What this term means to Affordable Oregon and why we care
The phrase “affordable housing” is often used by the media, advocacy groups and government as a euphemism for “lower income housing.” Others use the term to explain the first-time home buyer market, referring to smaller homes, condominiums and townhomes as “affordable.” The phrase has been used and abused by so many organizations no one really knows what it means anymore.
While Affordable Oregon finds the effort to create affordable, low income housing a laudable effort and one that should continue, it is our goal to create affordable housing for everyone in Oregon, focusing initially on the Portland Metropolitan Area. This organization will pursue policies and practices that promote lower housing costs across the board, not just focusing on a subset of the population based on their income.
Key to our pursuit is a simple number made up of complicated, raw data: Cost of Construction per Square Foot. When a prospective homebuyer looks to purchase a new home, regardless of the construction type, the homebuyer can take a simple mathematical equation and quickly determine value: TOTAL COST OF THE HOME/TOTAL SQUARE FOOTAGE = COST PER SQUARE FOOT. This number, while not perfect, tells a homeowner right away if they are getting housing affordability. Our goal at Affordable Oregon is to do everything we can to drive this number down, allowing every person to acquire a more affordable place to live.
Consider the current price per square foot in the Portland Metropolitan Area. The area spent most of 2017 leading the nation in home price increase year over year before a late influx of new housing stock finally relieved a supply shortage that was driving the average home price over $220 per square foot. Currently, a home in the Portland Metro Area will cost an average of $217 per square foot or $434,000 for a 2000 square foot home. At Affordable Oregon, we don’t think $217 per square foot is affordable for anyone. In most of America, that is considered an exorbitant amount of money to pay for a place to live.
What makes the price of housing so expensive in Portland? Depends on who you ask, but there is a consensus the following factors are at play in some form or another:
- Desirability: People move to Oregon for a variety of reasons, including lifestyle, climate, jobs etc.
- The Economy: A certain increase in housing costs is likely when the national or regional economy is doing well.
- Shortage of Skilled Construction Labor: General contractors and construction professionals have long lamented a lack of viable construction professionals available for use in the Portland housing market. This circumstance increases prices when demand is high.
- Difficult Topography and Weather: Oregon is not flat and the expense of developing housing on slopes can greatly add to the cost of construction. Not to mention we spend half the year virtually under water. The cost of maintaining storm water in the NW is always going to have an effect on the price of housing.
- Government: How is government policy, process and financing effecting housing prices in Oregon, specifically the Portland Metro Area.
This last factor is where Affordable Oregon will focus its efforts. Affordable Oregon believes that for too long local and regional governments have skirted their responsibility for increased housing prices, specifically in these areas:
- Available Land Supply: As prices rise, the quality and quantity of available land for development has not increased or in some cases changed at all. Metro Regional Government, the entity charged with providing land for future development, chose not to add land to the Urban Growth Boundary in their last required analysis despite nearly double-digit year over year home price increases. Meanwhile, unsuitable or unreasonably expensive lands for infrastructure development in Damascus, Pleasant Valley and Springwater stay in their analysis.
- Local governments charged with providing infrastructure for lands inside the UGB take too long to plan and don’t consider a full range of funding sources. Taking years to develop capital improvement programs and infrastructure financing plans, these local governments are ignoring their role in increasing the cost of housing and keeping supply off the market.
- The process for developing land in our local jurisdictions (cities and counties) is incredibly complicated and punitive. Development of land and housing construction has become so complicated by regulation that expensive consultants are required to navigate the local development code. In many cities, its taking 14-18 months and hundreds of thousands of dollars in planning/engineering consulting fees to process a simple subdivision application.
- Getting a permit to build a home is taking far too long in many jurisdictions. Local builders report that once they finally have lots ready to build on, some jurisdictions are taking up to 8 weeks or more to even LOOK at their building permit, let alone process their permit, putting needed housing further behind and costing millions.
- All this time costs money and a lot of it. All builders and developers deal with the concept of “time/value of money.” Every week, month and year they hold land without building they are paying finance charges, taxes, earnest money and managing to finance thousands of dollars PER HOME in fees and system development charges before finally being able to sell a home. In order to be profitable, they pass that right along to the buyer which ultimately leads to our current affordability crisis.
These factors are what Affordable Oregon is focused on exposing and improving through our work. If you are interested in becoming a part of the fight for affordability, become a member here.