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PDX rents go down; renter incomes up

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Rent growth generally slows in fall and winter months in most cities simply due to the moving season, rising again in the spring and summertime. But in Portland, city planning that has increased housing supply along with good-paying jobs has relieved the crunch compared to what other cities feel during similar growth spurts.


PORTLAND TRIBUNE: JAIME VALDEZ - One recent report says Portland rents are falling as apartment consruction is catching up with demand.Rents have gone down more than half a percentage point in Portland since last year, after flattening out in the past few months.

That's according to a report released by Apartment List this month, showing rents fell for three straight months in 55 of the top 100 cities.

Rent growth generally slows in fall and winter months in most cities simply due to the moving season, rising again in the spring and summertime. But in Portland, city planning that has increased housing supply along with good-paying jobs has relieved the crunch compared to what other cities feel during similar growth spurts.

Portland's median two-bedroom rent was $1,600 last month, down 0.6 percent from the same time last year.

"Portland is No. 21 on the list in median two-bedroom rent, but rent growth there is significantly lower than other cities," said Andrew Woo, Apartment List's director of growth and data science who is based in San Francisco. He tracks cities nationwide and is a West Coast expert, saying Seattle's rents saw a 6.7 percent increase since last year.

"In Portland we're seeing what used to be a really attractive market for millennials and rentals," Woo told the Tribune. "However, the increase in apartment buildings and supply is helping it keep a lid on rents, which is good for renters."

Room for growth

Woo said Portland's rent growth is lower than comparable cities for a few reasons.

"One is rent growth is spurring construction," Woo said. "Two is unlike some cities that are popular these days, Portland actually has more and more room to grow and has been a little less restrictive in permitting and allowing new construction to happen when you compare that to San Francisco, New York City or Seattle for example — it's not so bad, but it's more landlocked and so is San Francisco. There's simply no room to grow; it makes it a lot harder to build new apartments."

In Seattle's growth, skyrocketing rents are partially driven by strong income growth.

"A lot of strong, good tech jobs in the city have attracted more people to come — they are better compensated and better able to afford better apartments closer to the city, which are in high demand," Woo said. "In Portland, there isn't that same swelling of tech jobs or other really good-paying jobs that fuel that attraction for millennials and allow them to be able to afford these luxe apartments."

Portland's growth spurt, compared to what other cities have experienced in terms of rental rates during growth, is pretty normal according to Woo.

"In fact, it (rental growth) is a little less than other cities that have experienced similar growth, just because it's easier for Portland to increase housing supply than it has been for its neighbors to the north and the south," Woo said.

Apartment List calculates rent growth on a same-unit basis.

"What that means is for a unit that is available during this time period last year, and the time period this year, the rent they're asking for is actually less than what they were asking last year," Woo said.

"It's a little surprising to me that's the case considering vacancy rates in Portland are so low, but I think it's a combination of factors," Woo said. "It's the off-season right now. Once spring and summer start to hit you'll see rent growth again in low single-digit numbers, and also new construction — new supply coming online has helped remove some of the pressure on inventory that has caused prices to rise in recent years."

Strong renter incomes

"The other number I was looking at bodes well for renters in Portland: Renter incomes in Portland were kind of slightly growing or flat over the past few years, but in the most recent year it actually jumped 8.7 percent," Woo said. "We've seen that kind of growth across the nation. In most metropolitan economic recoveries people are seeing stronger job growth and wage growth, but not always to this extent."

Typically, cities nationwide have seen 4-6 percent growth in renter incomes during this time of economic recovery, but Portland's is closer to 9 percent.

"There are two things that happen with that when incomes grow," Woo said. "One, more people are attracted to good jobs. They'll come in and the housing that is in that area has stronger demand.

"When incomes are high and that attracts people, usually that also means the jobs they get are good-paying enough they are able to afford those higher rents," Woo said. "That contrasts with other cities where rents are going up, like L.A. or Miami, where rents go up but incomes aren't going up, so people can't really afford it."

Cost-burdened renters

The rule of thumb says people should spend 30 percent or less of their income on housing. People who spend more than that are considered "cost-burdened," because at that level it's difficult to afford healthcare or put money into savings.

"Nationwide, this has gone up in recent years," Woo said. "In Portland, it actually went down from 2014-2015."

In 2014, 54 percent of renters in Portland were cost-burdened. In 2015, it dropped to 50 percent.

"It's a significant drop. That compares to a nationwide average of right around 50.6 percent," Woo said. "But it's a nice little drop, from slightly below the nationwide average from the year before."

This week, Apartment List is taking a deeper look into that and releasing a report on the share of renters in Portland and nationwide who are cost-burdened. View the statistics online at: apartmentlist.com/rentonomics/rental-data

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