PAMPLIN MEDIA GROUP: CHASE ALLGOOD - New home construction is well underway in the Bethany area of Washington County again, and in the new North Bethany area.Housing affordability is suddenly the hottest issue in Portland.

The City Council is scrambling to promise more income-limited housing and to protect tenants forced out by rent increases and “no-fault” evictions for remodeling projects. Most of the proposals have followed protests organized by advocacy groups for minorities and low-income people.

But one group having trouble finding affordable housing has not gotten much attention — working and middle-class families who want a single-family house near an employment center. Although homeownership has declined since the Great Recession, many families still want the benefits from owning their own homes. Realtors say this is especially true now that the regional economy is recovering and more and more people are moving here for work.

“This is an historic moment in the residential real estate market. We’re seeing strong job growth and historically low interest rates at the same time. That’s creating buyer demand, and there are not enough homes currently on the market to meet it,” says Lennox Scott, chairman and CEO of John L. Scott Real Estate.

According to Scott’s real estate group, there are hardly any mid-range price houses near employment centers for sale in the region today. Office manager Israel Hill defines mid-range as around $450,000 — which is well above the new median price of $305,000.

Prices not too high?

Scott says home prices are not necessarily out of line in the entire region, which includes Clark and Columbia counties. He believes prices are right about where they should be. The real problem, Scott says, is a shortage of available houses for sale. The most recent Regional Multiple Listing Service report says there were only 5,837 active listings in the region in August, including Clark County. That’s just a 1.9-month supply, well below normal levels.

There are several reasons for the shortage of available single-family homes. The construction of both single-family and multifamily housing slowed dramatically during the Great Recession. But only multifamily housing has recovered since then. In fact, the number of construction permits issued for single- family houses in the tricounty region has not increased since the bottom of the recession in 2009. In contrast, the number of permits issued for multifamily units has more than doubled since before the start of the recession.

Before the recession, in 2005, 11,889 residential construction permits were issued in Multnomah, Clackamas and Washington counties. Of that total, 7,893 were issued for single-family homes and 3,996 were for multifamily units.

By 2009, the total number of permits had dropped to 4,579. Of that total, 3,882 were for single-family houses and 697 were for multifamily units.

In 2014, the total number increased to 12,682 permits, more than before the recession. But the number of single-family house permits was only 3,823, less than half the prerecessionary number. In contrast, the number of multifamily permits was 8,859, more than twice the number in 2005.

Housing mix shifting

The pace of single-family home construction appears to be picking up, however. Through July of this year, 5,089 residential construction permits had been issued. Slightly more than half were for single-family houses, 2,699. The rest, 2,390, were for multifamily units.

There are many reasons for single-family house construction to be lagging, including the reluctance of many people to buy houses because of the losses they and others suffered during the recession. But land supply also is an issue.

Put simply, there are not a lot of large, empty tracts currently approved for residential development in the region. There are virtually none within Portland city limits, which helps explain the controversial residential demolition and infill projects in close-in neighborhoods. The highly publicized fight by neighbors to save 150-year-old sequoia trees on two lots also is a symptom of the shortage.

But where there are available sites, construction is booming. In Happy Valley, where work nearly stopped during the recession, houses already have been built on nearly every pre-approved lot. Bulldozers have cleared the land and work is underway on new homes in the upper Bethany and North Bethany areas of Washington County. New subdivisions are sprouting between Gresham and Damascus in east Multnomah County. And the Villebois development in west Wilsonville is approaching capacity.

Stalled subdivisions

A pause button is about to be hit that could exacerbate the single-family housing supply shortage, however. Few other large parcels in the region are ready for construction for various reasons.

Two areas targeted for development in Washington County — South Hillsboro and South Cooper Mountain — are still in the final planning stages. Voters in Damascus are likely to disincorporate their city at the May 2016 primary election, slowing, if not preventing, the planned construction of around 8,000 single-family houses. Several other areas added to the urban growth boundary by Metro since 1979 are not yet ready for development, including the Springwater Community and Pleasant Valley concept areas.

And other potential building sites are up in the air because Metro and Multnomah and Clackamas counties have not yet completed the process to designate them as urban reserves, where new development can occur over the next 50 years.

Fall and winter are traditionally slower months for home sales, in part because families are reluctant to put their homes on the market during the traditional Thanksgiving to New Year holiday season. But Scott says this year is even slower then most, suggesting regional single-family house prices will continue increasing into 2016.

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