It is Complicated: Developing Housing in Portland Oregon. by Fred Stewart

Hello friends and family! It’s important to remember most financing for new home development is provided by investors and funds not associated with banks. Most banks avoid new home construction unless there are special and particular circumstances that will limit risk to nearly an absolute minimum. This is why you only see banks getting involved with affordable housing if there is government investment involved. Over the last two years, the Portland market has lost at least 50% of its housing development resources. This comes to at least 500 Million dollars! What this means is that resources that are doing business in Portland are charging more for interests and fees to borrow the funds that are available to get it started.

Those investors are also pickier when it comes to developments they will finance. Housing policy in Portland has made financing housing developments more expensive and thus far riskier. This is good for property owners because it adds upward pressure to existing real estate values. When the viral Covid-19 pandemic is mostly over we are going to see upward pressure on rent values and market values that will rival what we saw in 2016, which surely will not be good for most renters.

It is important that friends and family work together during this down cycle to prepare for the future and save for and arrange buying a home now. Today’s prices will seem cheap in the year 2023 if interest rates stay below 5% and they most likely will. All measures of rent stabilization the leaders we have voted for have instituted generally benefit property owners in the long run but put renters …especially renters with families in a perilous position of uncertainty.

Portland needs more housing actually developed and built, but current policies have effectively put a cap on how much housing can be developed. This is wrong! When you add on the issues the pandemic adds to our situation when it comes to labor, and housing for at risk populations’ becomes even more tenuous. Due to what is going on right now, it simply takes longer to build housing than it did before the pandemic and the longer it takes to complete a project the more the costs go up for the end-user and the more renters and their families will suffer and struggle, with issues like contending with crowded shared housing and even perhaps losing their housing.

Because of Federal Regulatory laws it is risky and complicated for institutional Banks to invest in housing development and the process is slow and burdensome. Developers have to be mindful of all aspects of potential risk because for the most part, the federal government wants banks to take very little if any risks at all. The cheapest (lowest interest rates and fees) in the United States occur with institutional banks.

The leaders we vote into office might want to talk with banks and real estate developers regarding how to address this issue. The state of Oregon through the cities and counties might have to take on some of the risks involved with developing housing, which we can all agree Portland needs more of. This would include perhaps up to 5% to 20% of the costs of developing or lower up. The good news is Portland no longer has single-family zoning and that gives the market a lot more space to make decisions that could benefit the entire market and address critical needs when it comes to building housing in Portland and the Oregon market in general. With some needed changes to the restrictions of the market, Portland can develop more housing and address this desperate need for lifetime Portland residents and the newcomers who move here every year.

With the right attention to this issue, additional housing in Portland can become more than just talk and can become a reality for Portlanders. They and all Portland residents deserve this much! Perhaps with more focus on these issues Portland can claim its famous “livability” once again.


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