by Richard Leonetti
Oregon Tax News,
Taxpayer Foundation of Oregon
Understanding the “Housing Crisis”
A response to the Oregonian’s “Refinancing underwater mortgages: Why not help people keep their homes?”
It is easy and fashionable to blame Wall Street for our housing crisis. It is also wrong. The bigger culprit is right here in Oregon: our urban growth boundaries and restrictive and expensive Smart Growth rules.
In 2006 and 2007 when housing demand jumped and Federal policies made it easier to buy, builders in places like Atlanta, Houston and Nashville built quickly and met the demand with only small increases in prices. In Oregon, and particularly Portland, building permit and land costs were higher and the process took much longer, so the strong demand with restricted supply, led to rapid increases in prices. Encouraged by these rising prices and profits, builders built and speculators bought until demand was more than satisfied. The price collapse that followed was automatic.
For these same reasons, the next time there is a sharp rise in demand due to births or in-migration, the same restrictions will cause a housing bubble and collapse again.
A national real estate company, Coldwell-Banker, has for years tracked the price of 2 ½ bath, 2,200 sq. ft. house in various markets. In 2009 that house cost $187,000 in Houston (no zoning), $255,000 in Atlanta (some zoning), $357,000 in Portland with our Smart Growth. Portland’s policies assure home prices will always be high and limit who can afford them.
The American Dream for many people is their own home on a lot large enough to have a tree with a swing for the children. But not in Portland: the few in-fill lots are often too small for a tree with a swing, and multi-story condos won’t do it either. Both are so expensive that only the upper-middle class can afford them.
I understand the person who is under-water on his mortgage wanting the prices to go up so he can sell it to someone else. But just as we would like gas prices to be less, if home prices were less it would enable more Oregonians to be home owners. We can make houses cost less and still have a very livable city by some changes in the Smart Growth rules we have imposed.