Oregon’s self-created problem: Lack of affordable housing

by Sen. Doug Whitsett

“the proposed solution is to spend a great deal of other peoples’ money, on yet another government program, to try and solve the problem without addressing its cause”

The Legislative process often involves bringing various stakeholders together to find solutions to difficult problems. But sometimes, those problems are the result of well-meant but misguided government policies. Too often, the only proposed solutions involve the further expansion of government programs.

A lack of affordable housing has become one of Oregon’s most significant problems. It is reaching a crisis point in places like Bend, where housing stock has not kept up with demand. Working families are struggling to meet their most basic needs for affordable housing.

Since the 1970s, Oregon has pioneered a unique land-use system that heavily regulates the use of every parcel of land in the state. This top-down system restricts the amount of land that cities and counties can zone for residential, commercial and industrial use. Other states have zoning systems in place, but they are not driven by the state government in the same way that Oregon’s statewide central planning regulates landowners. Not one of the other 49 states has chosen to follow our central planning lead since the enactment of Senate Bill 100 in 1973.

A proposed solution for our state’s affordable housing woes was presented before the Ways and Means Transportation and Economic Development Subcommittee during a Wednesday, April 8 public hearing. Rep. Gail Whitsett (R-Klamath Falls) is a member of that subcommittee and participated in the hearing.

The particular request before the Legislative Assembly takes the form of Senate Bill 5513, the budget bill for the Oregon Housing and Community Services Department (OHCS). The actual sources of the money appropriated to support this agency and how that money is spent is anything but transparent.

During the public hearing, it was confirmed that the Oregon Housing Authority has approximately 49 programs with 64 funding sources, in addition to those run by the U.S. Department of Housing and Urban Development (HUD). It includes $15.7 million in appropriations from the state’s General Fund, as well as $11.9 million in lottery revenue from the Administrative Services Economic Development Fund. It also provides $155 million in federal funds for the agency from HUD and $119 million in non-HUD federal funding.

The preponderance of the funding appears to be designated to pay the principle and interest due on previously borrowed money. Past funding for those programs has thus far incurred over $1 billion in bonded indebtedness for the State of Oregon and its taxpayers.

Also included in SB 5513 is an OHCS request to borrow $100 million to fund the construction of new affordable housing. Of that $100 million, $85 million would come from the sale of General Obligation bonds, with the remainder being raised from the sale of Lottery Revenue bonds.

The program was included in former Governor Kitzhaber’s Recommended Budget. In spite of the change in governors since the start of the legislative session in February, the program and its funding allocation remain a priority for new Governor Kate Brown.

A particular source of frustration for the legislators on the committee is the lack of details attached to this $100 million plan.  The purposes for the funding request were inadequately structured and had virtually no sideboards. Instead, lawmakers were given promises that those important details would be worked out through the use of various advisory councils.

Testimony offered at the hearing revealed that the purpose of the $100 million is to pursue a “production agenda” involving the building of 3,000 to 4,000 housing units. The state would buy the land, which would then be developed by an as-yet-undetermined third party, with all of this being paid for by an unidentified mix of state and private money.

Questions were also raised about the differences between private and public sector development costs. Simple math dictates that the proposed costs of building these “affordable” housing units would exceed $250 per square foot. This calculates to more than $300,000 for an average, 1,200 square-foot single living unit!

Rep. Whitsett asked how the state planned to repay the bonds that would be used to raise the $100 million for the program. She was informed that those dollars would come from future general fund and lottery fund revenues. Her questions regarding the total future principle and interest required to repay the borrowed money went unanswered. I estimate that repayment amount to be about $190 million, assuming six percent interest and a 25-year repayment period.

In my opinion, this proposed “affordable” housing project is a clear example of a solution to a problem that didn’t exist until government created the crisis. A basic understanding of supply and demand would reveal that deliberately restricting the amount of buildable land is going to cause that land to become much more expensive. But instead of addressing the restrictive and heavy handed land-use policies that caused this problem in the first place, the proposed solution is to spend a great deal of other peoples’ money, on yet another government program, to try and solve the problem without addressing its cause.

If Oregon was truly serious about addressing its affordable housing crisis, it would initiate legislation to address the initial cause of the problem, which is the fact that it is against the law to build a home on the vast majority of the land located within the state. Unfortunately, the proposed solution is to give another blank check to a state agency in the hopes that spending more of other peoples’ money will somehow solve the government-created affordable housing crisis.

Senator Doug Whitsett is the Republican state senator representing Senate District 28 – Klamath Falls