Blame urban growth boundaries for our housing crisis

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.

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  • mike

    If our policies keep home prices high so few can afford them, then this is good, as people who can’t afford them won’t buy them and end up defaulting.

    • gullyborg blog

      That may be the stupidest comment, ever. No matter what the price point of housing is, there are people above and below that point. There will always be people below it who go too far into debt to buy a house. The lower the price point is, the more people can actually afford a home. The lower the price point, the less debt end up lost among those at the low end who buy homes they can’t really afford. That means the least capital is lost through defaults. What is better:

      a) Homes averaging a million dollars, so only 10% owns, renters must burn several thousands of dollars a month in rent, and when people default on a million dollar loan, they lose hundreds of thousands of dollars of capital, perhaps their business? OR,

      b) Homes averaging a few hundred thousand, so half the people own, renters can get by on several thousand dollars in a whole year for rent, and when people default on a $200K loan, they only lose tens of thousands of dollars and maybe a car?

      Saying high prices are good is about as stupid as you can possibly be.

  • Bob Clark

    I don’t care for the urban growth boundaries because they limit economic growth as demonstrated by Metro squabbling over a few hundred or less acres for development in all of the Portland metropolitan (less clark county) area. Ideally, I think maybe a more balanced approach where greenspaces are interspersed around various local developments, stretching all throughout Oregon, would allow for development and nature to co-exist; allowing the masses a way to also enjoy nature and not just the well heeled who have their second McMansion homes in the country. The state and federal governments would contribute their vast land holdings to making for this grid of greenways and development. People will then be freer to choose between urban and rural lifestyles rather than forced into the city of Portland’s concrete condos and apartment complexes. With the advances in car and bike technology transportation can be made more robust to accomodate this freer and more prosperous Oregon society.

  • JohnB

    This is all part of the UN Agenda 22 that Portland liberals have foisted on the public by decree.
    Even though this horrible treaty has never been voted into acceptance municipalities continue to adopt portions of it.
    It basically wants us all to live in each others pockets and take public transportation. As well as destroy or right to purchase and use our property.
    A mans home used to be his castle until Agenda 22 tries and makes it the States property even though you purchased it.
    Rack um stack-um and build more unnecessary rail is the Metros slogan

  • valley person

    This article is utter nonsense. Prices for Portland housing track prices nationally. We go up and down pretty much in synch. Prices are higher here than in Atlanta or Houston because we are on the west coast, and lets face it, its a more desirable place to live than Atlanta or Houston.

    The UGB has very little influence on the price of a house here. It does limit where new homes can be built, and it results in smaller lot sizes than we would have otherwise.

  • Bill

    You people are all crazy. Of course the UGB relates to home pricing. I am glad, though, that the homes cost a lot as it keeps out the rif raf.

    • teriB

      The rif raf are still there. Take a look around, maybe watch some news……….

      • guest

        Obscene enough news attending rif raf occupant droppings in front of city hall or infesting foreclosed homes; condiments of Flim Flamny Fae and/or Freaky Mac and cheese whizzer barfalo wing bytes hucksturd by Barney Franks, et al.

  • Erik

    The housing crisis was a national phenomenon. How can urban growth boundaries which only exist in a handful of states be responsible for it?
    Also, can you provide a link to the Coldwell Banker numbers? I have questions about their geographic scope. In Portland, higher priced homes tend to be in the city proper with more affordable housing is in the suburbs. My understanding is that the opposite is true in Atlanta.

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