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Portland's rent growth lags behind national average as new units come to market

Although 69 percent of U.S. households live in single-family homes instead of multifamily developments, the latter has become increasingly important to the future of large metros — including Portland — and developers' spending on it is way up.

Portland ranks No. 4 in terms of spending the most on building new multi-family construction per capita, below tech hubs Seattle (No. 1), Denver (No. 2) and black gold-rich Dallas.

That's according to a new study out by Apartment List, which dug into historic data on new residential construction to compare to today's multifamily housing trends, which are attributable to the nation's growing share of renters.

Multifamily construction is important to the local economy because the addition of new units serves the need for housing, helping keep rent growth stable, and because construction creates jobs and grows wealth in the community.

The study found Portland has spent $8.2 billion on multifamily construction since 2000, ranking No. 19 of the top 25 largest U.S. metros where multifamily spending has most drastically increased. Per capita, that makes Portland No. 4 out of the top 25.

Between 2000 and 2016, Portland's residential construction spending going to multifamily developments increased from 11 to 29 percent. Nationwide, multifamily construction spending has quadrupled since 2010.

However, the study found Portland's rent growth lags behind the national average: rents here have actually declined in recent months as a boom of new supply comes online. Compared to Seattle, Denver and Dallas, where rent growth exceeds the national average, the addition of multifamily units has still helped temper the growth.

However, Apartment List's data here comes from Portland-based City Observatory, an urban planning and economy website supported by the Knight Foundation. It doesn't take into account the Inclusionary Housing policy that resulted in fewer multifamily development permits going into the city's system that hasn't yet correlated to a visual of fewer boom cranes up in the skyline.

Recession Recovery

According to the study, new residential construction has lagged due to increased costs for land, labor and materials. Because of this, mainly single-family home construction has slowed and the — relatively cheaper — multifamily type of housing has picked up drastically since the Recession.

Multifamily housing is especially important to cities like Portland because it helps provide dense, transit-oriented living near urban cores and clusters of jobs.

As population grows, new residential

construction plays a crucial role in maintaining housing's affordability. Adding new units close to the urban core helps soften rent growth, according to the study. Transit-oriented construction can reduce commute times and promote sustainability, and many new developments around town have made sure to include entrances and exits nearby TriMet MAX and streetcar stops,

urban bikeways and pedestrian throughways.

As population and employment grows — the labor shortage and skill gap is real right now — multifamily construction acts as as stimulus to local economies, allowing cities to grow in inclusive and sustainable ways, the study found.

Renters and commuters

According to Apartment List, multifamily construction spending topped $10 billion each in 14 of the largest metros from 2000

to 2016 — with spending in New York alone totaling almost $65 billion across the six-year span.

During just 2017, the nation spent more than $62.6 billion on multifamily construction — four times the amount spent in post-recession 2010.

Increasingly, multifamily makes up a larger and larger share of new construction dollars. In 2017, it was 18 percent of all new residential construction spending, up from 7 percent in 1993, when Apartment List's data begins. In terms of units rather than spending, multifamily makes up 38 percent of new construction in 2016, up from 17 percent in 1993.PAMPLIN MEDIA GROUP: FILE PHOTO, COURTESY HOLST ARCHITECTURE - A rendering for an upcoming multifamily development at 1400 N.E. Multnomah St. in the Lloyd District is planned to add 677 market-rate apartments and 12 live-work units to the neighborhood.

Across the nation, spending on multifamily construction was trending upward ahead of the 2008 housing bubble that collapsed, and its current rebound is near the 2006 all-time high, totaling $62.6 billion in 2017 — that's 3.8 times the amount spent in 2010. Meanwhile, single-family housing is less than halfway to its 2006 rate of more than $500 billion today reaching for $300 billion.

Between 2005 and 2016, 91 percent of all newly formed households were renters, and renters currently occupy 87 percent of the units in multifamily properties, according to the census.

New York City spends the most overall on new multifamily construction, but Seattle spends the most per-capita.

Ultimately, the share of spending on multifamily developments has increased in cities that already have lots of it: for example, Houston's share of new residential construction spending going toward multifamily developments increased by 0.7 percent despite its large population, because it has historically built mainly single-family homes.

Overall across the U.S., multifamily housing is making up a bigger and bigger share of housing types, especially in dense urban cores near knowledge-based jobs such as tech rather than suburbian or outlying industrial jobs that are being roboticized. This is creating a transportation crunch and giving rise to super-commuters, who travel more than 90 minutes to work. In all but 10 states, super commuters' numbers grew by more than 40 percent between 2010 and 2015, according to Pew Research.

Whether for most U.S. metros or for Portland, it's clear that denser multifamily housing close to the downtown cores are in store for the nation's near future.

By Jules Rogers
Reporter, The Business Tribune
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