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Portland's popularity boom may be headed for bust

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PAMPLIN MEDIA GROUP: JOHN M. VINCENT - Are there storm clouds on the horizon for Portland's top-places rankings? If you ask researcher Bert Sperling, the answer is an unequivocal 'yes.' Sperling designs many of the studies that lead to the rankings.It seems that hardly a day goes by without Portland receiving another placement in the top ranks of a “best places” list. Hundreds of such studies are done each year, and Portland consistently scores in the top echelons of the rankings.

But have we reached “peak Portland”? Are we on the precipice of a decline in those scores?

Bert Sperling thinks so, and as the architect of many of the studies, he should know. Sperling created Money magazine’s first Best Places to Live study and now does a plethora of data-driven projects for news publications and businesses.

“It’s everybody’s most livable city these days, and that’s kind of a problem,” Sperling says. “I believe that for every boom, there’s a bust. Booms are unhealthy, busts are unhealthy, but I think it’s impossible to control.”

He cites San Francisco and Seattle as cautionary tales, where booms have led to explosive growth and busts in affordability and livability. He can’t recall a city that has been able to tackle universal affordability.

Those cracks already might be showing. In its 100 Best Places to Live study, released March 2, U.S. News and World Report ranked Portland No. 20, three places behind (gasp) Houston, Texas, and 13 behind Seattle.

Sperling’s insights are based on data, but backed up with on-the-ground experience traveling to the places he has ranked. Last summer he took a 10,000-mile road trip crisscrossing the southeast United States. “That gives me an idea of what’s behind the data,” he says.

PAMPLIN MEDIA GROUP: JOHN M. VINCENT - Already Portland is seeing some of the things that make it special being uprooted for increased density. Increased rents and diminishing space will not allow for low-cost, low-friction enterprises to survive. A recently announced development project will likely have food cart pods moving from lot to lot to stay ahead of the building.“We’re at that magic point. Portland is really attractive right now.”

But it’s that attractiveness that Sperling fears will lead to its decline. The main driver will be housing affordability, and it will change the fabric of Portland, pushing the creative, interesting, entrepreneurial spirits that make the city what it is, first to its periphery, and then out of the city altogether. The only people living in or around the city’s core will be more affluent, more privileged, Sperling predicts.

Sperling looks at Portland’s east side as an example of what can happen in a “low-cost, low-friction” area. In the 1970s through the 1990s, there wasn’t a lot going on, “but in the last 15 years, it’s become the place where everything is happening regarding eating, arts and music,” he says. Those kinds of amenities influence many of the Best Places-type studies.

“The Pearl is a good example of what happens when things get expensive,” he says. “The shops are nice, but not much exciting is happening there. As Portland matures, it will look more like the Pearl, and the more vibrant places like the east side will fade.” The trend will take time, as he sees the interesting stuff shifting out toward Foster, Lents or Woodstock before being pushed beyond the city’s boundaries.

Sitting in the Blue Kangaroo coffee shop in Sellwood, Sperling laments “we’re going to end up with a lot more Starbucks than we have Blue Kangaroos. We’re going to have a lot less weirdness.”

By the numbers

According to data provided by the Federal Housing Finance Agency and interpreted by Sperling, the Portland housing market exploded in the 1990s, with prices more than doubling (110 percent) — the greatest increase among our peer group of the 50 large metro areas.

Despite the jump, Portland’s prices still lagged other West Coast cities by a wide margin — we were still a value. During the next 15 years, Portland’s prices rose at a rate slightly higher than the peer group, but well below the rates of Los Angeles, San Francisco, Austin and other “hot” cities.

“Point is, Portland has been lagging in price increases, and has been tilted toward being underpriced in comparison with other metros,” Sperling says. “Combine this value with the amenities, which have been accelerating in the last 10 years, and you have a desirable market.”

COURTESY: METRO - Rents have been rising across the region, with double digit increases from 2011-2015, as shown in this graphic published by Metro, with data from Multifamily NW and Axiometrics Johnson Economics.Trends in rents nearly mirror the home price increases, according to Sperling and the data he interprets from Zillow.com.

According to a recent study released by Metro, the region’s rents have increased 63 percent since 2006, with Northeast Portland leading the way. The average income of renters has only grown 39 percent over the same period. However, rents in Portland still tend to be half of what they are in the Bay Area, for example.

Portland was the last affordable bastion on the West Coast.

But that value proposition is taking a dramatic shift. Over the past five years, Portland had the 16th-greatest increase in home prices, but over the past year it moved into third place. No other metro area among the group of 50 largest places shows such a significant spike, Sperling says.

Those rising rents and housing costs are already pushing Portland’s creative class out of traditionally affordable areas. “Creative spaces are being disrupted, housing is going to become less affordable, and traffic congestion is only going to increase,” Sperling says. “There will be overbuilding — building that is done as an emergency, and development that is suboptimal.”

Sperling doesn’t see how the creative, innovative and entrepreneurial activity can happen in a high-cost environment. “Affordability is important, because it allows you to take more risks,” he says. “You can afford to take more swings at the plate.”

But now Portland is heading in the opposite direction, and it’s hard to buck the market. “It’s not like you’re able to roll back the tide.”


By John Vincent
Reporter
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