Nearly $100,000 in fees, over-costs before one starts to build a house

By Taxpayers Association of Oregon Foundation

According to the Oregon Department of Land Conservation and Development, Oregon needs to build 550,000 houses over the next 20 years.  That’s on top of the 140,000 needed right now due to underbuilding in the last decade.

Given that the Agency’s rule making body, the Land Conservation and Development Commission (LCDC), composed of politicos appointed by the governor, Metro, and the Portland Bureau of Planning & Sustainability have been all consistently obstructionist and hostile to development (except by development firms led by former Portland Bureau of Planning & Sustainability staff), it’s hard to see how this will happen.

Oregon’s housing crisis is due to an artificial, politically manufactured shortage of buildable land due to three factors:

· Draconian land use regulations created and enforced by LCDC

The vast majority of Oregon’s privately owned land is off limits to development, or development is severely restricted.  In most of rural Oregon, land cannot be subdivided into single family home sized lots.  In some parts of Oregon, no parcels under 320 acres can be created.

· Artificial shortage created by Urban Growth Boundaries (UGBs)

Within UGBs standard 5000 square foot lots can be created by subdivided most existing, larger lots.  Outside of UGBs land can only be subdivided into large parcels.  Most of the land outside UGBs is already at or below its allowed lot size.  Arbitrary expansion of UGBs often favors the politically connected.

· Astronomical permitting and ‘system development’ fees imposed by local governments.  

Due to the two previous factors, a 5000 square foot lot in Portland starts at about $300,000.  Before a builder turns a shovel full of earth, they can count on nearly $100,000 in permitting and ‘system development’ fees.  Either one of these would be prohibitive of building ‘affordable’ homes.  Together they make it unprofitable for builders to build anything other than McMansions.

And, in 2022, there is a new development:

High mortgage interest rates

The same $1750 a month mortgage payment (assuming 10% down) that would buy you a $500,000 house a year ago will only get you a $275,000 house today.  That $500,000 house – a borderline dump at Portland prices – means a $3150 a month mortgage payment today.  Even if the previous three factors were eliminated, this one alone is an affordability killer.

A few years back the legislature passed a law requiring cities to make all land zoned for single family residences OK for duplexes.  I saw how this worked in North Portland where some of the last affordable single family residences ($300,000 at the time) were replaced wholesale with $1,000,000.00 per side duplexes.

The cornerstone of the legislature’s latest plan?  Hundreds of millions for ‘workforce housing’ for government workers.  With Portland’s 2020 median income at about $75,000 a year, that means we’ll be subsidizing houses for people earning as much as $100,000 a year – provided they are public employees.

The rest of you?  Maybe you can live in one of the hotels the state plans on purchasing to house the ‘homeless.’