Affordable Housing in Oregon, Part One: How We Got Here

By Rep. Mike Nearman

Oregon has a housing affordability crisis and there are several proposals on the legislative table to alleviate the crisis. As a member of the House Committee on Human Services and Housing, I’ll get a front row seat for this debate. Before we look at solutions, I think we need to consider some of the causes, which can, in turn, guide the quest for solutions.

Since 1974, Oregon has had some of the most restrictive land use laws. Because of this policy, the supply of land that could be developed into housing is restricted by government, which drives up the price of land that can be used for development. We can have a discussion about whether or not we want to change the land use laws, but there is no doubt that these policies restrict the supply of buildable land and therefore are a price driver. Most notably — on this issue — state and local government has control of this restriction on resources and if this issue is to be taken seriously as a concern, government needs to lead the way by relaxing restrictions.

Another factor driving the lack of supply of affordable housing is the fact that very little housing was constructed for about five years during the Great Recession beginning in 2008. Since housing is such a big ticket item, when builders build, they tend to build the highest end housing that they can afford. They need to get the most out of the land, especially when the price of land is so high. This is not so much the case for small ticket items, like, say toothpaste, where there is a market for a low cost alternative.

The way that we get affordable housing is not so much through private developers creating budget homes and apartments, but more through what was once higher-end housing getting run down over time and becoming more and more affordable. The same effect can be seen in the automobile market. No automaker makes any vehicle that you can buy for even $10,000, but you can certainly find a used affordable vehicle for even a $1,000 or less. Time creates affordable big-ticket items, not the market.

With that in mind, when the government sector endeavors to spend public money on housing to cover a need caused by the likes of the Great Recession, they need to take care that they are supporting very low cost units that the market will not supply. Sadly, this has not been the priority. While public money could multiply the number of units by creating simple housing – even dormitory style housing which might be ideal for low-income persons — the trend has been to build few, expensive units.

Another driver of the lack of affordable housing, is one that perhaps cannot and perhaps should not be solved – the Oregon Coolness Factor. In shorts, Oregon is a cool state, and attracts a large net in migration. Short of making the feral skunk the state animal, there is probably not a way to deter people from moving to Oregon. And while growth has some negatives, I’m not sure I want to stop or slow it.

A further possible driver is that financial regulations (Dodd-Frank) which arose out of the housing collapse of 2008 have restricted access to capital. Providentially, interest rates have been low since then, but any rise in rates will surely cause a new problem. Resolving this will be the job of the federal government.

As we look for solutions, we need to keep the sources of the problem in mind.

State Representative Mike Nearman (R-Independence) is a member of the House Committee on Human Services and Housing and is looking for solutions.

Next: Affordable Housing in Oregon, Part Two: Where Do We Go From Here

  • Kenneth Allen Donaldson

    When is the last time government solved a problem Mike? We built a rental last year and the SDC’s for half of the duplex was $22,000, and then there was the building permit. The property taxes are 14% of the construction cost the first year and will go up year after year. This government that you want to fix the problem has created much of the problem. If we had not been given credit for the old house we tore down the SDC’s would have been $44,000 and we would have either not built or put a used trailer on the lot. Go fix some roads and bridges and leave us alone.

  • Oregon Engineer

    “While public money could multiply the number of units by creating simple
    housing – even dormitory style housing which might be ideal for
    low-income persons — the trend has been to build few, expensive units.” obviously you have never heard of such things as “the Projects” in places like LA, Chicago, New York. and many more which were supposed to be affordable housing all built with federal funds and maintained by the local governments. they are falling down, most have been abandoned and were never taken care of by the tenants. Government is the solution? not. As Kenneth pointed out 44000 for a duplex for just government regulation before on penny is spent on construction. If you want to do something remove all the land use regulations in the state and let the property owners actually determine the best use with out county or state permission. IN this state the people buying property never own it. It belongs to the county and state and the payments of a mortgage and property taxes allow them to live there. Any construction of any type on “private property” requires permission from the county. It is the whim of bureaucrats elected or not to, determine how the property owner uses his property. So I agree with Kenneth get the government out of the construction business. What you described is all market driving the cost of housing. I have no idea where you get the idea that markets do not create affordable housing, only time. So you must be a product of the oregon education system.

  • Jayhwk

    One other factor is the governmental cost of building housing. Washington County has calculated that there is $84,000 in regulatory cost in each new house. That means you cannot build a cheap house.

    The comment about new cars turning into cheap cars reminds me that the Dems passed the “Cash for Clunker” legislation. The govt bought the “clunkers” for $8,000+or-, then scrapped them, creating a shortage of used cars and driving up the prices for the poor. Remember all the NYT and CNN stories about how the poor could not afford transportation. Neither do I, never mind.

  • Bob Clark

    During the Obummer years, Oregon championed becoming a welfare state, becoming addicted to federal transfer monies which help attract an accelerated pace of immigration; which in turn, needs a place for shelter. So, in some ways, Oregon’s population surge was a bit artificially induced exacerbating the housing shortage/homelessness.