The building industry has long held that part of the affordability crisis we are facing in the Metro area is due to the increased costs put on each home by government charges, fees and delays. Local government ignores these claims and tells the industry to “prove it.” At Affordable Oregon, we decided to do just that. Our Local Government Accountability Project (LGAP) takes a comprehensive look at local governments throughout the region and rates them based on their fees, charges, customer service and timelines. The process has taken months and is in its final stage, with a likely release the first or second week in June.
In the meantime, here are 5 interesting ways local government is impacting the cost of housing in the region:
- For a single family home, constructed in today’s market, the average cost per home, across 19 local government jurisdictions, is $67,188 per home. If the median price of a new home in the Portland Metro Area is $429,000 that means fees, charges and delays due to local government is approximately 16% of the cost of a new home.
- Keep in mind, $429,000 is the median price of a home. If a builder/developer wants to try and build a home in the $375,000 range to attract a buyer at a more “affordable” amount, the government related expense does not go down. That means attempting to sell for less than the median will drive the cost of government up to 18%, making the ability to build the house and still be profitable less attractive than building a higher priced home where the impact of fees is less.
- Everyone knows the cost of building a home in a recent UGB expansion area (think North Bethany or South Hillsboro) is more expensive than in an existing city right? Someone should tell the City of Portland, where the dollar impact of development is $85, 300 per home! The privilege of building in the City of Portland will cost 20% of your home’s total value. That’s more than North Bethany, South Hillsboro, Gresham-Pleasant Valley and all other current UGB expansion areas.
- Oddly enough, the city with the lowest fees, charges and delays in the Portland region is the City of Milwaukie. You know, the “city” located on Portland’s southern border. They have nearly the same infrastructure, land constraints and services available as the City of Portland but they can administer the construction process for $44,709 per home, 52% LESS than their closest neighbor. How can that possibly be right?
- Did you know that each city and county gets to choose which fees they charge, what they call them and how they charge them? With the exception of building permits, the State of Oregon allows local governments to charge rates that are consistent with a “methodology” to recover costs. Guess who sets the methodology? The individual city. Imagine as a builder/developer that each jurisdiction charges a different rate, for what is essentially the same services, but calls them something different and gets to determine whether or not they charge you a set fee, an hourly rate or a percentage of the value of project. How do you know you are being charged the right amount? Who created the prices? Based on what? Why can’t anyone agree on a price? This is what is currently happening in every jurisdiction in Oregon right now and its one of the reasons prices are out of control.
All of these facts were derived from the LGAP project and the entire study and presentation will be available in the next couple of weeks!