Analysis: Portland becoming million-dollar housing market

Published 10:01 am Saturday, November 23, 2024

Without major increases in Portland’s housing supply, the city is on track to be a million-dollar home market within a decade.

That is according to an economic analysis by Realtor.com that was released on Oct. 30. It is predicted that the median home price in Portland will more than double from $501,245 in 2023 to $1,051,000 by 2033. The million dollar-plus price tag was calculated by applying the same rate of growth to home prices between 2014 and 2019 to the next nine years — nearly 45%.

The only other two cities where prices are predicted to increase as fast are Boise, Idaho, and Salt Lake City, Utah. And the analysis did not even speculate about what would happen to rents in Portland, which also have increased dramatically since 2023.

State, regional and local elected leaders are well aware of the affordable housing crisis, which is a statewide problem. The Portland City Council first declared a Housing State of Emergency at the request of former Mayor Charlie Hales in 2015. It has been renewed seven times since then, most recently on Sept. 25, 2024.

Portland and Metro voters have also approved bonds for affordable housing projects and an income tax for supportive homeless services. The council and Oregon Legislature have allowed multifamily projects to be built in single-family neighborhoods. Oregon Gov. Tina Kotek had signed three executive orders to address the affordable housing and homeless crises, and convinced the 2023 Legislature to spend an additional $1.4 billion for affordable housing projects.

But according to the first annual State of the State’s Housing Report, much more needs to be done to solve the affordable housing crisis. The report by the Oregon Housing and Community Services department said the crisis was decades in the making before exploding in 2014.

“Oregon’s housing crisis has deep historical roots, worsened by decades of building less housing than needed to keep up with Oregon’s rapid population growth and wages,” read the report released on Nov. 21.

It said that in 2013, approximately 53% of Oregonians had a household income that qualified them to purchase the average home. Ten years later, only 29% of households could afford a typical home. This decrease was primarily because, for every dollar Oregonians earned in wage increases between 2013 and 2022, the median sales price of a home increased by $7.10, further distancing homeownership from reach.

According to the report, the state experienced 21% population growth between 2004 and 2023, equaling more than 753,000 people. To keep pace with the growth, a record high 500,000 housing units must be built in Oregon in the next two decades.

The report found the long lingering crisis exploded between 2015 and 2019 when Oregon’s population grew by three residents for every new housing unit, significantly worsening the housing shortage. Following a brief decline in spring 2020, prices for single-family homes soared by over $68,000 in just five months — an increase that typically spans several years of growth. Factors including heightened demand for larger homes, supply chain disruptions, remote work arrangements, and other pandemic-related influences likely contributed to this sharp escalation in prices, the report said.

Average rents for all units in Oregon increased slowly between 2017 and 2020, the report said, rising from $1,261 to $1,281. Then average rents surged by 7% (nearly $100) between 2020 and 2021, followed by almost 9% (about $169) going into 2022. Over these two years, Oregonians found themselves spending $3,328 more on rent a year than they had before the COVID-19 pandemic, according to the report.

Housing cost increases are hurting low-income and Black, indigenous and people of color (BIPOC) in Oregon more than others, the report said. As of 2022, 65.8% of white Oregonians owned their homes, while only 50.5% of BIPOC Oregonians were homeowners, representing a 15.3% gap. In 2013, only 34.9% of Black residents owned their homes; in 2022, that figure was 34.0%, remaining essentially unchanged. They are also disproportionately rent burdened, the report said.

The affordable housing crisis also is fueling an unprecedented increase in homelessness. More than 20,000 people were experiencing homelessness in Oregon, with three in 10 considered chronically homeless as of 2023. The state ranks third in the nation for people experiencing homelessness and first in the nation for unsheltered homelessness among families with children when adjusted for population size, the report said.

Progress addressing the affordable housing crisis has been mixed. For example, on her first day in office, Kotek signed an executive order setting an ambitious housing production goal of 36,000 new homes per year. But, as reported by the Oregon Capital Chronicle, housing production in the state has actually fallen since the Jan. 9, 2023, signing.

“Local governments in Oregon issued just fewer than 17,700 building permits in 2023, according to a federal database. They’re further behind this year — by September, builders had pulled just more than 10,800 permits,” reads the story posted on Nov. 3, 2024.

Oregon Housing and Community Services said it is making some progress in the report, however. The $1.4 billion approved by the 2023 Oregon Legislature has helped it either build or have more than 28,000 affordable rental housing units in its pipeline since 2019, compared to just under 13,000 units in the previous five-year period. Most in Multnomah County were also financed with Metro affordable housing bond funds. They include 1.700 units of Permanent Supportive Housing for the chronically homeless.

But, the report also said, “The findings in the State of the State’s Housing Report make it clear that OHCS cannot solve the issues facing the people of Oregon on its own. Factors beyond housing affect whether people can thrive in today’s economy. It will take continued investment in effective solutions from the Legislature and requires coordination and collaboration between local, state and federal agencies and partners to ensure housing stability for all Oregonians.”

“Factors beyond housing affect whether people can thrive in today’s economy. It will take continued investment in effective solutions from the Legislature and requires coordination and collaboration between local, state and federal agencies and partners to ensure housing stability for all Oregonians.”

Oregon Housing and Community Services report