happened to a “Mans home is his castle”

  • valley person

    ” What the story largely ignores, however, is that Oregon’s land-use
    regulatory system makes it illegal to build any kind of housing on most
    private land in Oregon.”

    Of course, most private land in Oregon is located in places where no one in their right mind would build a home anyway, so who cares if they can or can’t build one?

  • valley person

    There is plenty of space already zoned to build homes in Oregon. There is simply no demand for new homes. One has to wonder, if land use rules are the problem, why have housing prices dropped 30% in the last couple of years? Did we do away with our land use laws when I wasn’t looking?

    • HBguy

      I guess all those contentious meetings with Metro and UGB expansion don’t actually occur? And 1000 friends has nothing to do and no reason for being? And LUBA has cobwebs on their doors? 

      Be reasonable. A tight UGB is desired by many, and it drives up the price of dirt. The housing bubble and subsequent crash has nothing to do with the UGB. There are many things that impact home prices. A tight UGB is unarguably one. 

      • valley person

        A tight UGB only drives up the price of land to the extent that there is more demand than available housing units. Local and regional planners and the homebuilders have gradually increased the amount of homes allowed on any given acre. So where you used to get 4 homes, you now get maybe 8 in the same area of land. The cost of an acre can be spread over 8 instead of 4 homes, thus having little or no impact on final price, but an impact on final lot size.

        And you have to wonder, if the tight UGB is determinative of house prices, why did we just experience a 30% drop in price with no effective expansion of the UGB?

        • HBguy

          As to first paragraph. The is precisely why we don’t have affordable housing throughout the metro area. Because land prices are so high, you need dense zoning for affordable housing. So they tend to be aggregated together. Not spread out. This is always a problem, but where dirt is more expensive, it’s worse. 

          As to your second paragraph. Again, I don’t wonder that at all. The drop had to do with the mortgage crisis, not dirt prices, and its temporary, and it’s all relative to dirt prices in other areas. The drop in prices didn’t effect the fact that affordable housing is still being built only in select areas.

          • valley person

             I don’t think you have much of a case. “Affordable” housing doesn’t necessarily need a cheap price of land per acre for reasons stated. It depends on how many homes you can put on that acre.

            And the raw cost of land is a fraction of the final cost of a home. The average cost of an acre of developable land in the UGB before the crash was round $350,000. Divide that by 8 units and you only get $43,000 per unit, which is about 1/5 the price of a median home in Portland prior to the crash. Cut that $350K in half and you only drop the price of a home by $22,000. That isn’t really very much.

            There are so many factors at work here, but one of them that gets overlooked is that the cost of developing the lot has gone sky high because over the past 3 decades we reduced the amount government, especially the feds, would subsidize utilities and roads. This has forced local overnments to put the full cost of development on the builder. You want a culprit…look there before you blame raw land values. 

          • HBguy

            Having worked with developers, land owners and contractors over the past 20 years, I can tell you, your numbers are off. Which makes your analysis invalid. And, the other thing you need to consider is zoning. You simply won’t be able to zone high density right next to low density residential. The neighbors, landowners, businesses, and city staff just won’t do it.

            For someone to claim that a tight UGB doesn’t impact affordable housing is ludicrous. It surely isn’t the only thing that impacts it, but it is a big factor. 

          • valley person

             What numbers are off? Price of developable land? Units per acre? What? I own 5 undeveloped acres inside the UGB, so I track land prices closely. I’m a designers who has worked for developers on and off for over 30 years, so I understand the economics of land development. And I’m engaged in planning for a new city, Damascus, where the costs of pipes and roads has been a significant issue that has been well studied.

            The Portland region, where most of the demand for new housing is and will be in Oregon, by law has to establish a 20 year supply of land available for either development or re-development. This is of course dependent on decent growth estimates, which are constantly adjusted. The latest estimate of population growth dropped, and as it turns out, given current zoning, there is quite a bit of excess development capacity in the region.

            Some of this capacity is phantom of course. The costs of development may be too high for the market, which includes my own property by the way. But that is more a function of utility and road costs and development fees than raw land costs.

            The tightness or looesness of the UGB is a factor in housing costs if and when it actually restricts the supply of housing units that can be built. The increase in housing costs Portland experienced in the late 90s through 2006 was experienced to the same degree in  other housing markets around the nation with no UGBs. The decline we have experienced since then is also consistent with the decline in these markets.

            How do you explain this? Wouldn’t Portland’s unique situation, with our “tight” UGB, distort the market in ways that would be recognizable in comparing to other metro regions, like Phoenix, Atlanta, and Vegas, which have no UGBs?

            Last point. Nearly every area where Metro expanded the UGB over the past 15 years has failed to develop any housing. the reasons are in some cases political, as in Damascus where we can’t agree on a plan. And in other cases tied to the cost of extending public infrastructure. The raw cost of land has not been a factor.

          • HBguy

            I guess everything is perfect then. There is no scarcity of affordable housing. It is equally spread throughout the region. People all want to live in more density. And if dirt goes up in price, it doesn’t effect affordibility, despite all common sense telling you otherwise. Everyone wants to have a single family home bordered buy high density apartments. People don’t move out of the UGB area to get a different lifestyle I’m wrong on all counts. You are right on every count. Every single one.

          • valley person

             See answer below to avoid narrowing columns.

  • David from Mill City

     

    In the 1920s and 30s the Santa Clara Valley in California
    was known as the Valley of Hearts’ Delight because the soil was so rich that
    almost anything would grow there. By the 1940s it was acres on acres of
    orchards of all types. Today it is all gone, the trees and the rich soil. The
    trees and soil was bulldozed up to build thousands of track homes built in the
    1960s and 70s.  The homes were built on
    the good farm land rather than the pasture land on the surrounding hills because
    it was cheaper and easier.

    The good news is that is much harder to do in Oregon because
    good farm land is protected by our land use laws and UGBs.  While it may be financially advantageous for
    the individual farmer and developer to convert good farm land to cheap housing it
    is not advantageous for the community. First because we all need to eat, and growing
    crops on poor land is much more difficult and has lower yields the good farm
    land. And second because the resulting sprawl is more expensive to provide
    public services to.

    Oh less I forget in Santa Clara County a cheap house starts
    around $250,000 and a 2 bedroom apartment goes for $1200 a month.  Which in my book is not affordable.

  • Donkey Peyote

    Anyone perceive the (class warfare conscious) Oregonian series as yellow journalism? 

  • valley person

    HB guy writes: “I guess everything is perfect then.

    No, everything isn’t perfect and never will be. land use, like life, is filled with imperfect choices. The best we can hope for is to optimize.

    There is a scarcity of “affordable” housing in every growing metro region in the nation. That scarcity has a lot more to do with high poverty rates, a declining median income, and the high costs of building new homes (for reasons stated) than it does with raw land values being inflated by urban growth boundaries.

    “People all want to live in more density.”

    No, they don’t, but this has nothing to do with what we are talking about. If you want to make an argument that urban growth boundaries are bad because they force people to live in a higher density setting than they really want, then make that argument. But don’t mix this argument in with the price of housing related to the price of land related to the mere fact of an urban growth boundary.

    “And if dirt goes up in price, it doesn’t effect affordibility, despite all common sense telling you otherwise.”

    Common sense can be deceiving. Common sense tells us we live on a flat earth. When data contradicts common sense, go with the data. We just had a 30% drop in housing prices in the metro region with the exact same UGB we had before. We had pretty much the same increase and decrease as other metro areas with comparable growth rates and no UGB. That data strongly suggests that the Portland area UGB is not having much if any impact on the price of a house today or yesterday. Other factors have far more influence.

    If you or Mr Charles have data, not anecdote, that shows how the price of a home in Portland is higher by X due to the UGB, I’m open to it.  If all you have is “common sense” and anecdotes, then I’m sorry. That isn’t enough for me.
     
    “People don’t move out of the UGB area to get a different lifestyle ”

    I’m sure they do. I moved out so I could have a small farm and play with a tractor. then the UGB came out and found me. But again, I have no idea how this issue has anything at all to do with the effect of the UGB on the price of housing within the UGB.

    You seem to be introducing more and more arguments that have nothing to do with Mr Charles post or my response.

    • David from Mill City

       

      A number of years ago had a conversation with an economist
      from ECO-Northwest. He stated that they had been conducting a study to
      determine if the UGB had an impact on home prices and that they could not identify
      one. That the real estate market place for 
      urban areas in Oregon did not behave differently than similar areas outside
      of Oregon.

      Given that every urban area needs to look at its UGB every
      ten years and needs to have a twenty year supply of buildable land, there may
      not be a real shortage of land in the UGB , it reasonably follows that the existence
      of a UGB does not affect housing values. 
      There are two factors that as yet have not been factored in to this
      discussion, the trend for larger housing units and the reality that the labor
      costs for building a cheap home are close to those of a similar sized expensive
      home. Both of these have an impact on the availability of affordable housing.

      • valley person

         The market price of an acre of developable land inside the UGB tends to run around 10 times that of an acre of farm or forest land outside the line. It is this differential that people look at and conclude the UGB drives up the cost of housing.

        But when you factor in how many homes you can build on that inner UGB acre, and all the other costs of development, the UGB dissipates as a factor in the final price of a home.

        If we did not have a UGB, most of the land currently outside of it would still have development restrictions based on County zoning, septic capability, water availability, and site development costs like long driveways. The yield on those acres would be very low, and mostly you would get large, expensive homes built on them, not smaller, affordable homes.  

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